South Korean manufacturing companies operating in North Korea outside Gaeseong still face an uncertain future, despite the South’s hints at a softening stance toward Pyongyang, sources said.

The government has appeared to be loosening its “May 24 measures,” which banned all exchanges and cooperation with the North after the sinking of the Cheonan, since Yu Woo-ik took the helm of the Unification Ministry in September.

Yu has allowed South Korean firms at Gaeseong Industrial Complex to continue production, international aid groups to support North Koreans and South Korean scholars to visit Gaeseong for inter-Korean cultural exchanges.

But the government remains reluctant to scrap the May 24 measures which effectively ban inter-Korean economic cooperation.

According to news reports, 20 heads of South Korean firms that invested in the complex met unification ministry officials to urge resumption of inter-Korean economic cooperation and compensation for their losses accumulated since the May 24 measures.

The “Inter-Korean Apparel Processing-on-Commission Association” and other North Korea-related business groups said in October that more than half of small- and medium-sized South Korean companies outside Gaeseong were either facing bankruptcy or have already gone bust.

An unnamed source from a South Korean company operating in North Korea was quoted by the Yonhap news agency as saying that the official “requested the South Korean government to scrap May 24 measures but the Unification Ministry was reluctant.”

“Some firms strongly insisted they meet Unification Minister Yu and President Lee Myung-bak,” the source said.

Yu recently said in a meeting with South Korean merchants in Beijing that the South has no option but to halt any food aid, investment and exchanges with the North unless the North gives up nuclear weapon development and provocations.

However, South Korean companies doing business in the North raise concerns that a prolonged suspension of inter-Korean economic cooperation might lead to Chinese companies snatching business opportunities in the North.

By Kim Yoon-mi (yoonmi@heraldcorp.com)