Kaesong Closure 'Would Cost $500 Million'

      May 24, 2010 09:44

      It would cost about US$500 million to shut the joint Kaesong Industrial Complex in the North, the government estimates.

      A government official on Sunday said the estimate includes insurance payouts from the Inter-Korean Economic Cooperation Fund for South Korean businesses operating at the industrial park if the North decides to shut the industrial park or if Seoul decides to pull out South Korean staff for safety reasons.

      The North has earned more than $96.81 million in cash from wages from 2004 to March this year. It expects to earn another $40 million this year.

      "Some 100 of 121 South Korean firms at the industrial park are insured with the Inter-Korean Economic Cooperation Fund," a Unification Ministry official said. "The indemnity insurance will compensate for up to W7 billion or up to 90 percent of their investment (US$1=W1,199)."

      But no firm that voluntarily withdraws before the North or the South shuts the industrial park is entitled to insurance payouts. An executive of a firm operating at the industrial park said, "The total investment South Korean firms made in the industrial park probably exceeds W1 trillion." That means the $500 million estimate by the government is too low, and despite the insurance limit of W7 billion, quite a few firms have invested more than W20 billion, he added.

      It is difficult for early starters to withdraw given that they are making profits now and the amount of their indemnity insurance has shrunk due to depreciation of their properties. But many latecomers are ready to leave if there is an adequate compensation, though the ministry official said none have yet told the government they want to pull out.

      The North Korean media have been repeatedly reporting a statement issued last Friday by the North's Committee for the Peaceful Reunification of the Fatherland saying it considers itself at war and will respond resolutely to any action the South takes over the sinking of the Navy corvette Cheonan on March 26. It also threatened to cut off all ties with South Korea and scrap a bilateral non-aggression pact.

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