Factory owners remain firm on returning to Gaeseong
Passion for unification greater than fear of business risk
Clothing manufacturer Nine Mode President Ok Sung-seok said he and other factory owners at the joint industrial park in Gaeseong, North Korea, are determined to resume business there if it reopens.
Ok, also a co-vice president of the Corporate Association of Gaeseong Industrial Complex (GIC), said they are aware of the business risks associated with North Korea. Operations at the GIC were suspended indefinitely in February 2016 after Pyongyang carried out a nuclear test and a ballistic missile launch.
His company suffered a 30 percent fall in sales after the GIC shutdown, but he said the sales loss cannot destroy his wish to take part in inter-Korean unification over the long term, after opening a factory in the GIC in 2007.
“I have reasons other than cheap labor and logistical costs for standing by my plan to maintain a business at the GIC,” Ok said during a phone interview on the 67th anniversary of The Korea Times. “I’d call it a special sense of duty toward the peaceful unification of the two Koreas, and I believe other owners at the GIC feel the same way.”
Shin Han-yong, the association’s president and the chairman of fishing equipment manufacturer Shinhan, offered a similar view. His company enetered the GIC in 2007, three years after it opened as part of inter-Korean reconciliatory efforts.
He was running a plant in China and decided to expand his business to Gaeseong when Seoul and Pyongyang agreed on a joint fishing deal during the second inter-Korean summit in 2007. At the time, President Roh Moo-hyun and North Korean leader Kim Jong-il agreed to bolster cross-border economic cooperation to uphold the spirit of the first inter-Korean summit between Roh’s predecessor, Kim Dae-jung, and the North Korean leader in June 2000.
“I thought that producing fishing equipment in North Korea would contribute to the fishing industries of the two Koreas,” Shin said. “I still consider my decision meaningful.”
Yoo Chang-geun, another co-vice president of the association, said he has a vision to promote IT services to the reclusive state through his North Korean employees. Yoo runs SJ Tech, which produces components for semiconductors and cars. The company had also been offering IT services to the other factories there and the maintenance facilities at the GIC. Among the 123 small and medium enterprises at the GIC, SJ Tech was the first to complete a registration for operation there in 2004.
“Many of my employees are the elite from North Korea’s top schools, such as Kim Il-sung University and Kim Chaek University of Technology,” Yoo said. “It’s important to train them with South Korea’s IT because they can share their knowledge with their family members and friends eventually. And this is why I won’t give up running the business at the GIC. It should not be shut down permanently.”
Government urged to step up support
The three executives of the association called on the Moon Jae-in administration to step up its support for the troubled enterprises. All three serve as senior members of the association’s emergency committee, which aims to obtain financial assistance from the government.
Their companies are seen as some of the lucky ones, because they could find a new venue for their factories and continue business. Nine Mode purchased a plant in Hanoi, Vietnam, in July 2016 and has been operating it since. According to Ok, fewer than 20 companies among the 123 enterprises at the GIC have acquired a replacement factory in Vietnam.
With the approval of the Ministry of Unification and the Ministry of Justice, a portion of Shinhan’s fishing products are being made by convicts in South Korea, in addition to the firm’s employees in China.
There are about 30 companies that used to operate at the GIC that are now virtually bankrupt. However, they still cannot file for bankruptcy and undergo rehabilitation because of the complicated procedures for dealing with their remaining assets at the GIC. North Korea illegally seized the assets and threatened to liquidate them.
“In these circumstances, we ask the Moon administration to promptly accept our demand for payment for financial damages caused by the suspension of the GIC,” Shin said.
The losses incurred by the 123 companies due to the GIC shutdown totaled 786.1 billion ($694 million), according to the unification ministry. The firms have insisted on receiving the remainder of the full amount after the previous Park Geun-hye administration provided compensation that equaled only 59.6 percent of the total.
Meanwhile, the three executives downplayed suspicions that the Kim Jong-un regime pocketed the wages paid to North Korean workers at the GIC to develop nuclear and other weapons of mass destruction. The suspicion was cited as a reason to suspend the GIC, in line with the United Nations Security Council’s (UNSC) nuclear sanctions against North Korea.
During a National Assembly audit of the unification ministry in Oct. 13, Minister Cho Myoung-gyon said resuming the GIC could be a violation of UNSC resolutions.
“We simply could not accept Cho’s explanation because the U.N. had acknowledged that the GIC is exceptional, considering its significance to inter-Korean reconciliation,” Yoo said. “Our government voluntarily branded it as if it was in defiance of the U.N.”
Ok speculated that resuming the GIC operation will be tougher than in 2013, when it was suspended for 166 days amid heightened tensions on the Korean Peninsula. He said while the North unilaterally pulled its workers out of the GIC in 2013, it was South Korea that decided to shut the complex down in 2016.
“The ball is in North Korea’s court, whether the GIC can reopen,” Ok said. “Moreover, the issue now concerns not only the two Koreas but also the U.N.”
For the joint industrial zone’s operation to resume, the entrepreneurs called for a revision of the terms and conditions of its operation.
“The relevant clauses should be rewritten in a detailed and precise manner so that neither the South nor North will attempt to close it,” Shin said.
Ok said it remains uncertain whether his plant is among the 19 clothing factories that the repressive state has been secretly running without the South’s consent. Pyongyang indirectly acknowledged the partial operation on its propaganda website Uriminzokkiri after the U.S.-based Radio Free Asia raised suspicions in early October.
Ok and the other entrepreneurs have asked the North to allow them to visit the site to find out what has happened but have not received a response.
I have reasons other than cheap labor and logistical costs for standing by my plan to maintain a business at the GIC. I’d call it a special sense of duty toward the peaceful unification of the two Koreas.