GROWING FRUSTRATION BY KIC COMPANIES, BUT NO SIGNS

UNCLAS SEOUL 000815 SIPDIS E.O. 12958: N/A TAGS: PGOV PREL ECON KS KN SUBJECT: GROWING FRUSTRATION BY KIC COMPANIES, BUT NO SIGNS OF WAY FORWARD ¶1. (SBU) SUMMARY: On May 19, Representative Kwon Young-seh (GNP) hosted a forum at the National Assembly to discuss the current situation at the Kaesong Industrial Complex (KIC). Speakers and discussants included MOU Director General for KIC Project Bureau Kim Young-tak, former head of the Korea Land Corporation Kim Eun-jong, Vice Chair of the Corporate Council of KIC Yoo Chang-keun, and other experts from academia. The two-hour session included a desperate plea from the KIC CEOs who called for President Lee's involvement in "saving KIC" and suggestions from experts for a need to build dormitories, among other steps, to address the broader inter-Korean framework in the KIC. MOU remained firm on the ROK citizen's safety as top priority and left "no room for negotiation." Other law makers, journalists, and KIC managers also attended. END SUMMARY. -------------- MOU: No Room For Negotiation -------------- ¶2. (SBU) As the ROKG point man for the KIC, MOU Director-General Kim Young-tak emphasized the ROKG's inability to overlook the detainee case. Kim said that the ROKG view remained unchanged: there was "no room for negotiation" in regard to the South Korean detainee; the rest of the KIC agenda would have to be solved through dialogue, with perseverance. ¶3. (SBU) Recalling the 22-minute KIC meeting between the two Koreas on April 21 which he attended, Kim said that the ROKG's top three priorities were: 1) guaranteed employee safety; 2) guaranteed freedom of access, crossing and communication; and 3) increase in number of North Korean workers from outside of Kaesong area, as 40,000 out of 50,000 eligible workforce in Kaesong City are already employed by the KIC and more than 100,000 North Korean workers are needed once construction is complete. The most recent ROKG attempt to meet with the DPRK was made on May 18, to which the North did not respond. On May 15, North Korea sent a message threatening to close the KIC, if the ROKG continued to disrespect the spirit of the June 2000 Joint Statement, and announcing that existing contracts were void. ¶4. (SBU) Mr. Yu, a Hyundai Asan employee, has been detained by the North since March 30, or 53 days. According to Kim, Yu's detainment is a clear violation of the KIC Agreement, Chapter 10, Articles 2 and 4, which calls for the two Koreas' cooperation in solving any KIC problems and guarantees the accused basic rights. -------------- North Wants Dorms, not KIC Closure -------------- ¶5. (SBU) North Korean Studies University professor Yang Moon-soo interpreted current DPRK behavior as an expression of frustration over slow progress in the promised expansion. The present KIC problems, according to Yang, stemmed not from KIC itself, which North Korean wanted to expand more rapidly, but from the South's anti-reconciliatory behavior such as cancellation of food and fertilizer assistance and refusal to build dormitories to allow an increased number of North Korean workers. North Koreans saw the construction of dormitories as an important symbol for KIC expansion and ROKG commitment. According to Yang, now may not be the right time to show this commitment, but "no action means slowly killing the KIC," which would lead to the end of inter-Korean relations. "The ball is in South Korea's court," Yang said. ¶6. (SBU) Yim Eul-chul, Kyungnam University professor, former reporter and a close observer of KIC since its inception, suggested solving current KIC issues by addressing a bigger inter-Korean framework; first by providing fertilizer and food aid to win the North's confidence, and second, by negotiating wages and land lease fees through dialogue. Yim did not believe North Korea's April 21 request for wage and land lease increase stemmed from the North's greed for profit. In reality, North Korea suffered a great deal from the Lee administration's decision to cut off aid last year and a slight increase in wage would partially help the difficult situation. Yim said the biggest problem between the two Koreas is lack of communication, not KIC. Once the "big picture" (aid) is solved, the rest (wages and Yu's case) would be easily addressed, Yim said. ¶7. (SBU) Turning to the detainee case, Yim believed that North Korean treatment of Hyundai Asan employee Yu, a representative of a South Korean company with a long history of a friendly working relationship with North Korea, would be humane. Yim argued that the current ROKG handling of Mr. Yu -- number one agenda item and precondition for future meetings -- was counterproductive to Yu's fate. -------------- --- KIC Companies Vow to Remain Even After Closure -------------- --- ¶8. (SBU) Companies blamed the ROKG, not the DPRK, for the current state of KIC and believed the construction of dormitories would send a positive message to the North. Vice Chair of the Corporate Council of KIC and CEO of S.J. Tech Co., Ltd. Yoo Chang-geun described the current situation as a "grave South-South problem, not a North-South problem." Expressing frustrations with the ROKG which continues to solicit "endless patience" from the companies without offering a way forward, Yoo demanded President Lee's immediate attention to the KIC situation. Yoo said he could not understand how his government could allow inter-Korean relations to deteriorate to this extent because of one ROK citizen, when in fact over 1,000 ROK citizens' livelihood depended on KIC's operation. In case of KIC closure, Yoo and other CEOs operating in the KIC, said that they were prepared to "send workers home and remain (themselves) in the KIC." ¶9. (SBU) Rep. Kwon (GNP) cautioned against "a quick fix" for the current situation and over-emphasis on dormitory construction. Kwon said border difficulties also occurred between former East and West Germany and called for a careful, comprehensive approach to the current KIC challenge. -------------- KIC May 2009 Stats -------------- ¶10. (SBU) As of May 2009, 106 factories (63 textile; 22 machinery/ metal; 11 electronics; 7 chemical; 2 food; 1 timber/ paper) are operational in the KIC and 28 are under construction, scheduled to be completed by end of 2009. 40,134 North Korean workers (84 percent female in 20s and 30s) are employed by the KIC. In 2005 and 2006, the ROKG subsidized 50 percent of the companies' costs at KIC, but the sizable subsidy was replaced by optional "insurance," which the companies had to purchase independently, in 2006. STANTON