Apparel production in limbo at Kaesong industrial park
According to South Korea's Ministry of Unification, clothing, textile and footwear manufacturers comprise 60% of businesses at the Kaesong industrial complex
As global tensions continue to build over North Korea's nuclear programme, the fallout has already extended to the inter-Korean Kaesong industrial complex, where work at the area's key clothing and textile manufacturing plants has ground to a halt after 53,000 North Korean workers failed to show up.
The industrial park in North Korea's border city of Kaesong houses 123 South Korean companies that employ North Koreans as manufacturing sector labourers.
According to Lee Yeon-Du, a spokeswoman at South Korea's Ministry of Unification, "textile-related firms - clothing and fabric manufacturing companies - comprise 60% of the businesses."
Noeul Kang, deputy director of the ministry's general management division, says when operations were suspended, 122 of the complex's companies listed in a 2011 Congressional Research Service report to the US Congress were still engaged in production activities mentioned in the report.
This list of 122 firms, including several shoe as well as clothing and textile manufacturers, was drawn up based on February 2011 data from the ministry.
"Since then, one more business - Ohryun Kaeseong Company, which produces clothing - has begun operating at the complex. So now, 123 firms are there," said Kang.
Suspension of operations
Since Tuesday (9 April), when North Korea pulled out its workers and failed to schedule bus services to transport them to the complex, "manufacturing operations at the industrial park have stopped," Lee told just-style.
"The supply of raw materials into the zone has also come to a standstill," after the North announced on 3 April it wouldn't let South Korean personnel and materials into the complex because it fuelled tension along the demilitarised zone separating the Koreas," adds Lee. "Companies there use raw materials transported from the South."
Although North Korea has banned workers from South Korea from entering the industrial park since 3 April, it continues to allow South Koreans at the complex to return home to the South.
Following suspension of operations Tuesday, many South Korean citizens "didn't want to leave their companies in Kaesong behind quickly and head to the South because they wouldn't be able to enter the complex again," Lee explains.
As of today, "there are 296 South Koreans and one Chinese national left at the complex, with 110 locals and one foreigner having travelled to the South from there. Before operations were interrupted, there were normally 400 to 500 [non-North Korean] workers at the park each day," according to Lee.
Shipments at a standstill
An official at the Association for South Korean Firms in the Kaesong Industrial Complex said: "Shipments of finished garments and other products from the complex have been discontinued." The official, who declined to be named, is an employee of a clothing manufacturer at the park.
He said due to the ban on travel from South Korea to the complex, cargo trucks could not come from the South to pick up shipments and deliver them. The official added it was impossible to predict when the situation would be resolved and deliveries could resume.
Future in doubt
Despite mounting scepticism over the fate of the last remaining symbol of inter-Korean economic cooperation, the park's companies are not concerned that Pyongyang might dismantle them or confiscate their assets, he said.
So they have not planned measures to protect their positions in such worst-case scenarios, according to the official.
Another worker at one of the complex's companies, who also requested anonymity, agreed the firms think these scenarios are unrealistic and North Korea would not take such drastic actions.
"The companies believe laws of both Koreas that established the Kaesong industrial complex - laws which Seoul and Pyongyang agreed upon together - ensure protection of their investments as well as the firms' continued existence," he explained.
Lee said the businesses could get up to 90% back on investments if they'd prepared themselves against financial risk by signing up for inter-Korean economic cooperation insurance.
But a [South] Korean Federation of Textile Industries official, who declined to be named, said the 90% is far less than what the firms want as compensation.
"That sum is not enough for them to set up another business elsewhere and much smaller than what they'd collect if the complex was up and running," he said.
"All the companies can do is to wait for the North and South Korean governments to agree on a solution to the situation," he concluded.
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