Original URL: http://www.theregister.co.uk/2013/04/05/north_korea_closes_indsutrial_enclave/

NORKS closes South-Korea-run industrial enclave

Tension is no threat to tech supply chain, says international business boffin

By Simon Sharwood

Posted in Business, 5th April 2013 00:53 GMT

North Korea has cut off access to the Kaesŏng Industrial Park, a manufacturing precinct on North Korean soil that is run by South Korean companies.

Kaesŏng opened in 2004 and has since become home to several South Korean technology manufacturers, although big names have stayed away due to the Park's precarious position ten kilometres beyond the demilitarised zone. That doesn't stop hundreds of South Koreans commuting to the park to run factories staffed by North Korean workers.

The North agreed to the Park's construction as a symbol of co-operation and also because it values the 100,000 or so jobs it sustains.

At the time of writing, access to the Park from the South was cut off. South Korean workers can leave, but not enter the enclave. Many are staying put, according to Reuters, as they don't see anything to worry about. Others, says South Korean News outlet Chosun Ilbo, are stockpiling food in their Kaesŏng facilities and are rather more worried now that the region has been ringed by armoured vehicles.

Professor Christopher Nyland, who holds a chair of International Business at Australia's Monash University, told The Reg he sees no threat to the technology industry in the current Korean crisis.

“Everybody is behaving exactly as we would expect them to behave,” Professor Nyland said. “When the Americans started joint exercises they would have been totally aware of how the North Koreans would respond.”

“This has happened before, these exercises take place happened every few years. The difference is North Korea now has the bomb. It is possible they could strike South Korea, but they would wipe themselves if they did so, and so it will not happen,” Nyland opined.

While the Professor expects tensions will recede, a mistaken border or airspace incursion by a US ship or plane could lead to retaliation by North Korea, at which point all bets are off.

A calmer outcome is, he feels, far more likely because China has no interest in the USA having a pretext for putting boots on the ground in North Korea. Were that to happen China would have US forces on its doorstep, something the Middle Kingdom is understandably keen to avoid.

China is also keen to get out of manufacturing, Hyland said, in favour of higher-skilled-and-paid industries. That intention is already making China less attractive as a low-cost manufacturing centre, which could be good news for North Korea if it opens to foreign investment. If it does so, Hyland told The Reg South Korean concerns will “flood” the North with investment in a mode familiar to those who watched West Germany embrace East Germany (but without Korean re-unification to kick things along).

NORKS could therefore emerge as heir to China's low-cost manufacturing crown.

Just why the peculiar nation hasn't already taken steps down this road bemuses Hyland, who says China's example of a liberalised economy in which The Party still retains a lot of control should serve as an example to North Korea's masters. And given Kim Jong Un was recently using a MacBook, NORKS certainly has at least one reason to welcome western companies to its shores. ®