[Initial Insight] Kaesong Industrial Complex, When Will the Closed Doors Open Again?

[Asia Economy Reporter Kim Jong-hwa] "More than 30% of the companies operating in the Kaesong Industrial Complex are on temporary shutdown, effectively in a state of closure, and the number of companies unable to endure any longer due to COVID-19 continues to increase. We urgently request the establishment of survival measures."

On the 10th, in front of the Blue House, at a press conference held by the Kaesong Industrial Complex Enterprises Association marking the 6th anniversary of the full suspension of the Kaesong Industrial Complex, the desperate appeals of businesspeople erupted.

They also stated, "On February 10, 2016, the Park Geun-hye administration’s unilateral and forced closure of the complex dealt the first death sentence, and two weeks ago, the Constitutional Court’s ruling upholding the full suspension of the Kaesong Industrial Complex delivered the second death sentence," expressing their frustration by saying, "The government is shifting its faults onto the businesspeople."

The Kaesong Industrial Complex, which first welcomed 18 companies in June 2004, has endured various incidents such as the detention and release of South Korean workers in 2009, the Cheonan sinking and Yeonpyeong Island shelling in 2010, and North Korea’s third nuclear test and worker withdrawal in 2013.

In particular, when it resumed operations in September 2013 after 134 days, the North and South adopted the "Agreement for the Normalization of the Kaesong Industrial Complex," which guaranteed the normal operation of the complex regardless of political circumstances, but this was not upheld.

In January 2016, following North Korea’s fourth nuclear test and long-range missile launch, the government succumbed to international pressure, especially from the United States, and suspended operations in February of the same year, to which North Korea responded by closing the complex.

Although these events occurred amid difficult inter-Korean relations and complex international politics, the promise was broken first by our government, and businesspeople suffered due to such national policy decisions.

Naturally, compensation by the government was provided, but it is not considered sufficient.

The damages reported by resident companies amounted to 964.9 billion KRW according to government reports, and 786.1 billion KRW as identified by government surveys. The government provided a total of 534.7 billion KRW in support, including 468.7 billion KRW in 2016 and 66 billion KRW in 2017. However, this was essentially a loan-type trade insurance payment that must be repaid if the Kaesong Industrial Complex resumes operations. This is why complaints arise, saying, "It’s an interest-free loan during the suspension period, so how can this be called compensation?"

Regarding the Constitutional Court ruling on January 27, Kaesong Industrial Complex businesspeople may have felt it was an inhumane act, as if even nailing shut the already tightly closed factory doors.

In response to the constitutional complaint claiming the Park Geun-hye administration’s suspension of the complex was unconstitutional, the Constitutional Court dismissed the case, stating, "Even if just compensation was not paid for the restriction of property rights or financial losses claimed by the petitioners, the suspension measure in this case cannot be seen as violating constitutional provisions or infringing on the petitioners’ property rights."

A remark from a businessperson heard at the press conference lingers in my ears: "A bad country that shifts the government’s faults onto businesspeople."

Regulatory easing and procedural simplification have progressed significantly, and as seen in the activities of the Small and Medium Business Ombudsman, the government’s efforts to improve the business environment continue. However, the perception that Korea remains a difficult country to do business in is still strong, and the Kaesong Industrial Complex incident is a representative example.

Although presidential candidates are rushing to announce economic pledges, it is unclear how much they have considered ways to help small and medium enterprises operate and grow without the anxiety of 'sustainability.' Who and when will be able to fully reopen the closed doors of the Kaesong Industrial Complex?