South Korea did not rule out the possibility that a joint industrial complex in North Korea would be shut down, a news report said yesterday, after Pyongyang announced it had canceled contracts for companies operating there.
North Korea told the South on Friday that all contracts on running the factory park in Kaesong, just north of the border, were invalid. It said that it would write new rules on taxes, rent and wages on its own and that the South should unconditionally accept them or pull out of the complex.
The move was a major blow to a project seen as a symbol of cooperation between the wartime foes, though the communist regime has previously taken steps to undermine the complex in protest against tough approaches to it by conservative South Korean President Lee Myung-bak.
More than 100 South Korean companies employ some 38,000 North Koreans at the zone to make everything from electronics and watches to shoes and utensils, providing a major source of revenue for the cash-strapped North.
Pyongyang’s announcement signals a sharp raise in taxes, rent and wages — a move that would significantly reduce the appeal of operating factories in the North where arbitrary border restrictions and closures have meant losses for South Korean companies.
South Korea denounced the announcement and called the North irresponsible.
“This is a measure that fundamentally threatens the stability of the Kaesong complex, and it is not acceptable at all,” Unification Ministry spokesman Kim Ho-nyeon said on Friday.
Yesterday, the mass-circulation Chosun Ilbo newspaper said Seoul was bracing itself for the park’s closure.
“Our position is that we will risk Kaesong’s shutdown in the worst case,” an unidentified official was quoted as saying.
The paper said the government plans to compensate the Kaesong firms for losses if the complex is closed.
Unification Ministry spokesman Kim said the government was not taking the park’s closure into consideration.
“Our position is to save the complex,” he said.
Relations between the two Koreas have significantly deteriorated since Lee took office in February last year.
Since then, reconciliation talks have been cut off and all key joint projects — except the factory park — have been suspended.
North Korea claims the South is benefiting from “preferential treatment” at Kaesong — including free rent and cheap labor. The regime scrapped those benefits on Friday, blaming Seoul’s “confrontational” stance.
“We cannot provide favors forever to those seeking confrontation,” the North said in a statement on Friday.
North Korean workers in the complex are paid about US$70 a month on average — about half the salary of Chinese laborers at South Korean factories in China, according to South Korean officials.
Last month, the two Koreas held their first government-level talks since Lee took office, but the meeting made little progress, with the North refusing to free a South Korean worker detained in late March for allegedly criticizing the regime’s political system.
The North said that it had intended to negotiate new terms for the complex, but that the South was insincere and kept raising the issue of the detained worker, which it said was off the agenda.
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