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Weapons of Mass Destruction (WMD)


North Korea Cancels Contracts at Joint Industrial Zone

By Kurt Achin
15 May 2009

An industrial venture once celebrated as a symbol of reconciliation between the two Koreas may be endangered by a sharpening dispute between the two sides. North Korea is essentially tearing up the agreements that make the zone run.

North Korea's official Korean Central News Agency declared Friday "the nullification of all incumbent regulations and contracts regarding the Kaesong industrial complex." If carried through, the move puts the joint North-South factory zone into a legal freefall that could threaten its very existence.

The Kaesong zone, located in North Korean territory just inside the North-South Korean border, was established about ten years ago as an experiment in peaceful cooperation between the two countries, which remain technically at war. South Korean companies use more than 30,000 inexpensive North Korean laborers to manufacture basic consumer goods like cookware and apparel.

Pyongyang says all of the contracts regarding wages, taxes, and usage fees are now void. It says it will issue its own unilateral terms to the South which it can either accept or not.

South Korean Unification Ministry Spokesman Kim Ho-nyeon says Seoul will not accept the North's terms, which threatens the fundamental operating security of the zone. He says North Korea's 'take it or leave it' stance is irresponsible. He adds, it implies the North does not have the will to sustain the Kaesong complex.

The Kaesong complex has experienced other obstacles in tandem with a gradual worsening of North-South relations over the past year and a half. North Korea has detained a South Korean executive for more than a month. He is accused of making inappropriate political comments about North Korea's leadership, and possibly seeking to persuade a North Korean woman to defect.

North Korea has refused to allow any outside contact with the executive, whether by South Korean officials or legal representatives. At a rare North-South government meeting, the North refused to even discuss the detained executive, instead handing the South demands for more money to continue running the Kaesong zone.

Friday's announcement from Pyongyang follows several days of negotiations between North and South aimed at setting up formal talks about the Kaesong zone. North Korea's statement accuses the South of showing an "insincere attitude" in the talks.

Despite the tension, South Korean spokesman Kim says a path to dialogue remains open. He says it is wrong for North Korea to form its Kaesong policy unilaterally. He urges the North to come back to the table and put aside its cancellation of the contracts governing the zone.

Several hundred South Korean managers remain in Kaesong to oversee operations. It remains to be seen how long South Korea will allow them to remain, with the legal framework governing their presence so uncertain.

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