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Shutdown of Kaesong complex causes loss for both Koreas: think tank

All News 11:00 February 09, 2017

SEOUL, Feb. 9 (Yonhap) -- South Korea may have failed to achieve what it sought to do when it shut down its only joint industrial complex with North Korea in the communist state a year earlier, while the shutdown may have only widened the gap between the divided Koreas, a private think tank in Seoul said Thursday.

Seoul announced the shutdown of the industrial complex in Kaesong exactly a year earlier on Friday amid continued and increasing military provocations from Pyongyang that included a nuclear test and long-range missile launches in the month before.

Many believed at least part of the wages paid to over 52,000 North Korean employees of some 120 South Korean firms at Kaesong may have been funneled into the North's nuclear and other weapons programs.

An aerial view of the joint industrial complex in Kaesong, North Korea, taken on Feb. 6, 2017. (Yonhap)

The shutdown of the Kaesong complex, therefore, had been aimed at cutting off the source of hard currency for the North, and also giving a clear message to the impoverished North that no help will come from the South unless it abandons its nuclear ambitions.

A year after all 124 South Korean companies withdrew, or had been kicked out, from the joint complex, North Korea appears to remain just as determined to pursue its nuclear ambitions. The country conducted its fifth and latest nuclear test in September 2016.

Seoul, on the other hand, now stands with no real dialogue channel with Pyongyang, the report from Hyundai Research Institute noted.

"As all dialogue channels between the governments of the two Koreas have been shut down, South Korea's credibility in the international community may continue to deteriorate while the so-called Korea discount may expand," the report said.

Korea discount refers to a tendency to undervalue or even avoid South Korean stocks due to geopolitical risks associated with or created by the communist North.

"Amid the worsening relations between South and North Korea, all other social and cultural exchanges between the two have also come to naught, with the urgently needed reunions between separated families indefinitely suspended," it added.

The file photo, taken in September 2013, shows dozens of North Korean employees working at a factory of a South Korean company in Kaesong, North Korea. (Yonhap)

The report noted that North Korea too may have suffered a great loss, at least in economic terms, as its trade and economic dependence on China is growing out of proportion, making its economy more vulnerable and also susceptible to changes in China.

In 2016, bilateral trade between North Korea and China came to US$6.05 billion, accounting for 87.4 percent of North Korea's overall trade, according to the report.

The shutdown of the Kaesong complex has also been a disaster for the 124 South Korean companies and their 140 or more suppliers based here.

The report noted an earlier survey by the unification ministry had set the overall damage of the 261 Kaesong-related firms at 944.6 billion won ($824.6 million).

The companies, however, have claimed the 124 former Kaesong firms alone, suffered a combined damage of nearly 1.5 trillion won.


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