SEOUL–At the dawn of the millennium in Pyongyang, the leaders of North and South Korea announced a bold agreement for achieving peace and reunification through economic and cultural exchange.

Today, one of the few remaining fruits of that historic deal, a jointly-run industrial park located six miles north of the border, faces an uncertain future after its suspension in the latest flare-up of inter-Korean tensions.

The Kaesong Industrial Complex lies idle after North Korea deported South Korean factory managers and seized equipment on Thursday, a day after the South suspended operations in retaliation for Pyongyang’s latest rocket and nuclear tests.

For cash-strapped North Korea, which was supplying some 50,000 cheap workers to South Korean textile and appliances manufacturers, the venture had been a big money earner.

N.K. wages funneled to nuke program?

South Korea’s Unification Ministry said workers had been paid some $560 million in wages in total — and that much of that had been funneled to the regime’s weapons programs.

“It appears that such funds have not been used to pave the way to peace as the international community had hoped, but rather to upgrade its nuclear weapons and long-range missiles,” the ministry said on Wednesday in a press release explaining the closure.

The ministry did not indicate if the closure would be permanent, but cemented its position on Friday but cutting the facility’s electricity and water.

On Sunday, the North launched a satellite into orbit using a long-range rocket, a month after conducing its fourth nuclear weapons detonation. The UN Security Council has banned such rocket launches, viewing them as covert ballistic missile tests, and vowed to introduce new sanctions against already isolated Pyongyang.

South Korea’s conservative President Park Geun-hye blasted the launch as “an outright disaster for world peace.”

North Korean workers at South Korean-owned factory in Kaesong complex.

Kaesong had been the sole enduring symbol of an era of engagement pioneered by a Nobel Peace Prize-winning president and continued by his successor. Late President Kim Dae-jung, the country’s first liberal leader who governed from 1998 to 2003, sought rapprochement with the North in what became known as the Sunshine Policy.

Kim’s efforts culminated in an unprecedented summit with now deceased dictator Kim Jong-il in 2000, out of which Kaesong and other initiatives were born. The complex began turning out products in 2004, under Kim Dae-jung’s successor Roh Moo-hyun, who followed a similar line of engagement and participated in the second and final inter-Korean summit three years later.

“I think with the closing of Kaesong Industrial Complex, the North and the South have virtually entered a state of war,” Moon Chung-in, a former advisor to Presidents Kim and Roh, told Asia Times. “I do not see any reversal of the situation in the near future. As international sanctions on the North intensify, inter-Korean relations will be seriously deteriorated.”

Despite coming from the less engagement-friendly side of aisle, President Park entered office in 2013 with a vow to build trust with Pyongyang through cooperative projects such as an inter-Korean railway, a policy she termed “trustpolitik.”

Burning the bridge

South Korean gate to Kaesong Industrial Complex

But by closing Kaesong, Park took aim at a sacred cow that even her engagement skeptic predecessor President Lee Myung-bak left unscathed. Despite a tenure that coincided with rocket and nuclear tests, as well as the sinking of the warship Cheonan, for which the North was blamed, Lee never made good on threats to shut the complex.

The only other time operations were halted, for five months in 2013, was a decision by Pyongyang to protest joint military drills between its neighbor and the US.

“There could have been phenomenal changes in the North if the Kaesong project expanded as planned,” said Moon. “Park burnt the last bridge between the North and the South. I don’t think she has any other card to play with the North.”

Like the greater Sunshine project, Kaesong has long been controversial, with critics repeatedly raising the possibility that it was funding Pyongyang’s weapons programs. The first of North Korea’s four nuclear tests occurred at the height of Roh’s presidency in 2006, not long after Kaesong’s opening.  Wages at the complex are handled by the regime, making their use unclear — but numerous reports have said workers receive only a fraction of their earnings, with the rest going to Pyongyang.

On Friday, however, the left-leaning Hankyoreh newspaper dismissed the ministry’s claims of the funds being used for weapons as an “absurd exaggeration and distortion of the facts,” insisting workers receive 70% of their pay, with the rest spent on legitimate purposes such as uniforms and amenities.

An opinion poll on Thursday showed the public spilt on the closure, with 47.5% in favor and 44.3% against, a gap within the margin of error.

“Could be the end of an era — definitely relations between North and South are at the lowest level in many years,” said Donald Kirk, a veteran Korean correspondent and the author of “Korea Betrayed: Kim Dae Jung and Sunshine.” “This whole sequence of events is highly significant — the one-two punch of the nuke test and rocket launch, the shutdown of Kaesong, North Korea’s reaction, South Korea today shutting off the power.”

John Power is a journalist who has reported on North and South Korea since 2010. His work has appeared in outlets including The Daily Mail, The Christian Science Monitor, Mashable, NK News, Asian Geographic, The Diplomat, The Korea Herald and Narratively, among others.

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