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Gaesong Cooperation Project at Risk

Posted July. 25, 2006 03:53,   

한국어

The Gaesong project, which has been at the center of inter-Korean economic cooperation efforts, is facing a crisis ahead of its first lease.

Most Korean companies that showed great interest in doing business in the complex are having second thoughts due to the tension in the Korean peninsula after the North test fired ballistic missiles.

The second lease, scheduled for late June, has been indefinitely postponed, and the lease itself is at risk at this point.

Also, the risk of doing business in Gaesong is ever increasing as North Korea included the Gaesong project in one of its “retaliation” tools, blaming South Korea for changing its stance.

The North withdrew four of nine permanently stationed workers at permanent joint governmental office for economic cooperation, and suspended the visit of the South’s bank officials.

The Board of Audit and Inspection head Chun Yoon-chul’s visit to the site scheduled for Tuesday was canceled as well as Korea Electric Power Corporation’s transmission tower groundbreaking ceremony on July 28.

“Companies have shown great interest in doing business in Gaesong due to the exchange rate issue, but they are having doubts these days,” said Kim Kyung-man of Korea Federation of Small and Medium Business.

The Dongdaemun-gu council, which planned to visit the complex in August to build 24,000 pyeong apartment-like factories in the complex with a consortium of 300 companies, canceled the visit.

Also, companies are hesitating because the U.S. is arguing that products made in the Gaesong Industrial Complex are not “Made in Korea” products.

“It is literally impossible to enter the U.S. market with a ‘Made in North Korea’ tag. If the products are not regarded as ‘Made in Korea’ products, then we have no choice but to go to China,” said a worker at a hat manufacturing company.

“The U.S., having suspicions on the North using income from inter-Korean economic cooperation as military costs, can have negative impacts,” said a South Korean government official.

However, the Ministry of Unification is officially denying any problems so far.

“The date of lease can be adjusted. Business will restart once inter-Korean relations are improved,” said Kim Moo-hong at Korea Land Corporation, which is responsible for sale of lots of the complex.