News Focus) Tough road ahead for South Korea as North reconsiders joint venture

(By Kim Hyun
SEOUL, April 23 (Yonhap) -- South Korea is analyzing North Korea's demand for
more cash to run a joint industrial park on its soil, a move made against a
backdrop of its increasing threats against Seoul.
Seoul officials hope that negotiations on the joint park will nudge open a rare
dialogue channel to help ease cross-border tension, but analysts say that was not
what Pyongyang had in mind at talks this week.
In the first government-level talks in more than a year on Tuesday, North Korea
demanded the two nations begin negotiations to discuss operational changes in the
industrial park in its border town of Kaesong. Pyongyang said it will reconsider
"preferential treatment" given to South Korean firms at the park, such as low
wages and the free use of land, and review contracts overall on the joint
venture. With the curt announcement, the meeting ended in 22 minutes after 12
hours of wrangling over procedural disputes.
North Korea is seemingly demanding more cash and wanting negotiations for it, but
watchers say its real intention is more ominous.
"Our government is comprehensively looking into the proposal North Korea has made
at this time," Unification Ministry spokeswoman Lee Jong-joo said on Thursday,
asked by reporters over Pyongyang's intentions on the Kaesong venture.
"We are carefully analyzing North Korea's recent actions, the situation of the
Korean Peninsula, as well as internal goings-on in the North," she said.
Pyongyang's motives are difficult to read because of its coercive rhetoric that
suggest demands on the Kaesong complex may be about inter-Korean politics. In the
document handed to the South Korean delegation at the talks, North Korea accused
the Seoul government's pro-U.S., "confrontational" policy of wrecking the joint
industrial venture and laid out its specific demands.
North Korea said it had opened Kaesong to South Korea, risking sensitive military
sites in the border town to honor the summit accord reached by its leader Kim
Jong-il and then South Korean President Kim Dae-jung in 2000 to boost
reconciliation.
"Now that the South Korean authorities have trampled on inter-Korean summit
accords and reversed inter-Korean relations so as to follow invasive foreign
forces and continue confrontation with us, we have no other option but to
reconsider all preferential treatment we have granted to the South under the
summit accord," the document said.
Pyongyang criticized Seoul's support of U.N. sanctions against its April 5 rocket
launch and its plan to participate in a U.S.-led campaign, the Proliferation
Security Initiative (PSI), as "confrontational."
A day after the meeting Tuesday, North Korea accused the South Korean military of
arbitrarily moving a border marker, lambasting it as a "severe military
provocation." Seoul denied the accusation as groundless.
Inter-Korean relations have dipped to their lowest point in a decade since Lee
took office in February last year, pledging a tougher position on North Korea's
nuclear program and ending the flow of unconditional aid initiated by his liberal
predecessors. Pyongyang accuses Lee of abrogating inter-Korean summit accords.
The Kaesong venture was launched by Kim Dae-jung and developed by his predecessor
Roh Moo-hyun.
"Our government seems to be trying to read good signs in North Korea's proposal
to meet again. I take the opposite opinion," said Cho Bong-hyun, a North Korea
analyst with South Korean lender IBK and a frequent visitor to North Korea.
Wage hikes and land fee payments certainly serve the interest of a cash-strapped
North Korea, but its ultimate intention is shutting down the joint venture as a
pressure tactic to change Lee's conservative policy, he said. When the two sides
meet again, North Korea will press for steep increases, which would be
unacceptable to small South Korean firms already struggling to survive the global
economic downturn, he said.
North Korea wants to pass the responsibility for shutting down the joint venture
to South Korea, Cho said. North Korea is afraid of being blamed for the shutdown,
which would further jeopardize its image as a business partner to foreign
investors and may trigger an internal backlash from its workers losing jobs, he
said.
The Kaesong venture, just an hour's drive from Seoul, opened in late 2004,
joining South Korean capital and technology and North Korean labor and land.
South Korean firms pay their North Korean 39,000 employees between US$70-$80 on
average a month, less than half of what they would pay to Chinese workers. The
wages, directly wired to North Korean government's bank accounts, amounted to $26
million last year, according to ministry data.
Hong Ihk-hyun, an analyst with the Korea Institute for International Economic
Policy in Seoul, said inter-Korean dialogue is not on North Korea's priority
list.
Pyongyang withdrew from six-party denuclearization talks, protesting the U.N.
Security Council's condemnation of its rocket launch. Analysts say this is North
Korea beckoning the U.S. to begin bilateral talks.
For North Korea, its "preferential treatment" for South Korean firms means favors
granted by North Korean leader Kim in the 2000 summit agreement, Hong said. With
Seoul suspending the summit accord, Pyongyang also wants to ditch benefits it has
given to South Korean businesses in Kaesong, he said.
"North Korea is saying it will treat South Koreans as they treat foreigners --
'If our demands are met, the joint venture will continue, but otherwise, it will
have to be terminated,'" Hong said.
hkim@yna.co.kr
(END)