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Controversies over Kaesong Complex
Inter-Korean Tension
Controversies over Kaesong Complex
  • By mary
  • March 11, 2015, 10:57
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Model Industrial Complex factories in Kaesong (Gaesong) Industrial Area. (photo courtesy of Mimura/Wikimedia Commons)
Model Industrial Complex factories in Kaesong (Gaesong) Industrial Area. (photo courtesy of Mimura/Wikimedia Commons)


Another controversial issue raised by North Korea is fueling the growing tension between North and South.

It was last month that the North announced a unilateral decision to raise the minimum wage from US$70.35 to $74 starting in March. It also said it would collect 15 percent of the workers' basic wage plus overtime payments as "social security." The South's firms currently pay 15 percent of the basic wage alone. Yesterday, a South Korean official said that the Korean government would penalize any companies operating in the inter-Korean industrial complex if they complied with North Korea's decision to raise wages for North Korean workers there.

Today, North Korea brought up the subject of land usage fees for the joint inter-Korean factory park in North Korea. Last November, the North's Central Special Development Guidance Bureau in charge of the industrial complex called its South Korean counterpart, indicating its intention to start talks on the rent issue.

The Kaesong Industrial Complex in the North's border started operations in 2004 on the agreement between Seoul and Pyongyang to pay rent from 2015. However, the countries have such a wide gap between negotiation terms that the talk is expected to be quite difficult.

In 2009, the two Koreas exchanged ideas on the issue. When the North attempted to collect up to US$10 of rent per 3.3 square meters of land, South Korea strongly opposed and rejected its demand. An official from Seoul said that it was an unreasonable price compared to cheaper rents in better industrial environments such as Hanoi, Vietnam where space is available  for only US$2.8 per the same square meters.

The Kaesong inter-Korean factory complex has stood for inter-Korean cooperation, but is now at the center of an inter-Korean feud. The tension seems to be mounting towards a peak on April 10, when South Korea firms will start paying March wages. Some mention the North’s extreme measures of 2013, when it withdrew its workers from the complex leading to a four-month shutdown. Seoul says that it wants to hold talks with the North about the recent wage hike, but the call has so far gone unanswered.