(EDITORIAL from the Korea Herald on Nov. 28)

Bad precedent

South Korean staff at the inter-Korean economic cooperation office in the
Gaeseong industrial park will be pulled out today and the office will be shut
down as demanded by North Korea. The Gaeseong Industrial Complex, a symbol of
inter-Korean cooperation, is now at a perilous juncture, its fate dependent on
the political will of the two Koreas.

North Korea said it would strictly restrict border crossings starting Dec. 1 and
suspend day-tours to Gaeseong. Once-a-day train services across the border will
be halted and the number of South Koreans working at the joint industrial complex
will be cut, also starting Dec. 1.
These are "first stage" measures, the North said, indicating that more steps may
be taken vis-a-vis the Gaeseong industrial complex, including perhaps an eventual
shut down.
Unification Minister Kim Ha-joon, speaking before a parliamentary committee, said
the possibility that North Korea might totally shut down the industrial estate
could not be ruled out.
There are 88 South Korean companies operating in the Gaeseong industrial complex,
employing some 35,000 North Korean workers who earn about $70 a month. Gaeseong
is the main foreign currency earner for isolated communist state.
A shutdown of the industrial park would deal a significant blow to the North
Korean economy. Perhaps this is why Pyongyang is taking incremental steps instead
of immediately ordering a complete shutdown.
There are signs that Pyongyang is trying to revive the Sinuiju special economic
zone on the border with China. The zone was first proposed in 2002 but the idea
eventually died out when China decided it may compete with China's own special
economic zones.
Pyongyang may be seeking an alternative to the Gaeseong complex in an SEZ near
the Chinese border. However, the precedent it set at Gaeseong will hardly inspire
confidence in investors. Some 1.4 trillion won of South Korean capital went into
developing the complex and setting up factories there. The South Korean
businesses operating in Gaeseong now stand to lose their investments.
If Pyongyang thinks that it can simply replace Gaeseong industrial park with the
Shinuiju zone, it is badly mistaken. Businesses are unlikely to invest in a
country which has a habit of throwing out companies when it is politically
expedient.
Unification Minister Kim indicated that there had essentially been no change in
the administration's North Korea policy. What Pyongyang's next step will be with
regards to Gaeseong is yet unclear. However, it should remember that how the
Gaeseong industrial park model of economic cooperation evolves will have a great
impact on North Korea's future economic projects with the South and other
countries.