President Kim Dae-jung of the Republic of Korea was a great statesman. He was a peace laureate. He came forward with the “Sunshine” policy to create rapprochement with the Democratic People’s Republic of Korea (DPRK). The first-ever inter-Korean summit was convened in 2000. The setting up of the joint industrial complex was the “shining” example of the “Sunshine” policy to bring North Korea in international business and trade and to create investment opportunities in line with South Korean global free trade dynamics.
As a result of this policy, Kaesong Industrial Complex was set up in December 2004. Leading Korean Chaebols (conglomerates) established number of factories in the complex, which was just 10 kilometers away from border with South Korea and 50 kilometers from Seoul. As of latest information, there were 124 South Korean factories. Mostly these factories were labor-intensive taking benefit of cheap and available unemployed North Korean labor force.
The purpose was duel: to address acute poverty in North Korea, and also creating employment opportunities to North Korean workers. Over 54,000 North Korean were employed in these factories. The Kaesong Industrial Complex was a great source of income for poor families and also for the improvised North Korean national exchequer.
A single North Korea worker at the Kaesong Industrial Complex easily took care of his extended family. These factories produced goods from food to shoes to watches and superior quality clothes. Workers were highly satisfied with the working conditions. They were given free lunch at work, coal briquettes and rice to use in their homes. There were other attractive facilities as well.
The Kaesong Industrial Complex reflected the use of soft power by South Korea. But South Korea even does not want to use any political leverage. The reason was peace and harmony. For South Korea, it was just a humanitarian matter to alleviate acute poetry in North Korea. Many North Korean families had heavily relied upon the working of the Kaesong Industrial Complex for nearly a decade.
Unfortunately, during 2004-2016, North Korean nuclear and missile program was intensified. Since 2006 four nuclear tests were conducted. Ballistic and intercontinental missiles were launched. South Korea and Japan were essentially threatened. Under these circumstances, the inter Korean economies became a failure.
It was believed that the government in Pyongyang diverted poor workers’ wages to nuclear and missile programs and buying weapons besides luxury goods as told by the South Korean Ministry of Unification in Seoul. Workers were given only 30 percent what they earned from these factories and over 70 percent wages were taken by the government as South Korean companies used to pay workers’ wages to the North Korean government. Wages accounted for nearly US$ 90 million per annum.
Under North Korean provocative actions, South Korea was compelled to announce the closure of the Kaesong Industrial Complex on 10 February and the next day Pyongyang’s military took over the complex. Seoul suspects that the complex would be converted into a military base.
The Kaesong Industrial Complex was a jewel and the great leap forward offered by South Korea to address North Korean economic woes. With the closure of the Kaesong Industrial Complex, the decade of trust-building and mutual harmony between the two Koreas also came to an end.
Workers’ participation might be introducing a social change and mobility in North Korean communist system, which was resisted by Pyongyang. Human right violations are very serious in context of the Kaesong Industrial Complex as workers could not receive the rightful amount of their wages. Earlier in 2015, UN General Assembly realized gravest human rights violation namely summary executions, enforced disappearances, arbitrary detentions, discriminations, and trafficking.
To rescue Korean companies invested in Kaesong Industrial complex, South Korean government announced US$ 267.6 million insurance coverage and US$ 445 million of loans for small and medium size enterprises affected by the closure of the complex.
The Kaesong Industrial Complex is a setback only fueling tension. A great business success became a failure. Would Kaesong’s closure trigger reforms in North Korea is an important question to be asked at this point in time. Would North Korea change? Some statistics reveal that Kaesong’s income was only 1 percent of North Korea’s total trade of US$ 10 billion a year. Therefore, Kaesong’s closure would not affect North Korea future strategic program, which is detrimental to inter-Korean ties and peace-keeping efforts on the peninsula.
The closure of the Kaesong Industrial Complex has virtually revived the Cold War between the two Koreas. The South Korean government announced the first-ever largest military drills with the United States being conducted in March near the disputed maritime area with North Korea. Tensions are likely to escalate on the Korean Peninsula in the days ahead.
The writer is a Senior Research Fellow at the Institute of Strategic Studies Islamabad. He writes on East Asian affairs.