South Korea’s Ministry of Unification (MoU) has claimed that the reopening of the Kaesong Industrial Complex (KIC) would be challenging, due to United Nations Security Council Resolutions. This is a groundless claim.
I worked as a policy advisor to the former Minister of Unification and was one of the first South Koreans to visit the KIC during its ribbon-cutting ceremony.
The KIC project was first discussed during the ROK-DPRK Summit in 2000, but it took more than four years (construction of the first factory was started on December 15, 2004) to initiate, due to U.S. sanctions at that time.
To persuade the U.S. to support the project, we wrote down a list of all the facilities and parts that would be used to build the complex and visited the U.S. Department of Commerce to get their approval.
Most of the UNSC Resolutions are focusing on the possibility of the assets… being used by the KPA
I remember how challenging it was to persuade the U.S.: at the time, the DPRK was still labeled a state sponsor of terror, and any U.S.-made parts or parts that used American technology had to get the approval from the Commerce Department before entering the DPRK.
We were able to persuade the U.S., because those parts that were to enter the DPRK did not have any potential to be used for the military purposes. The Commerce Department also commended our efforts in attaching Radio-Frequency Identification on every South Korean part that was to be used in the construction of the compound, so they could be tracked.
This is the important part. Most of the UNSC Resolutions are focused on the possibility of assets entering the North being used by the Korean Peoples’ Army.
BULK CASH AND UNSC RESOLUTIONS
So if KIC reopens, will we not be able to pay “cash” to the North Korean workers due to the UNSC resolutions?
The first time the UNSC comprehensively imposed a resolution on North Korea was in 2006, after Pyongyang conducted its first nuclear test. The UNSC Resolutions 1718 (October 14, 2006) and 1874 (June 12, 2009) did not include any restrictions related to “bulk cash.” The first time that phrase appeared was in Resolution 2094 (March 7, 2013), under the Park Geun-hye administration.
In article 11 of Resolution 2094, it clearly says the transfer of bulk cash “that could contribute to the DPRK’s nuclear or ballistic missile programmes” is prohibited, and expressed “concern that transfers to the DPRK of bulk cash may be used to evade the measures imposed” in the past.
While the resolutions against Pyongyang have grown tougher over the years, we have to take note that while the articles target specific fields where the bulk cash must not be used, they do not unconditionally stop any and all bulk cash from entering the DPRK.
The Park Administration’s stance on the KIC was that “the UNSC Resolutions do not apply to the compound”
The DPRK’s fourth nuclear test was conducted on January 6, 2016, and two weeks later on January 22, the MoU held a meeting with the South Korean President.
During the meeting, the ministry clearly stated that “the KIC takes an important position in the inter-Korean relations… and that is why the compound could be maintained… amid the UN sanctions.” This statement shows that the MoU, at that time, saw KIC as not being a violation of the UNSC Resolution.
Resolution 2270 was adopted on March 2, and the only UNSC Resolution that the South Korean government at that time could make reference to was Resolution 2094 from 2013. Let’s rewind the clock back to January 22, 2016, and think what we were up to at that point. It was two weeks after the North’s fourth nuclear test and, at the time, the UNSC was discussing the resolution.
At that time – as the above record shows – the Park Administration’s stance on the KIC was that “the UNSC Resolutions do not apply to the compound.” South Korea’s decision to shut the KIC on February 10 had nothing to do with the UNSC Resolution. The UNSC Resolution, then, can’t be the reason for the shutdown, as the MoU claims.
THE 70 PERCENT FIGURE
On February 12, 2016, Unification Minister Hong Yong-pyo said that “many [are] worried that KIC wages are being used for the development of Weapons of Mass Destruction. We have the related data.”
On February 14, during an interview with KBS, he said: “it is confirmed that about 70 percent of the wages are being transferred to the Seogisil (Secretariat) of the Workers’ Party of Korea (WPK).”
The bottom-line of Hong’s speech was that they had evidence “that the KIC wages are being used for the WMD development.”
Hong’s claim was a groundless lie, and I will explain why.
When South Korean companies at the KIC paid salaries in USD to the DPRK’s Central Special Development Guidance Bureau, 30 percent of that money was deducted, said to be a tax used to improve Kaesong City. No one in the MoU questions this.
This money was used for public services: free education, free healthcare, and social overhead capital. No one asked questions about this money, as it is evident what it was being used for.
The MoU has claimed “around the 70 percent of the wages goes to the North Korean workers”
Then where and how is the other 70 percent used? When the North conducted its first nuclear test in 2006, the UNSC adopted a resolution, and the MoU officially announced: “around 70 percent of the wages go to the North Korean workers”. Since that time, the MoU’s official explanation about this 70 percent has not changed.
The KIC wages in USD were transferred to the DPRK’s Central Special Development Guidance Bureau; then the bureau transferred most of the money to the North’s Minjok Economy Federation (a rough translation of 민족경제연합회), which passed that to the trading companies.
Then the trading companies, with those wages, would purchase payment in kind (like food and daily necessity) from countries like China, Russia, and Malaysia, and the items would be paid to North Korean workers.
On February 15 last year, a meeting was held by the Foreign Affairs and Unification Committee of the National Assembly, and a South Korean lawmaker introduced the case of Mr. Song, an overseas Korean businessman living in Australia.
Mr. Song received money from the Minjok Economy Federation and used that currency to buy items from overseas that would be used as monthly wages to the North Korean KIC workers.
During an interview with South Korean media, Song said that “most of the daily necessities are being imported from foreign countries like China and Russia, and we supply them to Kaesong City and the KIC.”
“But it’s hard to profit a lot from the transactions due to the high distribution costs caused by the poor road conditions and the market price,” he continued.
“If one have studied North Korea even the slightest bit, you can’t possibly say that 70 percent of the KIC wages are going to Pyongyang.”
The North Korean workers would then get a Mulpyo (gift card), go to a designated store, and purchase the items.
You see? 70 percent of KIC wages went from South Korean KIC companies, to the DPRK’s Central Special Development Guidance Bureau, to the Minjok Economy Federation, to trading companies, to the designated store and, finally, to the North Korean workers.
The MoU has accumulated over a decade of data on how the KIC wages moved from 2006 until 2016 – the ministry is perfectly aware of how the designated store is being run.
If the ministry “having the evidence” is true, then it means that the South Korean government had violated the UNSC Resolution.
But right now, only one person seems to not know about how that system works, and that is Minister Hong. Anyone who has studied this field for a long time knows its mechanism.
DEBATE IN THE NATIONAL ASSEMBLY
When I first heard what Minister Hong said about “70 percent being used for WMDs.” I knew that it was a lie, because this proof doesn’t exist. Take a look at the proceedings from a meeting held between Hong and lawmakers on February 15, 2016:
Lawmaker Chung Sye-kyun: “So do you have the proof? Do you or not?…”
Minister Hong: “I have not said that we have positive evidence.”
Lawmaker Chung Sye-kyun: “So, you do not have the proof?”
Minister Hong: “As I do not have the positive evidence, I stated in my announcement that we ‘see’ (such signs) and told the reporter that we “can’t confirm.”
But that is not what Hong said to the media on February 12 and 14, Minister Hong, at the National Assembly, denied what he had explicitly said before. About a year ago, I criticized Hong, saying that if the ministry “having the evidence” is true, then it means that the South Korean government had violated the UNSC Resolution.
If South Korea had proof that 70 percent of the wages were being used for the North’s WMD development, then the government should have reported it to the UN and immediately stopped the KIC.
Currently, the world is suffering from all kinds of fake news. I will tell you this: the MoU’s statements on the KIC are typical fake news.
Featured Image: South Korean government
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