Korean tension unlikely to force joint-factory closure

"Closure of the Kaesong Industrial Complex: South Korean businessmen do not buy that story," Yoo Chang-guen, president of SJ Tech Co. and vice chairman of a group of companies operating at the special zone in North Korea, told reporters.

Rising tensions between the two Koreas have cast a shadow over the facility just across the border, where some 35,000 North Koreans work in mostly South Korean-owned factories manufacturing clothing, watches, shoes and other light industrial products for export.

The industrial zone, which opened in 2004, has symbolized closer relations between the Cold War rivals pursued during much of the past decade. Currently, some 130 companies are either operating or under construction.

Starting this month, however, North Korea has cut the number of South Koreans allowed access, ended a largely symbolic cargo train service, tightened border crossings by vehicles and suspended tours run by a South Korean company to the city of Kaesong.

Analysts see the move as Pyongyang's attempt to pressure conservative South Korean President Lee Myung-bak to assume a softer stance toward the North. Lee took office in February vowing that Seoul should not offer unconditional aid to its impoverished, nuclear-armed neighbor as his liberal predecessors did, though he still broadly favors engagement.

Yoo said that while North Korea has several complaints about the South, he believes the decision to hinder border crossings was mostly prompted by its intense anger over the flying of propaganda leaflets into the country by activist groups based in South Korea.

"The leaflet issue is a more serious problem than we think," he said.

Yoo added that Lee's get-tough policies and even the shooting death of a South Korean tourist at a North Korean mountain resort in July had no adverse effect on Kaesong.

But in October, "the North Korean military expressed deep regret to South Korean counterparts over the leaflets containing information that really upsets North Korean authorities," he said.

South Korea says the groups sending leaflets, which are attached to balloons, are protected by freedom of speech, though it has appealed to them to stop the practice for the sake of inter-Korean relations.

On Friday, activist leaders said they would refrain from the campaign "for the time being and monitor" whether North Korea changes its attitude. The decision came after the leader of the ruling Grand National Party urged them to reconsider the practice.

"But we're ready to send leaflets at any time if North Korea continues its threats," said activist Choi Sung-yong.

Yoo said that North Korea is unlikely to close the facility because it does not want to endanger its existence.

"As far as North Korea is concerned, the Kaesong Industrial Complex is the only success case economically," he said.

Yoo said that while the restricted access has caused some inconvenience for South Korean companies, operations at the complex were being "performed without any difficulties at all."

He said North Korea has taken steps to consider the needs of the South Korean businesses, such as ensuring that goods can still cross the border by truck.

Lee Im-dong, an official with the Kaesong business association, said the recent North Korean restrictions have still hurt the firms because customers have grown skittish about ordering products made at the complex.

"We are assured that we don't have any question about the steady, stable operation and production in the Kaesong Industrial Complex," he said. "But it is buyers in the South and elsewhere that are concerned about the future risk and questioned whether the products can be stably manufactured in the KIC."

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