Amid the protracted tension over the North Korean nuclear crisis, South and North Korea held the second round of working-level talks on June 19 to discuss ways to operate their joint industrial complex in the North’s border town of Gaeseong. Some anticipated North Korea would come to the meeting with an uncooperative attitude. Others predicted a breakdown in the talks even before the meeting started, since South Korea and the U.S. stressed their tough stance toward North Korea during their bilateral summit on June 16. As expected, South and North were poles apart on key issues during the talks. Yet, the two sides were able to keep their negotiation momentum alive, one of the few positive results of the talks. In a conciliatory gesture, North Korea offered to lift the restrictions it had placed on December first last year without any preconditions. Following the so-called December first measure, the North reduced the daily number of border crossings to six times and also slashed the number of South Koreans allowed to stay at the industrial complex to 880. Here’s Dr. Dong Yong-seung from the Samsung Economic Research Institute to explain.

On a positive note, North Korea showed willingness to continue negotiating with Seoul during the recent talks. Under the December 1st measure, North Korea restricted the number of people crossing the inter-Korean border and that of South Koreans allowed to stay within the industrial enclave in Gaeseong, as well as the time for visiting. The drastic measure has caused many problems for South Korean companies doing business there. I think the North has made an unusual concession this time, realizing that the measure causes manufacturers too much trouble rather than pressuring South Korea. Also, North Korea believes the industrial park business has given many benefits to South Korea alone, even while the North finds it somewhat disadvantageous. Pyongyang seems to have frankly expressed how it felt about the joint business during the latest meeting.

Some experts analyze North Korea’s attitude from an economic perspective. North Korea, which is now under strong sanctions imposed by the international community, cannot easily abandon the Gaeseong project, considering more than 30 million dollars of annual income, the livelihoods of 40-thosuand North Korean workers and prospective foreign investment in the nation. For those reasons, North Korea seems to focus more on the maintenance of the Gaeseong industrial complex than on a complete shutdown. South Korea, for its part, suggested that the two Koreas hold joint surveys of industrial zones abroad sometime next month, along with the establishment of accommodation facilities for North Korean laborers and childcare centers in Gaeseong. Many are now wondering if it is possible to actually implement those proposals.

The South Korean delegation proposed that an inter-Korean joint inspection team visit foreign industrial complexes in Southeast Asia and China and look into wages and management there. Seoul made the proposal in order to let North Korea recognize the reality that the North is making unreasonable requests and that the industrial park in Gaeseong isn’t competitive at all, compared to other similar facilities abroad. The joint inspection of foreign industrial zones may provide one main justification for keeping the Gaeseong business afloat. It’s still uncertain whether the proposal will be put into action, but the plan itself could serve as a good reason for maintaining the Gaeseong complex if the two sides move forward to more extensive negotiations.

Despite these developments, it’s far from easy for South and North to reach consensus because they still have serious differences over main issues involving the Gaeseong industrial complex. During last week’s talks, North Korea repeated its requests for a monthly wage hike to 300 dollars per worker and an increase in the land lease fee to 500 million dollars. In response, the South made it clear that it cannot accept excessive demands, underlining the principle of respecting previous inter-Korean agreements. According to diplomatic experts, North Korea will seek to make small concessions and gain bigger benefits instead at future negotiations, so the Gaeseong complex may be on the verge of shutdown at any time if the North clings to its demands to the last. Meanwhile, the Seoul delegation placed top priority on the release of a Hyundai Asan employee detained by the North. But there was little progress on this issue, with North Korea refusing to inform Seoul of the detainee’s present whereabouts. Dr. Dong makes a cautious prediction that the North’s detention of the South Korean worker, identified by his surname Yu, may be prolonged.

There’s a high possibility of a long-drawn-out detention of the South Korean worker, since this matter is related to not only the Gaeseong industrial park but also the overall relations between South and North Korea. Apart from the detainee issue, all the inter-Korean negotiations and dialogue surrounding the Gaeseong project are not just limited to the joint venture business but represent inter-Korean ties on the whole. North Korea, for its own good, may broach the issue of releasing the detainee or allow a meeting with him.

It is South Korean companies at the Gaeseong industrial complex that suffer the most from the current setback. One manufacturer pulled its factory out of the complex on June 17, becoming the first company to withdraw. Also, buyers are canceling their orders, making the situation even more difficult. On the day of the inter-Korean working-level talks last week, an association of companies in Gaeseong said it was frustrating to see the two Koreas fail to reach agreement on key issues. But the association made positive evaluations of some proposals, saying that they represent the South Korean authorities’ commitment to sustaining and developing the Gaeseong industrial park. It also expressed hope that the follow-up inter-Korean talks, scheduled for July 2, would produce good results. To this end, experts stress that South and North should not lose their dialogue momentum.

At the third round of talks next week, the two sides are expected to continue to sound out each other’s positions. North Korea will take some time to watch how the South will accept its demands, while sticking to its previous position. On the other hand, Seoul will seek to continue offering specific reasons why it can or cannot accept the proposals made by both sides, in an effort to maintain dialogue momentum with Pyongyang. Seoul should continue trying to the very last to persuade North Korea, in order to find a breakthrough in their stalled relations.

The next round of inter-Korean talks will take place in less than a week. We do hope the two sides will be able to make forward-looking proposals and coordinate their differing views successfully during the upcoming talks so the joint business complex in Gaeseong can restore stability quickly.


[Interview] Businessman Runs Online Shopping Mall Selling N. Korean Goods
Staff members are busy dealing with commodities for delivery in the office of Buknam Trade Co. in Ilsan, Gyeonggi Province, northwest of Seoul. The company operates an online shopping mall providing North Korean goods. Agricultural products, such as mushrooms and bracken fern, are displayed on one side of the office and liquors and artifacts are exhibited on the other side. Buknam Trade imports a variety of North Korean goods, ranging from cheaper agricultural and fisheries products to high-priced art pieces, for local sales. Here’s Park Young-bok, the representative of the trading firm.

We conduct business in three areas—software, artworks and commodities. We’ve so far sold some 20,000 paintings by North Korean artists to customers here in the South. We’ve also developed North Korean software items for mobile phone games and delivered them to South Korean users. In addition, we’ve imported 230 kinds of North Korean products, including farming and fisheries products, liquors, health foods, handicrafts and clothes. We make wrapping paper here in South Korea and export it to the North. North Koreans pack their goods with South Korean wrapping paper and send them to the South.

Buknam Trade works jointly with a North Korean firm on the operation of the online shopping mall dealing in North Korean products. It’s the first jointly operated Internet site in the history of inter-Korean trade. When the company orders products through the Internet, North Korea sends them to the South by ship. The South Korean firm then remits money to a Chinese account established by North Korea. Mr. Park is the only South Korean businessman to establish a hot line with North Korea, and he communicates with Northern officials through MSN Messenger service several times a day. Park started this business six years ago when one of his friends introduced him to North Korea-related trade.

Buknam Trade was set up in September of 2003. I was sure of business profitability, considering the cheap yet high-quality North Korean labor and the same culture and feelings shared by the two Koreas. If these merits are combined with South Korea’s capital and planning proficiency, I don’t think there will be any country in the world that is capable enough to compete with us.

In 2006, the number of workers in his company increased to 27, and the sales rose to 5 billion won. Thanks to the Internet, his company conducts trade with North Korea relatively freely, but still, there are many difficulties in carrying out the business because the systems in South and North are widely different and the North finds it hard to understand these differences.

North Korea’s business structure is somewhat different from that of South Korea. There are thousands of factories in the North, but they can engage in trade only through five North Korean companies, which are similar to South Korea’s general trading firms. In general, North Korea does not allow South Koreans to stay in the communist country. It would be ideal if a South Korean technical team stayed in the North to examine the whole production process and select the best products before sending them to the South. Then, we could see a sharp increase in the sales of those products here in South Korea. At present, though, that’s impossible. South Korean technical experts are not allowed to stay in North Korea, which is the biggest problem.

Stumbling blocks don’t exist in North Korea only. There are many regulations set by the South Korean government, too. For example, it bans imports of particular agricultural products with a wide consumer base in South Korea, such as corn and ginseng, in order to protect the local farming and fisheries industry. Worse yet, investment and orders have been reduced considerably due to the protracted deadlock in inter-Korean relations over the nuclear standoff. As a result, the number of workers has decreased to seven from the previous 27, and Park says he may have to make his company even smaller in the future. Yet, the businessman will never give up on this meaningful project. He may suffer economic losses right now, but he’s determined to continue to cherish the rewards he has obtained in the course of conducting the joint trade business.

South and North Korea have been divided for such a long time, and their estrangement has been deepening further. Thanks to my business, I can help South Korean consumers eat bracken fern produced in North Korea and also help North Koreans use South Korean wrapping paper made with excellent printing skills. I find it rewarding to contribute to easing the estrangement between the two Koreas. As a Korean, I feel proud to have done something useful for my divided country, though only in a small way. While enduring the current difficulty, I believe better days will come in the future. With this hope in mind, I’m working on this business now. I must continue it.