North Korea unexpectedly closes entry to key industrial park, upping tensions

North Korea barred South Korean workers from crossing the border to go to work at a cluster of factories jointly operated by North and South, threatening the future of the last major institution of inter-Korean cooperation. 

The move ratchets up tensions on the Korean peninsula another notch after near daily exchanges of hostile rhetoric. Though the North has not shut down operations at the factories, the act may signal a shift in North Korea’s behavior away from threats of retaliation and toward action. It is not known how long the suspension will remain in effect.

“I think it has something to do with comments by Western and South Korean observers who say that North Korea wouldn’t give up the Kaesong Complex no matter what, that North Korea needs the business too much. They took that as kind of insulting to their leadership,” says Moon Chung-in, a professor at Yonsei University in Seoul.

The complex is located in North Korea, just north of the demilitarized zone, about 6 miles from the border with South Korea. The industrial park is home to about 120 South Korean companies employing an estimated 53,000 North Koreans in factories. It was designed to be a mutually beneficial arrangement; South Korean firms take advantage of the cheap labor of North Korea workers, who get jobs that are well-paying by North Korean standards.

The complex produced $470 million worth of goods last year. North Korea earned about $80 million from the complex in 2012, according to South Korea’s Ministry of Unification. As such, it is an important source of revenue for the cash-strapped country with an expensive military and no tax base. 

The South Korean workers already in the complex were allowed out, but those seeking to enter in the morning were not given access. This comes on the heels of a March 30 statement in which North Korea threatened to close the complex if there was “any attempt to damage the dignity” of the country.

The last time South Korean workers were denied entry was in 2009, after North Korea’s second nuclear test. Operations have continued without major interruption in recent years, despite the flare ups between North and South Korea. When former South Korean President Lee Myung-bak's government cut off inter-Korean exchange after the deadly sinking of a navy warship in 2010, the Kaesong complex continued operating. It also stayed in business after the deadly shelling of Yeonpyeong Island later that year.

In a late morning press release, the South Korean Ministry of Unification expressed regret, saying North Korea’s entry suspension “creates a barrier to the stable operation” of Kaesong and urged North Korea "to immediately normalize the entry and exit.” 

'We hope this situation does not last'

Moon Sun-jong, the owner of a textile factory in the Kaesong complex, said he was concerned about the possibility of an extended halt to normal business, saying, “We hope that this situation does not last.”

“I think we might be OK for a couple of days, but if it lasts for a week, we will have problems with production in our factory. For the time being all we can do is prepare to be allowed back in,” says Mr. Moon.

As of Wednesday morning, there were 861 South Korean nationals at the Kaesong industrial park, 446 of whom were scheduled to go back to South Korea. Some 484 were scheduled to enter Kaesong; 179 were held up at the border awaiting approval by North Korean authorities. Of the 446 who were scheduled to leave, only 46 went ahead, the rest staying behind because their replacements couldn’t get into the complex and their factories needed them to keep working.

The disturbance at the industrial complex comes the day after North Korea announced it would restart an idled nuclear reactor.

Nuclear reactor

As a key gain in the six-party talks on denuclearization in 2007, North Korea agreed to shut down the Yongbyon reactor, but yesterday it announced it would “rearrange and reactivate the five-megawatt graphite-moderated reactor, along with all of the nuclear facilities in Yongbyon, including the uranium-enriching plant, which have been halted and disrupted based on the agreement at the six-party talks,” according to a statement carried by the state-run Korean Central News Agency.

North Korea recently said that the agreements reached during the six-party talks were no longer valid, so the move to restart the reactor is not surprising. It would require several months to get the reactor functioning again.

The entry suspension at Kaesong is the latest escalation in a war of words and gestures between the two Koreas that is showing no sign of abating. Many are asking how bad the inter-Korean relations will get, and whether military conflict is on the horizon. But analysts say that even with the continued deterioration in the security situation, all-out war is still unlikely.

“Not even North Korea wants a war,” says Jang Yong-seok, professor at Seoul National University.

“Kim Jong-un may be aggressive, but he will still calculate the costs and benefits before going to war," he says. "Considering the damage that would be caused, he’s very unlikely to initiate a war.”