Some S. Korean firms in Kaesong near bankruptcy in July

By Kim Deok-hyun
SEOUL, June 25 (Yonhap) -- South Korean firms operating at a Seoul-funded
industrial park in North Korea warned Thursday they were quickly running out of
cash and some of them may file for bankruptcy next month, hit by deteriorating
inter-Korean relations.
The Kaesong Industrial Complex has become victim to cross-border tensions, which
have been escalating for more than a year and dealt a severe blow to the roughly
100 small-sized South Korean garment makers and other factories at the park.
Last week, South and North Korea failed to resolve a dispute over the North's
demands for higher wages and rent at the industrial zone in the North Korean
border city of Kaesong, about a two-hour drive from Seoul. Both sides plan to
resume talks on July 2.
"Currently, a number of plants in Kaesong are bearing the brunt of falling orders
and an insufficient number of North Korean workers," said Kim Hak-kwon, chairman
of the Corporate Association of Kaesong Industrial Complex, which represents the
South Korean firms there.
Kim said North Korean authorities in charge of the Kaesong complex have not
supplied enough workers. Some 40,000 North Koreans are employed at the park,
according to the South Korean government.
"Unless South and North Korea agree to normalize operations at Kaesong in the
July 2 talks, some of us will have no choice but to file for bankruptcy," Kim
said.
So far, 89 firms at Kaesong have incurred combined cumulative losses of 39.7
billion won (US$30.9 million), Kim said, calling for the South Korean government
to provide financial assistance.
In April, North Korea unilaterally declared that all South Korean firms at the
park must accept new terms for wages and land fees, and told those who would not
accept them to leave.
The North then demanded a four-fold monthly pay increase for its workers to
US$300. It also ordered Hyundai Asan and the Korea Land Corp. of South Korea,
which jointly operate the Kaesong enclave with North Korean authorities, to pay
$500 million for renting the site over the next 50 years, a 3,000-percent
increase from the original contract.
The reasoning behind North Korea's demands, and their timing, remains unclear,
but a number of executives at South Korean firms in Kaesong said they are looking
to leave.
"I believe there is no hope," said Yoon Byeong-jik, chief executive of Beomyang
Glove, a South Korean glove maker operating in Kaesong.
Yoon said he has grown frustrated as foreign buyers cancel orders because of
security concerns.
"If I'm able to repay my debts owed for investment in Kaesong, I will immediately
transfer the plant to Vietnam or Indonesia," Yoon said.
(END)