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IdentifierCreatedClassificationOrigin
09SEOUL1005 2009-06-24 10:51:00 CONFIDENTIAL Embassy Seoul
Cable title:  

NORTH KOREA SHOWS WILLINGNESS TO KEEP KAESONG

Tags:   PGOV PREL ECON KS KN 
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INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 6170
RUEHMO/AMEMBASSY MOSCOW PRIORITY 9930
RUEHKO/AMEMBASSY TOKYO PRIORITY 6259
RUEHSH/AMCONSUL SHENYANG PRIORITY 4634
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					  C O N F I D E N T I A L SEOUL 001005 

SIPDIS

E.O. 12958: DECL: 06/24/2019
TAGS: PGOV PREL ECON KS KN
SUBJECT: NORTH KOREA SHOWS WILLINGNESS TO KEEP KAESONG
INDUSTRIAL COMPLEX OPEN

Classified By: POL M/C Joseph Yun. Reasons 1.4 (b/d).



1. (C) Summary: The third round of Kaesong Industrial Complex
(KIC) talks on June 19 convinced involved ROK participants
that North Korea would not close the KIC, because the North
Korean delegation did not walk out during the lengthy meeting
and the next meeting date was brought up by the DPRK
delegation. As the priority item, the ROKG demanded the
release of Mr. Yoo, the ROK detainee held since March 30, and
better border crossing access. The ROK side also put down a
clear marker on KIC development by proposing three "guiding
principles" to make the project more transparent,
business-oriented and less political. North Korea demanded
USD 500 million from the ROKG because KIC provided external
benefits. The DPRK repeated its earlier demands for
increases in rent and wages, but showed some flexibility in
lifting border restrictions placed since December 1, 2008.
For mid- to long-term goals, the DPRK proposed construction
of a nursery, a dormitory and more roads and the ROKG
proposed a joint trip to other industrial parks in the
region. End Summary.



2. (SBU) The third round of inter-Korean negotiations at the
KIC took place on June 19, following April 21 and June 11
meetings. The talks lasted about three hours, including a
100-minute morning session and a 60-minute afternoon session.
The ten-member ROK delegation was led by Unification
Ministry official Kim Yong-tak, who also led previous KIC
discussions. Park Chul-soo, Deputy Director of the Central
Special District Development Guidance Bureau, led the DPRK
delegation, also consistent with previous DPRK delegation
composition.



--------------------------


North Korea Willing to Keep KIC Open


--------------------------





3. (C) The ROK delegation intentionally opened the morning
session with a 40-minute key note speech of 33-pages, which
was faxed to the DPRK in advance. While the DPRK delegation
interrupted three times, expressing annoyance and anger over
the long speech, the North Korean officials did not walk out
of the meeting. According to Suh Ho, Ministry of Unification
(MOU) Director General for Dialogue Planning Office and a
member of the ROK delegation, the speech was a litmus test
for the North. Had North Korea walked out during the speech,
it would have signaled its intention to close the KIC.



4. (C) Another "test" for the North, designed during a recent
ROK strategy session, was not metioning the next meeting
date. Until the end of the afternoon session, the ROK
delegation remained silent on future meetings. Finally, the
DPRK asked when the delegations would meet again, to which
the ROKG responded July 2. The DPRK initially
counter-proposed the ROK date with an earlier time, June 30,
but later conceded to July 2. Both "tests" proved to the
ROKG that North Korea was willing to keep KIC open, Suh said.




--------------------------


ROK Detainee


--------------------------





5. (C) As a top priority, the ROK delegation urged the North
to release Mr. Yoo, who has been held in North Korea since
March 30. The ROKG argued that Yoo's detention without
visitation rights was against the "cooperative spirit of the
Korean people," a phrase often used by the North against
South Korea. The ROK delegation also made an effort to
convey two letters from Yoo's family: one letter to Yoo
inquiring about his health and another to the DPRK
authorities to allow family members to meet with Yoo.



6. (C) The DPRK delegation said that Yoo is currently under
investigation under the 2004 Agreement on the Entry and Stay
in the Kaesong Industrial Complex and Mt. Kumgang Tourist
Zone and that all procedures regarding Yoo's case would be
based on this document. The DPRK delegation declined to
receive the two letters from Yoo's family, but told the ROK
delegation to pass the message to Yoo's family that "he is
all right." This was the first official accounting of on
Yoo's welfare -- another positive signal for the ROKG.



--------------------------



Guiding Principles


--------------------------





7. (SBU) After much interagency discussions in Seoul, the ROK
delegation conveyed the following three principles in order
to make the project less prone to ups and downs in
North-South relations:

- Transparency: Both sides must observe inter-Korean
agreements and relevant contracts, laws and institutions;

- Business Orientation: KIC must promote business and
economic goals; it should not be influenced by political or
military events or developments; and

- Future-Oriented Development: Both sides should seek to
develop the KIC into an internationally competitive
industrial park, with a future-oriented perspective.



8. (C) To drive the points home that Pyongyang's demand to
unilaterally hike wages and rents was not reasonable, the
ROKG proposed a joint visit to industrial parks in China and
Vietnam, possibly to more developed economies, such as the
United States and Latin America. The purpose of the trip
would be to observe operations of other joint economic zones.
As expected, the DPRK delegation did not provide a response,
and no details for the trip have been arranged.



--------------------------



--------------------------


ROK and DPRK Priorities: Access Guarantee Vs. More Fees


--------------------------



--------------------------





9. (SBU) ROK delegation proposed the following:

- Withdrawal of entry-exit limitations imposed by the DPRK
since December 1, 2008;

- Resolution of regular, safe and guaranteed passage,
communication and customs; and

- Establishment of a "Joint Committee on Passage and Stay" to
implement regular and safe passage.



10. (SBU) The ROKG rejected the North's demand for increased
land lease fees and wages.



11. (C) The DPRK placed its priority on increased land lease
fees and wages. The DPRK delegate explained that the current
land lease fee was granted as a "preferential" rate in the
"cooperative spirit of the Korean people." The North Korean
delegation argued that since the Lee administration decided
to no longer honor the "cooperative spirit of the Korean
people," it would not be possible for North Korea to continue
to provide a preferential rate.



--------------------------


USD 500 Million Fee


--------------------------





12. (C) Not covered by the press is the North Korean demand
for USD 500 million, which was first conveyed on June 11.
According to our MOU contacts, Pyongyang has characterized
this request as a security fee, not an economic or business
item. Asked to clarify, the North Korean said that the South
now had access to a strategic area of the DPRK, thus
enhancing South Korean security and deriving strategic gains.
During the June 19 meeting, the ROK delegation rejected this
request.



--------------------------

--
Potential Progress on Access, Nursery, and Dorms


--------------------------

--



13. (C) Providing another positive signal to the ROKG, the
North said that it would consider lifting measures on border
crossing at KIC. The DPRK also proposed working-level
consultations on issues related to the construction of a
nursery, a dormitory, and roads. Suh told poloff that a
nursery would be built before the dorms, since it was smaller
and cheaper. Although the Blue House gave a green light for
the dormitory construction, a project of that scale and
budget would require "much improved" political atmosphere,
Suh said.



--------------------------


Comment


--------------------------





14. (C) Despite the strained inter-Korean relations, neither
the South nor the North wants to pull the plug on the Kaesong
Industrial Complex. More than that, the KIC is quite useful
for both. For Pyongyang, the project is a source of foreign
currency. The North is prepared to play, as long as the
price is right, as demonstrated by its narrow set of
financial demands. In return, the South too can be flexible,
but the price has to be reasonable and the North must provide
at least some political cover, including a resolution to the
detained South Korean citizen. MOU officials, very
pessimistic even a week ago, are now in a better mood,
hopeful for the next round of talks on July 2.
STEPHENS