More like this

Business

Arrow

Government

South Korea abandons manufacturing enclave in nuclear North

Kaesong Industrial Complex to be 'completely closed', says Unification Ministry

North Korea's launch of a useless satellite atop a thinly-disguised intercontinental ballistic missile has turned out to have immediate terrestrial implications, including some for the technology industries, after South Korea closed a manufacturing enclave in the North.

The South's Ministry of Unification has announced that henceforth the Kaesong Industrial Complex will be “completely closed.”

The Complex stands on North Korean soil, but is populated by South Korean companies that use the facility to operate factories that employ northerners at lower wages than they'd pay at home. Those wages are low enough to make up for the hassle of doing business in the Complex, which is connected to the South by road but exists under tight security.

Workers from the South are paid in cash but must hand over their hard-earned at the border. It's not clear if workers are better off than those who work in the North.

North Korea likes the Complex as it means jobs for its people and foreign exchange as a result of their labours.

Korean giants like Samsung, LG and Hyundai aren't thought to have a presence in the Complex, but tolerate suppliers with facilities there. Electronics companies are known to work in the Complex.

South Korea has temporarily restricted access to the Complex in the past after Northern military activities. North Korea hasn't been happy about that, occasionally suggesting it could close the road and make it hard for Southern workers who visit the enclave to return home. That kind of threat made the enclave a potential flashpoint.

The South's now decided the complex is more trouble than it's worth.

The decision has been made on security grounds: South Korea feels there's no point giving the North economic assistance when the resulting cash is used to test missiles that threaten the South's existence. The South's government is putting its money where its mouth is, promising “whole-of-government assistance to our businesses”.

Around 50,000 North Koreans work in the complex. Their fate is unknown. ®

Sponsored: 2016 Cyberthreat defense report