S. Korean companies at Kaesong paying for sand with groceries

Posted on : 2014-03-26 12:04 KST Modified on : 2014-03-26 12:04 KST
On the fourth anniversary of the May 24 Measures, inter-Korean trade halted while the president talks about the “unification jackpot”
 mother of sergeant first-class Cha Kyun-seok
mother of sergeant first-class Cha Kyun-seok

By Choi Hyun-june, staff reporter

South Korean companies building factories at the Kaesong Industrial Complex have recently been unable to go ahead with their construction due to a sand shortage. More than two months have already passed. The companies need to purchase the sand from North Korea, but the South Korean government is insisting that any payments be made in food items and other groceries rather than cash. Meanwhile, North Korea is seeking the cash or diesel fuel it needs to extract the sand. This clash of opinions between North and South has left seven to eight companies severely hurting.

“It’s a case where the May 24 measures have been taken to an extreme,” said one South Korean businessperson at the complex, referring to the ban on inter-Korean trade enacted after the sinking of the ROKS Cheonan navy ship in 2010.

“Tens of millions of dollars in cash go to North Korean workers’ wages at the Kaesong Industrial Complex every year, yet they refuse to allow us to pay cash for what amounts to a few tens of thousands of dollars of sand,” the businessperson added. “I don‘t see how that’s appropriate.”

In March 2013, the South Korean government ordered that payment for US$20,000 of sand purchased from North Korea be made in Choco-Pies and ramen. The company who purchased the sand followed through and North Korea grudgingly accepted food as payment.

“We know about the companies’ issues,” said Hong Jin-seok, who heads the planning and oversight department for the Ministry of Unification’s Inter-Korean Cooperation District Policy Planning Directorate. “We’re currently discussing various issues related to the Kaesong Complex with North Korea, and the sand issue is one of them.”

With Mar. 26 marking the fourth anniversary of the Cheonan warship’s sinking, many are turning their attention to its single biggest legacy: the so-called “May 24 measures.” Their terms would seem incompatible with the “preparations for reunification” that the Park Geun-hye administration has been pushing as a major governance project this year.

Indeed, some are even calling the measures, adopted by Park’s predecessor Lee Myung-bak, the biggest obstacle to the “unification jackpot” the Park administration’s catchphrase.

The May 24 2010 measures brought a near complete halt to all inter-Korean trade outside the Kaesong Complex, as well as visits, aid efforts, and new investment in North Korea by South Koreans. As a result, over 1,000 companies involved in economic cooperation efforts with the North had to abruptly end them. Civic groups involved in humanitarian efforts for North Koreans were likewise kept idle.

The measures also brought a stop to exchange and cooperation efforts between the North and South Korean governments. Even dialogue for divided family reunions and military talks were halted, while the issue of North Korea’s nuclear program turned into a veritable maze to solve.

Now many are questioning whether the measures even had the intended effect of punishing North Korea. Their claim is that instead of causing any serious damage, they merely pushed the North into a closer relationship with China. Figures from the Korea Trade-Investment Promotion Agency (KOTRA) show trade with China going from just 30-60% of all North Korean trade in the early and mid-2000s to 88.3% by 2012. Meanwhile, total North Korean trade volumes actually rose from US$2-3 billion in the early 2000s to US$6.8 billion in 2012. Many are now voicing concern that China could completely fill the gap South Korean left behind, leaving it the North’s major partner in a post-unification scenario.

Another problem with the measures has been their inconsistency. The same South Korean government that forbids private companies from paying cash in the tens of thousands of dollars is involved in multi-billion dollar investment efforts in the President’s own areas of interest. A case in point is the “Rajin-Hasan Project,” signed during a South Korea visit last November by Russian President Vladimir Putin. For that effort, Seoul allowed participation by three South Korean companies or corporations - KORAIL, POSCO, and Hyundai Merchant Marine - which plan to invest US$150 million in the near future. Critics’ cries of discrimination between private and government efforts were met with Ministry of Unification exchange and cooperation bureau director Lee Soo-yong’s explanation that the Rajin-Hasan Project “is an exception to the May 24 measures.”

Seoul has realistic needs beyond mere policy consistency that require the lifting of the May 24 measures, but it has not been able to move readily. Because the administration was elected thanks to support from conservatives, it can’t simply lift measures that many of those supporters want to stay in place. It has talked about “responsible steps” from Pyongyang on the Cheonan sinking as a possible condition to lifting them, but experts agree this is out of the question.

“North Korea has never admitted responsibility for other cases where the evidence was more certain, such as the Rangoon bombing in 1983 and the Korean Air bombing in 1987,” said Kim Chang-soo, director of research for the Korea National Strategy Institute. “You’re never going to get them to make the first admission of responsibility for the Cheonan sinking when even South Koreans disagree about what caused it.”

Some are now suggesting the only way out is through roundabout methods. Paik Hak-soon, a senior fellow at the Sejong Institute, said the Cheonan issue was “not something that can be resolved in a clear way.”

“The government needs to work by lowering its barriers while avoiding any mention of the ‘May 24 measures,’” Paik recommended.

Korea University professor Yoo Ho-yeol suggested an alternative approach.

“You could have the unification preparation committee propose a lifting of the May measures to the government in a neutral zone,” he said.


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

Most viewed articles