Escalating tensions led to N. Korea’s expulsion of S. Korean officials

The Gaeseong Industrial Complex as seen from a South Korean guard post on March 27.

Deterioration in inter-Korean relations could cause trouble for S. Korean companies operating in Gaeseong

The first time that North Korea demanded that South Korean government officials stationed at an office inside the Gaeseong (Kaesong) Industrial Complex leave was early in the morning on March 24. However, tensions began to rise on the afternoon of March 26, after the North learned the contents of a South Korean Unification Ministry policy briefing to President Lee Myung-bak that had taken place earlier in the day. With reports that inter-Korean relations could continue to deteriorate, South Korean companies engaged in inter-Korean economic cooperation projects are expressing their concerns and keeping tabs on any potential consequences.

According to remarks made by officials of the South’s Unification Ministry, Lee In-ho, the head of the North Korean side at the Office of South-North Economic Cooperation and Consultation, told his South Korean counterpart, Kim Woong-hee, to withdraw the 11 South Korean officials working in the office within three days as of 10:00 a.m. on March 24. At the time, the North said the demand was put forward in response to a remark made by the South Korean Unification Minister Kim Ha-joong, who had said on March 19 that the expansion of the Gaeseong Industrial Complex would be difficult unless North Korea’s nuclear standoff were resolved.

The South-North Korean Economic Cooperation and Consultation office, which was established in October 2005, houses both North and South Korean officials. Though located inside of the industrial complex, it is not responsible for its management. Rather, it deals with requests for assistance

from North and South Korean companies operating within the complex.

At the request of the North, South Korean officials asked the North to submit an official document detailing “which agency and who made the demand.” But the North did not respond. Still, the situation was not yet critical. Because the North had made the demand via a verbal message, neither the South Korean government nor its officials at the office regarded the demand as serious.

Beginning on afternoon on March 26, a day before the deadline for withdrawal, tensions suddenly started to escalate when the contents of the South Korean ministry’s policy briefing to President Lee was reported to the media. AT 1:00 p.m. on that day, North Korean officials stepped up the tone of their demand by having vehicles for the withdrawal standing by outside the office.

Shortly after, North Korean officials visited the office every hour to press the South Korean officials to leave. But the South Korean officials, following government orders, remained at the office and reacted as though it was business as usual. There were no physical clashes or slanderous remarks, but the atmosphere became charged after midnight and, in the end, the 11 South Korean officials left the office at 12:55 a.m. on March 27. Five civilian employees remained.

While the incident took place at the office, operation of the factories in the Gaeseong complex is normal and nothing out of the ordinary has been found. An executive from Shinwon, a South Korean factory, said, “A message from the Gaeseong factory said that it was working normally. There were no demands from the North for work reductions,” the South Korean executive said.

Moon Chang-seop, the chairman of the Gaeseong Industrial Complex Management Committee, which is in charge of the complex and is composed of companies doing business within the complex, said, “There were no problems after (the North’s) missile launch and nuclear test in 2006. Compared with that, (the current degree of strain is) nothing. I don’t see any reason to refrain from further investment because both productivity and quality are increasing,” Moon said.

However, some executives expressed a note of wariness about the potential for further deterioration in inter-Korean relations. A chief executive of a South Korean company operating at the Gaeseong Industrial Complex, said, “I’m receiving a lot of phone calls from my foreign clients. Though I’ve said, ‘It’s okay’ and ‘Don’t worry,’ I’m also worried about a further deterioration in relations.” The chief executive, who asked not to be named, said, “I came here because the previous government said it was fine to invest here. How could the new government change that stance?”

An executive of the Small Business Corp., which supports inter-Korean economic cooperation projects, said, “Though the existing companies operating at the complex are concerned, other companies, which are preparing to enter the complex, are likely to put their plans on hold.”

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