hankyoreh

May 3. The company’s production at the Kaesong Industrial Complex has been halted since Apr. 3. (by Gil Yun-hyung)

By Gil Yun-hyung, staff reporter

“You need to keep watching the circuit board as you solder. It’s not an easy job, is it?”

On May 3, the last seven South Koreans left who had been left at the Kaesong Industrial Complex returned to South Korea. On the same day, Koh Byeong-seon, president of Dongwoo Control, one of the companies operating at Kaesong, was at the company’s headquarters in Incheon, watching the production line with eyes bleary from lack of sleep.

Dongwoo Control, a manufacturer of printed circuit board (PCB) controllers that are used in electronic devices such as rice cookers and water heaters, began work at Kaesong at the end of 2007.

“At Kaesong, we have four more production lines as big as this,” Koh says. “It’s already been a month since we had to stop operations there.”

Since North Korea blocked South Korean personnel from entering the complex on Apr. 3, the production line at the Dongwoo Control main factory in Incheon has been running around the clock. The company has so far managed to meet its deadlines for its subcontracting work, for which it purchases the components and then delivers the final product.

However, the company has had to shelve its toll processing work, which involves making finished products with raw materials provided by an outside company, since all of its production lines for that area of work are located at the Kaesong Industrial Complex. Among the toll processing work that Dongwoo Control is in charge of are parts used in Samsung Electronics’ new Galaxy 4 smartphone.

“While I’m worried about compensation for the raw materials, I feel even sorrier about the fact that our customers are not able to receive any orders from Samsung,” Koh said. Since the company’s clients are well aware of the situation faced by Dongwoo Control, they have not yet said that they will work with another company. If the situation continues indefinitely, they will be left with no choice. “Friendship alone is not enough to keep a business running,” Koh said sadly.

Other companies doing business in this area are in even worse shape. While so far no requests have been made for compensation for the raw materials or for violations of delivery deadlines, some companies say that have been notified that their clients are taking their business elsewhere.

Most of the companies operating at Kaesong are involved in clothing and sewing. They have already incurred huge losses because they have missed the new product release season for spring and summer attire.

These losses are even more of a blow for companies that have to provide their employees with long periods of training. “For companies like S Pottery, it takes two years or more of training from the time they hire a new employee until that employee can actually work,” Koh said.

The Corporate Association of Gaesong Complex is concerned that if this situation continues as is, some firms would start to go bankrupt.

Koh founded Dongwoo Control in Sep. 1979, but it was in the early 2000s that he began thinking about expanding overseas. After visiting 20 sites in China and Vietnam starting in 2003, he ultimately decided to relocate his business to Kaesong.

“While from the perspective of the company you always have to think about the bottom line, I wanted to choose a site that would allow me to contribute something to restoring peace to Korea and to creating jobs for both North and South Koreans,” Koh recalled.

When the groundbreaking ceremony was held for the company’s Kaesong factory in Mar. 2008, several hundred employees and even public officials from Incheon gathered to take some commemorative photographs. With business going smoothly, Koh made plans to expand the factory facilities in 2013.

“At first, the North Korean workers didn’t even know what the ‘circuit’ in ‘printed circuit board’ meant,” Koh said. “It was really satisfying to see the workers that we had fed and trained for six months start to smile and do their work well.”

As of the end of Mar. 2013, Dongwoo Control employed 497 North Korean workers.

But later, as inter-Korean relations became more strained, the company ran into more problems. One of the biggest complications is debtor conversion, which refers to separating the debt of the parent company from the debt of the subsidiary that is operating at Kaesong.

With its credit rating of BB+, Dongwoo Control had been regarded as an exemplary small company. But when the debt of the parent company was combined with the debt of Kaesong Dongwoo, the separate corporation set up in Kaesong, its credit rating fell to C.

Companies at Kaesong experienced various difficulties after the May 24 2010 economic sanctions against the North, which the South Korean government implemented following the sinking of the Cheonan naval vessel. South Korea accused North Korea after having been behind the sinking, but the North has denied involvement. Some companies that had already built facilities in Kaesong were thrown into a panic when they were told they could not bring in their manufacturing equipment. Others were not able to get recognition for the amount of money invested after the measures took effect.

“The government has put forward a proposal to use the Inter-Korean Cooperation Fund to provide 300 billion won (US$273.3 million) in operating expenses in the first round of aid, but financial institutions are bound to ask about a company’s credit rating and collateral during the actual process of offering a loan,” Koh said.

If the 300 billion won were equally divided among the 123 companies, each one would be able to receive around 2.5 billion won in assistance. Some are claiming however, that since the companies are currently unable to use debtor conversion, hardly any of them will actually be able to borrow this money.

“People assume that we receive huge tax benefits, but in fact we have suffered more discrimination than we would have if we were doing business in South Korea,” Koh said.

Koh’s only wish is for the Kaesong Complex to be reopened. “Sure, there are differences of opinion between North and South. If we go down the same road, we can find a way,” he said. “Bearing in mind that Kaesong is beneficial both for the North and the South and that it is a project that can reduce the cost of reunification, we have to do whatever it takes to save the complex.”

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