[NEWS FOCUS]Gaeseong firms weary of threats from North

South Korean companies operating at a joint industrial complex in North Korea expressed embarrassment over the North`s latest threat that it would "review all preferential contracts" for South Korean factories "from scratch."

There are 101 South Korean companies operating factories in the Gaeseong Industrial Complex that combines the South`s capital and technology with the North`s cheap labor and land. .

The North Korean authorities recently demanded the South raise wages for North Korean workers and pay land rent fees six years in advance.

"We are embarrassed. We never expected that the North would take issues with the operation of the Gaeseong industrial park," Yoo Chang-geun, CEO of SJ Tech and vice chairman of a business lobby group representing South Korean firms in Gaeseong.

"The wage problem that the North raised is a very important matter. If they ask us to raise wages, we cannot but cut back on investment," he said.

As of March, the South Korean companies in Gaeseong hired about 39,000 North Korean workers to produce labor-intensive goods like clothes, shoes, watches and kitchen ware.

The firms have paid monthly wages of about $75 to each North Korean worker so far.

As tension has increased between the two Koreas, more South Korean companies are considering pulling out of Gaeseong.

According to the Korea Land Corp., which rents land in Gaeseong to South Korean firms, eight companies have already canceled contracts with the state-run agency to set up a factory in North Korea. They were among the 100 companies which had received approval from both South and North Korean authorities to build a factory in Gaeseong in October last year.

Of the eight firms, two canceled the contract this month and another four have had the contract cancelled since Dec. 1 when the North imposed travel restrictions on Gaeseong.

Four more companies are in talks with the Korea Land Corp. on withdrawal of their contracts, industry officials said.

"Cancellation of the land contracts for factories in Gaeseong is partly attributable to the recently strained inter-Korean relations as well as to the global financial crisis and the deepening local economic downturn," an official of the Korea Land Corp. said.

Out of the 2.5 million square-meter site in Gaeseong, about 81 percent or 2.03 million square meters has been allocated to South Korean firms.

Some industry watchers said North Korea is not likely to actually shut down the Gaeseong complex because the impoverished nation cannot easily give up the monthly income of $2.8 million through North Korean workers` wages.

Critics said, however, the Gaeseong complex is becoming a tool for the North to play brinksmanship.

By Kim Yoon-mi



(yoonmi@heraldm.com)