By Jung Ha-Won
Seoul (AFP) Feb 10, 2016
South Korea said Wednesday it would completely shut down a jointly run industrial park in North Korea, which it claimed Pyongyang had been using to fund its nuclear and missile programme.
Days after North Korea launched a rocket that the international community says was a disguised missile test, Seoul said it was closing the Kaesong estate -- the first time it has ever done so.
"Today, in order to stop funds of the Kaesong Industrial Complex from being used to support the development of North Korea's nuclear and missile capabilities... the government has decided to completely shut down" operations, a statement said.
The Seoul-funded estate, just 10 kilometres (six miles) across the border in North Korea, has been a precious source of hard currency for the isolated and impoverished North since its opening.
Some 124 South Korean companies operate factories there, employing about 53,000 North Korean workers.
The estate has been operating "with a view to assisting the lives of the North Korean people, providing impetus to lifting up the North Korean economy and achieving the shared progress for both South and North Korea," the statement said.
"However, such assistance and the efforts of our government have ultimately been wrongly harnessed in the service of upgrading North Korea's nuclear weapons and long-range missiles."
-- Missile Defence System --
Seoul's response comes as the UN Security Council considers tougher sanctions to punish the North for Sunday's rocket launch and last month's nuclear test, as the international community struggles to finds a way to make Pyongyang pay.
Tokyo -- which feels particularly threatened by North Korea's bellicose moves -- on Wednesday unveiled its own fresh sanctions.
These included a ban on North Korean ships entering Japanese ports. "Third country" ships that have visited the country will also be barred.
North Korea insisted that its weekend rocket launch was a peaceful launch of a satellite, but Seoul, Washington and their allies say it was a ballistic missile test.
In the immediate aftermath of the launch, the US and South Korea announced plans to start formal talks on deploying an advanced missile defence system in the South.
That drew rebukes from Russia and China, who fear the Terminal High Altitude Area Defence System (THAAD) could target their weapons.
Moscow on Wednesday lashed out at the move, saying it could "provoke an arms race in Northeast Asia and complicate the resolution of the nuclear problem on the Korean peninsula."
-- "Grave situation" --
Kaesong -- a vibrant complex that produces labour-intensive goods like clothing and kitchenware using cheap but skilled North Korean labour -- had remained largely immune to turbulent inter-Korean relations.
Even in 2010, when the South accused the North of sinking one of its warships and imposed punitive sanctions, Kaesong stayed open.
The only exception was in 2013 during a period of heightened cross-border tensions when Pyongyang effectively shut down the zone for five months by withdrawing its workers.
South Korea's government and companies over the years have invested more than one trillion won ($837 million) in the project.
"All our support and efforts... were taken advantage of by the North to develop its nuclear weapons and missile programmes," said Hong Yong-Pyo, Seoul's unification minister in charge of cross-border affairs.
All South Korean managers currently working at the site, totalling 184 as of Wednesday, would be summoned home, Hong said, adding Seoul had notified the North of the decision.
"We ask for people's understanding about our decision, which was inevitable given the grave situation on the Korean peninsula," he said.
Analysts said shuttering the estate could have major consequences.
"The situation looks pretty grave and I worry about the safety of the South Korean workers (at Kaesong)," said Lee In-Bae, director of the Seoul-based Korea Peninsula Future Forum.
"(The North Koreans) may detain one or two South Korean nationals (at the estate) and try to use them as a bargaining chip for future negotiations."
Hong Hyun-Ik of Seoul's Sejong Institute think-tank said Kaesong in the past "symbolised the clear line between political and military turbulence and civil and economic cooperation. But the line has now been crossed.
"I'm afraid of the impact the decision will have on our sovereign ratings, our economy and our financial systems."
Cheong Seong-Chang, of the same institute, criticised the shutdown as "the worst possible choice" by Seoul which would not hurt the North's economy as much as expected.
"Shutting it down will likely lead to more confrontation between two Koreas, which will further intensify anxiety among South Koreans over national defence, not to mention the economic toll on our companies," he told AFP.
Facts about Kaesong joint industrial estate in North Korea
The move marks the first time Seoul has shuttered the Kaesong estate since it opened in 2004.
Here are some key facts about Kaesong:
WHAT IS KAESONG?
Kaesong is formally labelled as a special administrative industrial region of North Korea.
It is operated as a collaborative economic development zone that hosts South Korean companies attracted by its source of cheap, educated, skilled labour.
Kaesong was born out the "Sunshine Policy" of inter-Korean conciliation initiated in the late 1990s by South Korean President Kim Dae-Jung which led to a historic summit with North Korean leader Kim Jong-Il in 2000.
Established in 2004, the Seoul-funded zone was the last surviving example of substantive inter-Korean cooperation, after contacts between Seoul and Pyongyang were frozen in 2010.
WHERE IS IT?
Kaesong lies 10 kilometres (six miles) inside North Korea, with direct road and rail access to the South.
Hundreds of South Korean managers and other workers pass through the border crossing leading to Kaesong every day. Their names are transmitted in advance to the North Korean side, which then gives the go ahead for them to cross.
WHO WORKS THERE AND WHAT DO THEY DO?
There are currently 124 South Korean companies operating in Kaesong, nearly 60 percent of them textile units, along with machinery electronics and chemical manufacturers.
They employ more than 54,000 North Korean workers, while about 800 South Korean managerial staff work in Kaesong on a regular basis.
HOW SUCCESSFUL HAS IT BEEN?
The South Korean government and companies have invested a total of $852 million in the zone. After a slow start, they reported an average operating profit for the first time in 2011.
Turnover in 2014 was reported at $470 million, with accumulated turnover from 2004 to 2014 standing at $2.66 billion.
WHY IS IT SO IMPORTANT TO NORTH KOREA?
Kaesong is a vital hard currency source for Pyongyang. North Korean workers there earn an average monthly salary of about $150.
In 2012, the North sent tax notices to eight of the companies who had been based their the longest, demanding tax payments of amounting to $160,000.
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