(News Focus) N. Korea risks industrial complex to mount pressure on Seoul

By Kim Hyun
SEOUL, March 16 (Yonhap) -- By restricting access to a profitable joint
industrial complex, North Korea showed it is willing to risk millions of dollars
to make a political point and warned South Koreans of major fallout if
inter-Korean tensions continue, analysts said Monday.
The North ratcheted up pressure on Seoul to its highest level yet by holding
hundreds of South Korean workers in the complex at the border town of Kaesong
over the weekend. It managed, however, to avoid international criticism by
letting them go on Monday, though the North continues to refuse access to South
Koreans seeking to visit the complex.
The communist country's military, which oversees the border with the South, gave
no explanation for its actions, but watchers believe the North is protesting an
ongoing U.S.-South Korean military exercise and what it calls Seoul's
"confrontational" policy toward it.
The provocative measure caught Seoul officials off guard, as few expected the
North would risk financial losses in the Kaesong venture that generates millions
of dollars a year, including cash salary payments.
"For the North Korean military, its priority is not the stable operation of the
Kaesong industrial complex but letting South Korea and the United States know its
complaints," Yoo Ho-yeol, a political science professor at Korea University,
said.
"It managed to evade criticism that could have followed if it had continued to
hold the people," he said. "And it drove the Kaesong complex to the edge of
shutdown so as to raise calls inside South Korea to reconsider its hardline
policy," he said.
South Korean firms say the damage is already done, pointing out that nearly half
of the factories, mostly small and medium-sized firms that relocated from China,
will have to stop production if the supply of raw materials is not resumed by
Monday.
"Under these circumstances when we can't even cross the border, who on earth
would try to open a factory in North Korea? No one would think of investing
there," said Park Jong-cheon, a manager for Hankuk Steel that builds factories in
Kaesong. Park said his firm will lay off half of its 40 North Korean employees
next month, as construction orders have dropped by 70 percent.
"We started from scratch training North Korean workers who knew nothing. They are
good now and can work on their own. But now we don't have work to do," he said.
Seoul officials were without direct means of contact with North Korea, limiting
ways for them to detect Pyongyang's motives. The North cut off the last official
phone and fax channel a week ago, protesting the Key Resolve and Foal Eagle
military drill they called a rehearsal for a "second Korean War." Several others
were closed last year as relations deteriorated.
South Korean officials now call North Korea through a commercial phone line owned
by South Korean fixed-line operator KT Corp., and the North responds by
hand-delivered letters.
Analysts say North Korea's ultimate motive is not Kaesong's shutdown, which would
further dampen chances of foreign investment amid global economic woes.
There are 93 South Korean firms operating in Kaesong, employing 39,000 North
Koreans who produce clothes, watches, kitchenware, electronic equipment and other
labor-intensive goods. Their combined output was US$250 million last year.
The Unification Ministry could not say how much the project brings in for North
Korea, but South Korean factory managers say they pay about US$110 a month in
cash for each employee to the North Korean government.
The Kaesong complex, just an hour's drive from Seoul, is the only reconciliatory
project that now remains as an outcome of the first inter-Korean summit in 2000.
Other projects -- tours to the North's scenic Mount Kumgang and historic sites in
Kaesong, Korea's ancient capital -- were all suspended last year.
"North Korea sees the Key Resolve drill as the consummation of South Korean-U.S.
hostile policy toward it," Hong Ihk-pyo, an analyst with the Korea Institute for
International Economic Policy in Seoul, said.
North Korea earlier this month said it will not guarantee the safety of South
Korean passenger jets in its airspace during the March 9-20 joint military
exercise. The warning prompted South Korean airliners to reroute flights using
longer paths they had taken before the North opened airspace in 1998 amid warming
relations.
"North Korea's goal is neither detaining civilians nor shutting down the Kaesong
complex. It wants to tell South Korea that everything will remain unstable as
long as the hostile relations continue," Hong said.
hkim@yna.co.kr
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