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KIC, RIP? S.Korea closing Kaesong is short-sighted and wrong
Korea_President_Park_EastSideGallery_10 by KOREA.NET - Official page of the Republic of Korea on 2014-03-27 17:28:36
KIC, RIP? S.Korea closing Kaesong is short-sighted and wrong
Snuffing out the last ember of North-South co-operation makes no sense
February 11th, 2016

2016 is yet young: We’re hardly into February. But already it’s yielding a grim winter harvest of new dates that will go into future Korean history books, to be remembered and regretted.

Hitherto it was the North, negative as ever, that had made most of the running. On January 6 Pyongyang got the new year off to a bang with its fourth nuclear test, supposedly an H-bomb. A month later on February 7 they made it a double whammy, with a satellite launch – which, as everyone knows, doubles as a partial test of an inter-continental ballistic missile (ICBM).


But now South Korea has gotten in on the act, adding February 10 to this list of ominous dates. After several days of rumors swirling around Seoul, Unification Minister Hong Yong-pyo confirmed the worst. The South is closing the Kaesong Industrial Complex (KIC), the last remaining inter-Korean joint venture, completely and indefinitely. Here’s what Hong said:

“Despite our efforts to support the Kaesong complex, the factory zone is seen as being used for North Korea’s development of nuclear weapons and long-range missiles … We’ve decided to halt the operation of the Kaesong complex to prevent South Korean money from being funneled into the North’s nuke and missile developments and to protect our companies.”

But will closing Kaesong help? On the contrary, I fear it may backfire and harm the South

South Korean anger and frustration are understandable. Like the rest of the world, only right on the DPRK’s doorstep, they watch and seethe as Kim Jong Un – like his father before him –  keeps testing nukes and missiles: in defiance of UN resolutions and with seeming impunity.

But will closing Kaesong help? On the contrary, I fear it may backfire and harm the South.

First up, will this hurt the North? That question has two components, economic and political. Big-sounding numbers are being bandied about. A statement from the Ministry of Unification (MoU) put it like this:

“Until now, about 616 billion Korean won (about $516 million) have flowed into North Korea via the KIC, with 132 billion won alone last year. It is crucial for South Korea to actively get involved … while the international community discusses tougher sanctions (on North Korea) for violating UN resolutions and pushing forward with a nuclear test and missile launch.”

That sounds a lot of money, especially for an economy as small and short of hard currency as the DPRK. But Yonhap, South Korea’s semi-official news agency, puts this in perspective. An analysis article headlined “Kaesong closure to hurt both Seoul, Pyongyang” cites unnamed industry watchers, who reckon that KIC earnings comprise a mere 1 percent of North Korean trade.

The DPRK government keeps 30 percent of what the ROK sends; the other 70 percent presumably goes to the KIC’s 55,000 workers as wages. Compared to the $2.48 billion Pyongyang earned from exports to China last year, Kaesong’s $111m (gross) or just $33m net is small potatoes.

But politics is key, on both sides of the DMZ. The MoU asserts that Seoul must press ahead with sanctions, yet what’s the rush? It could as well wait till the UN Security Council drafts a new sanctions resolution. The UNSC has yet to agree on one for the nuclear test, but the rocket launch will concentrate minds. So if the ROK acts unilaterally now, that is by its own choice.


Is it the right choice? One thing is for sure: This is a complete U-turn by Park Geun-hye. Just three years ago, new in office – her term as president began on February 25, 2013 – Kim Jong Un tested her by fomenting a crisis in March and April. Remember all that rhetoric, extreme even by North Korean standards? Or the Chaplinesque staged photos of Kim and his generals, poring over maps of missile flight paths targeting the U.S.? – including Austin, Texas, bizarrely.

Mostly this was talk, but Kaesong saw action when the North summarily pulled out its 55,000 workers – for no discernible reason. Park handled this challenge brilliantly. She kept her head, and patiently negotiated the KIC’s reopening. By September it was up and running again.

Wisely too, Seoul insisted on new management rules to prevent any such unilateral sabotage from ever recurring again. In that spirit, on August 14, 2013 North and South signed a five-point agreement for what they called “the constructive normalization” of the complex, as a prelude to its reopening a month later. This bears reading in full – if with a heavy heart, now.

Clause 1 declares: “The two Koreas will not make Kaesong suffer again from the stoppage of the complex … They will guarantee the normal operation of the complex … (which is) not to be affected by inter-Korean situations under any circumstances.” (Emphasis added – AFC).

Not under any circumstances. The words are unambiguous, as is their implication now. What South Korea has decided to do is to break a promise, tear up the deal and go back on its word.

Yet it was Seoul which insisted on these guarantees, on the implicit assumption that the only conceivable saboteur was Pyongyang. That is clear from the detail, singling out such factors as “the stable passage of South Korean personnel, North Korean workers’ normal reporting to work and the protection of corporate assets” as specifically not to be tampered with.

So what has changed? Nothing whatsoever. The latest nuclear and missile tests cannot logically be a deal-breaker, for one glaring reason. Park negotiated the KIC’s reopening in 2013 in the shadow of North Korea’s third nuclear test that February, preceded by a satellite launch in December 2012. If the DPRK’s WMD activities could be set on one side then, why not now?

I ask this not rhetorically or to make a point, but in genuine bafflement. Park’s slogan used to be Trustpolitik. That means working with North Korea as it is, while seeking to change it over time. Like Ostpolitik in Germany, which paid off in the end, this cannot be done overnight.

For sure, as always South Korea is more sinned again than sinning. One expects nothing good of North Korea, but the South should steer a steadier course. Park Geun-hye has barely two more years left to serve. Did she lose patience, or lose her temper, or change her mind? It’s not North Korea which has changed, more’s the pity. Nukes and missiles: That’s what they do.

For the past decade, the Kaesong zone turned a bit of the world’s most heavily armed frontier … from front line into front door

At this rate Park will leave North-South relations in a worse state even than when she found them. Her hard-line predecessor Lee Myung-bak kept Kaesong open, despite two more immediately deadly provocations in 2010: the sinking of the Cheonan, and shelling of Yeonpyeong island.

For the past decade, the Kaesong zone turned a bit of the world’s most heavily armed frontier, impassable for half a century, from front line into front door. That in itself was revolutionary, as was Seoul’s plan. A few SMEs would make money, but the main thing was to demonstrate to Pyongyang how win-win business cooperation was a better way than daggers drawn.


The irony and tragedy is that this was working. A fascinating article by Christopher Green on Sino-NK, citing several Daily NK reports from 2013, claims that Kim Jong Il’s last instructions to his son included this: “Move decisively to close (the KIC) as soon as you see a chance.” Kim senior feared the zone was a Trojan horse, daily exposing 55,000 of his subjects to the palpable superiority of the enemy’s system. Indeed. So why is the South shutting it down?

If true, this may obviate one worry arising from the closure: that Pyongyang will play up and take hostages. Then again, Kim Jong Un may not pass up the chance to play menacing games of chicken, even if like his father he is glad to be rid of the place. But if the latter is true, talk of suspension or temporary closure seems optimistic. Like the Mount Kumgang tourist resort, mothballed since 2008, once Kaesong closes the fear must be that this will be for keeps.

So ends the last hope that the two Koreas might manage the pragmatic cooperation which has transformed ties between China and Taiwan. With no KIC, South and North Koreans will no longer be in contact anywhere on a regular everyday basis. That is a great leap backwards.

One Daily NK article from 2013 suggests that ordinary North Koreans saw Kaesong as like a canary in the mine. While it was operating, this meant their regime’s war talk was just bluster. Ominously, the suggestion is that this bluff-calling is another reason why Kim wants the place closed down. Now Park Geun-hye is doing the job for him. This is a sad day, and a bad move.

Featured Image: Korea_President_Park_EastSideGallery_10 by KOREA.NET - Official page of the Republic of Korea on 2014-03-27 17:28:36

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