hankyoreh

An attendee despairingly places his head in his hands during an emergency meeting of the Corporate Association of Kaesong Industrial Complex at the headquarters of the Korea Federation of SMEs in Seoul’s Yeouido neighborhood

“The primary duty of the state is to protect the lives and assets of its citizens. Are we not citizens of the Republic of Korea? What needs to be clearly addressed is the fact that our government suddenly decided to suspend operations at the Kaesong Industrial Complex, notified the tenant companies of this without any deliberation and put this into effect immediately. The government ought to pay us reasonable compensation; all this talk about covering the cost of insurance or giving us a reprieve on our taxes isn’t going to cut it. Just because we’re asking the government to take responsibility for the loss that we suffered because of the government’s decision and for no fault of our own doesn’t mean that we’re criticizing the government. Wouldn’t you agree?”

As Jeong Ki-seob, chairman of the Corporate Association of Kaesong Industrial Complex (CAKIC), poured his heart out, about 300 representatives from the 124 tenant companies at the complex frequently chimed in to signal their approval.

Jeong was speaking during an emergency conference on the complete suspension of operations at the Kaesong Industrial Complex, which was held at the headquarters of the Korea Federation of SMEs in Yeouido on the morning of Feb. 12.

Without exception, the company representatives at the conference admitted that they were at their wit’s end and that all hope is gone. Given that North Korea has announced that the complex is shutting down and that the area will return to military control, the companies have even had to abandon their hope that the complex might be reopened.

Company representatives reported that they were basically still in a state of shock. After South Korea announced that it would completely suspend operations at the complex and North Korea responded by expelling all the South Korean staff and freezing all assets inside the complex, South Korean business owners were essentially forced to vacate the premises empty-handed, leaving behind most of their finished products and machinery.

“In 2013, we were able to bring our raw materials with us. This time, the staff at the factory had to leave with just the shirts on our back, with just enough time to turn off the electricity and lock the doors. We left 120,000 bundles of completed socks, worth 1.2 billion won (US$994,000), behind us at the complex,” said an executive at a sock manufacturer who set up shop in the complex eight years ago. There are 10 pairs of socks per bundle.

“We tried to fit as much as possible into our trucks, but in the end they didn’t let us. We had to leave behind 100,000 sheets of fabric, which is worth between 700 and 800 million won[US$580,000-663,000],” said a manager at apparel firm Nine Mode named Oh In-yeol.

After entering the Kaesong Complex in 2006, Nine Mode had operated a small factory, until taking out a five-billion won (US$4.14 million) loan to construct a new building in Feb. 2015. The considerable investment that the company had pumped into the complex made this unexpected development all the more devastating, as the dazed expression on Oh’s face showed.

Since the companies were not allowed to remove the finished products with looming delivery deadlines, they are already voicing concerns that their clients will file for compensation, their credit ratings will tank and their subcontractors will suffer collateral damage.

“So far, none of our clients have told us they want to end our business relationship, but if we aren’t able to find a replacement production site, I think we’ll lose our supply contracts before long,” said an executive with one clothing manufacturer.

“We’re supplying four companies, and they’re 35 million won [US$29,000] behind in their payments. We still haven’t paid back the low-interest loan we got from the government back in 2013, and we were about to liquidate our factory at the Kaesong Complex,” said Jeong Tae-hui, who works for a food supplier called Hanbit General Logistics.

But while losing supply contracts is one concern, companies are just as worried that their credit ratings may take a hit.

“Confidence in the Kaesong Complex itself has fallen, so I doubt that the tenant companies will be getting orders even if the complex does come online again. It’s all over,” said Park Yong-guk with a sigh. Park directs the Kaesong branch of an apparel manufacturer called Green Fiber.

While South Korea’s Ministry of Unification estimates that the government and private-sector companies have invested around 1.02 trillion won (US$845 million) in the complex, the total losses are thought to amount to several trillion won, if the issues of compensating subcontractors and falling credit ratings are taken into account.

On Friday, the government announced emergency assistance measures for companies who are enrolled in the insurance program for inter-Korean cooperation projects. These measures would include compensating the companies, delaying their deadline for paying local and nationwide taxes, and suspending the collection of those taxes. But these measures only caused representatives from the tenant companies to lose their temper once more.

The loss that the companies will have to bear is much worse than when operations at the complex were suspended for five months in 2013, but the government relief measures are exactly the same as two years ago, companies complain.

“It took the tenant companies two years to return to normal after the complex restarted operations in 2013. Because the companies had enough time in 2013, they were for the most part able to remove their completed products and raw materials, only leaving behind their capital investment in the facility. This time, though, they weren’t able to do that,” said a spokesperson for CAKIC.

The companies are also unwilling to regard the payment of insurance money as being compensation for their losses. Only 76 of the 124 tenant companies had signed up for the inter-Korean cooperation insurance, and the total amount of compensation is only 285 billion won (US$236 million).

“We hadn’t been at the Kaesong Complex for very long so we were still in the process of signing up for insurance when this happened. We have no idea what we’re going to do,” said the president of an electronics manufacturer.

“Instead of providing relief, the government ought to be offering reasonable compensation. It ought to take responsibility for its actions,” Jeong said, as he strongly criticized the government’s measures.

The workers who find themselves without a job because of the closing of the Kaesong Complex are also bemoaning their lack of options. Along with the 54,763 North Koreans working at the complex, there were also 803 South Koreans working there (as of Nov. 2015).

“The government is offering some relief to the companies, but it’s ignoring the workers. I have no idea how I’m going to make a living in the future,” said an individual surnamed Ahn who is the regional manager for one manufacturing firm.

By Ko Han-sol, staff reporter

Please direct questions or comments to [english@hani.co.kr]