[Editorial] Lift the May 24 measures and get down to business with the North

Posted on : 2012-05-24 13:45 KST Modified on : 2012-05-24 13:45 KST

Two years have passed since the government halted inter-Korean interchange and trade with its May 24 measures. In that time, we have gained only hostility and discord between North and South. The Korean peninsula has not become a more peaceful place.
The social and cultural interchange that made up the bulk of the human exchanges has been completely shut off, as has humanitarian assistance with the small exception of infant aid. The May 24 measures were meant to influence North Korea through economic pressure. As it turns out, many of the South Korean companies that took part in economic cooperation trusted their government to do what was right and have suffered serious losses or gone out of business as a result.
This is the unsurprising result when operations are suspended and all investment is banned literally overnight for everywhere except the Kaesong Industrial Complex. A recent Korea Chamber of Commerce and Industry study of 200 companies doing business in North Korea found that South Korean companies took average losses of two billion won (about US$1.7 million). Six out of every ten suffered damages they will likely not recover from. The government argues that it has arranged support, including loans for participating businesses, but the companies themselves say this has been of no real help.
As justification for taking the measures, the government said the sanctions caused somewhere in the neighborhood of 250 million to 300 million dollars in annual foreign exchange import losses to North Korea. The idea is that by preventing the inflow of foreign currency, Seoul can eliminate the potential for it to be used to develop nuclear weapons and beef up armaments. But even that rationale has been wiped away by North Korea’s trade with China, which stood at US$5.6 billion last year, up 62.4% from the US$3.5 billion the year before. In the same period, inter-Korean trade dropped by 10.4% to US$1.7 billion. Meanwhile, Pyongyang has announced plans to cooperate with Beijing on developing Sinuiju and the Hwanggumpyong-Rason areas into complexes along the lines of Kaesong. In these projects, China will enjoy more favorable terms than South Korea does in Kaesong.
Private research institutes have estimated economic damages from the last four years of inter-Korean antagonism at US$8.3 billion for South Korea versus US$1.6 billion for North Korea.
These losses are certainly dismaying, but a bigger issue is the damage that has been done to the ability of inter-Korean economic exchange to take place without government interference. Since the July 7 declaration by the Roh Tae-woo government in 1988, businesses have sought the freedom to operate regardless of whatever political disagreements may come up between Pyongyang and Seoul. China and Taiwan have managed to bring their annual trade levels up to US$150 billion amid political friction.
It is too late to undo the damage of the May 24 measures. What the government needs to do now is lift those measures and conduct an examination of the businesses involved in inter-Korean economic cooperation, with an eye toward getting it up and moving again. Narrowing the economic gap between North and South is a useful way of encouraging change in the North and offers a real means of hastening reunification. It isn’t just the people involved in exchange and cooperation that suffer from this state of affairs-it’s all South Koreans.
Please direct questions or comments to [english@hani.co.kr]

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