North Korea makes overtures to normalize Kaesong project

Posted on : 2009-09-12 12:22 KST Modified on : 2019-10-19 20:29 KST
South Korean authorities are slow to move beyond 5 percent wage hike agreement for workers in Kaesong, leaving dormitory and land rental fees on the table
 and return through the Dorasan C.I.Q. located in Paju city
and return through the Dorasan C.I.Q. located in Paju city

North Korea submitted a plan Thursday to apply a 5 percent hike from last year’s wages for North Korean workers at the Kaesong Industrial Complex starting Aug. 1, 2009 to the end of July 2010. Analysts are interpreting this as signaling a withdrawal of their demand for wages be raised to 300 dollars per month presented at working level Kaesong talks in June.

In a regular briefing Friday, Lee Jong-joo, deputy spokesperson for the Ministry of Unification said that North Korea’s Central Special Zone Development Guidance General Bureau presented a plan to the Kaesong Industrial District Management Committee on Thursday asking that the rate of increase for the North Korean workers’ monthly wages at Kaesong this year remain at 5 percent, the level of increase that has become normative. “According to this plan, the minimum wage for North Korean workers at the Kaesong Industrial Complex would increase from 55.13 dollars to 57.89 dollars,” said Lee.

If this plan is agreed upon, increase in wages would be applied retroactively starting Aug. 1, 2009 and active through July 31 of 2010, she added.

Observers are noting that this appears consistent with North Korea’s recently conciliatory moves aimed at thawing inter-Korean relations. The meaning of North Korea’s proposal on workers’ wages can be analyzed in various ways. First, it appears likely to help the stabilize Kaesong Industrial Complex project operations, which have been heavily shaken by frigid inter-Korean relations. By handling the issue of North Korean workers’ wages in a manner that respects the original inter-Korean agreement, North Korea is sending the message that it will not place an undue financial burden on South Korean tenant companies. As of Aug. 3, there were 112 tenant companies.

Others say there is also room to view this proposal as a follow-up measure aimed at encouraging activity in the complex since it was established as one of five items of agreement between the Hyundai Group and North Korea’s Asia-Pacific Peace Committee on Aug. 17. Following that agreement, North Korea undid its “December 1 measures” by opening up land passage, releasing its restrictions on the number of staff staying in North Korea, and normalizing operations at the Kaesong Consultation Office for North-South Economic Cooperation.

In the broader scheme of things, this latest measures from North Korea could also be seen in a continuum of active gestures toward the U.S. and South Korea, which it has increased since early August. In other words, some observers are suggesting the latest version of a wage increase plan is North Korea’s way of delivering a message on improving inter-Korean relations. Depending on the response taken by South Korean authorities, it could also serve as a catalyst for improving relations between South Korean and North Korean authorities.

The South Korean government is being cautious, however, since not all points of contention between South Korea and North Korea regarding the Kaesong Complex project are resolved through this latest measure. In the presentation for this plan for a 5 percent wage hike, North Korea did not restate a clear position on its previous demands for increasing wages to 300 dollars per month and raising land rental fees to 500 million Won. When asked by a South Korean official about North Korea’s actions, Lee Jong-joo reported that a North Korean official had said, “For the time being, let's adjust it according to the present agreement for a 5 percent increase.”

While it is possible to view this latest step from North Korea as an effective withdrawal of its demands for a wage hike to 300 dollars, it is difficult to make any predictions on how the issue of land rental fees will be handled. It should be noted here that while the issue of wages has to do with tenant companies, the issue of land rental fees is a point of contention involving South Korean authorities. If those authorities do not respond to North Korea’s measures in an active and affirmative manner, it will be impossible to rule out a scenario where North Korea once again demands 500 million dollars in land rental fees in relation to changes in the political situation between the two countries.

The course and speed of South Korean authorities’ response remains an issue. Analysts are saying the South Korean government appears loath to “catch the ball.” South Korean authorities have stated that they do not intend to use this latest step from North Korea as an opportunity for immediately proceeding into inter-Korean discussions with the aim of resolving issues essential to encouraging activity at the Kaesong complex, such as building dormitories or problems related to passage, communications and customs. In order words, they plan to only address the issue of wages at Kaesong, while otherwise maintaining the tone of the Lee Administration’s present North Korea policy.

This approach appears to fall in line with statements made by President Lee Myung-bak at a breakfast talk with advisers on foreign policy and national security on Friday. There, the president said, “Now is both a momentous turning point and a time of upheaval in inter-Korean relations” and that the South Korean government “will not fluctuate from joy to sorrow depending on the situation, but instead will maintain a consistent and open keynote towards North Korea.”

Another government official derided North Korea’s measure by saying, “It means they need cash that badly.” Contrary to this government official’s response, experts on North Korea issues are calling for an active and affirmative response from the government. Kim Yeon-cheol, head of Hankyoreh Peace Research Institute says, “If the government maintains an unresponsive approach to repeated messages from North Korea, and places everything on the nuclear issue, inter-Korean relations could serious deteriorate before long.”

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