The Unification Ministry on Monday declared a halt to all inter-Korean exchange and cooperation projects, except for the joint Kaesong Industrial Project and humanitarian aid.
It will ban new business and investment in the industrial park and downsize staff there by 50 to 60 percent of the 900-1,000 South Koreans who work there on weekdays, but maintain production activities. All assistance projects for the North will stop, except purely humanitarian aid. The government made the two exceptions for political reasons, experts said.
Prof. Kim Young-soo of Sogang University said, "The Kaesong industrial park is a symbol of inter-Korean cooperation. The government apparently feared it would be branded forever as the party opposing reunification if it shuts the industrial park."
Chung Young-tae at the Korea Institute for National Unification, said the government “must have been worried about conflict within South Korea given opposition from businesses operating at the industrial park, opposition parties and civic groups if it shuts the industrial park."
The government's decision to continue humanitarian aid, Prof. Kim Yong-hyun of Dongguk University said, was apparently based "on the judgment that innocent North Koreans can't take the fall for the North Korean regime's wrongdoings. In the long term, humanitarian aid projects should be kept up for the sake of inter-Korean relations."
There is also speculation that the government considered economic implications when it decided to maintain the industrial park. The Kaesong project was valued at US$940.55 million last year, accounting for 56 percent of the total inter-Korean trade volume of $1,679.08 million.
If the industrial park is shut, the North loses $40 million from wages each year, which mostly go straight to the regime, but South Korea too will suffer significant losses. The government recently estimated that it will have to shoulder about $500 million including insurance payouts for South Korean businesses if it shuts the industrial park.