North Koreans On Edge Over Industrial Zone Suspension

orth Koreans fear a permanent closure by Pyongyang of a joint North-South Korea industrial park will jack up prices of South Korean goods smuggled into the country, sources said.

Last week, North Korea pulled its workers from the Kaesong Industrial Complex it runs with South Korea, taking a step closer to shutting down the last major intra-Korean cooperation project following weeks of provocations against the South and its ally the United States.

Sources said any permanent closure of the complex, located just north of the heavily fortified border, will not only put an end to cheap smuggled goods from factories within the zone but also result in higher prices of smuggled South Korean goods coming in, particularly from China.

Officially, goods produced in Kaesong using North Korean labor have to be shipped out of North Korea. 

North Korea has been stepping up threats of nuclear war since the United Nations imposed sanctions in response to Pyongyang's defiant third nuclear test in February. The North said South Korean authorities and “military warmongers” had sought to turn the industrial complex into a “hotbed of confrontation.”

North Koreans interviewed by RFA’s Korean Service said that a permanent closure of the project would cut off their access to South Korean goods smuggled out of Kaesong, forcing them to purchase them through middle men in China just across the border at significantly higher prices.

“If the Kaesong Industrial Complex is closed, the cost of South Korean products will rise and they will also become much harder to find,” a resident of Pyongyang who recently visited China said, speaking on condition of anonymity.

The source from Pyongyang said that “rumors are already spreading” among North Korean merchants as they prepare for a possible closure and the effects it might have on their sales of South Korean goods.

“Many residents of South Hwanghe province earn their living as sellers of South Korean products which are illegally obtained from the Kaesong Industrial Complex,” the source said.

“If it is closed, those residents will face serious trouble [making ends meet].”

Illicit South Korean products from the Kaesong Industrial Complex that are currently widely traded on the black market in the North include clothing, cosmetics and electronics, the source said, as well as sweet snacks known as “Chocopies.”

Cross-border ‘trade’

But while ordinary North Koreans and black marketeers within the country fret over the possibility of the joint project’s closure, retailers of South Korean goods from across the border in China see the potential for a gain in earnings.

A trader who travels between Chongjin city in North Korea’s North Hamgyong province and China told RFA that he didn’t want to see Kaesong closed but “it could represent a great opportunity for traders like me.”

“It has always been tough to sell popular South Korean products brought from China to North Korea because of the competition in price with goods obtained [illegally] from the Kaesong Industrial Complex,” he said, adding that he would finally be able to sell them at a price he could profit from.

A man surnamed Lee who owns a South Korean kitchen appliance shop across the border in China’s Liaoning province said he would gain considerable price leverage if Kaesong was to close for good.

“North Koreans who are big customers of South Korean products always complain about prices, saying they are too expensive compared with the same products in South Korea,” Lee said from his shop in Dandong city.

“There will be no more complaints from North Koreans if the Kaesong Industrial Complex is closed because the products produced there will no longer be available to them,” he said.

“But that doesn’t mean I hope the complex will close.”

Investors on edge

As the rest of the world waits to hear whether Pyongyang will fully shutter the industrial complex, Chinese companies with business interests in North Korea expressed jitters over an unstable investment climate in the country.

A Korean-Chinese surnamed Park who runs a clothing company in Pyongyang said that many Chinese companies are nervous about the Pyongyang’s political relationship with Beijing after the latter backed U.N. sanctions against the North following international condemnation of its nuclear test.

He said that Pyongyang could easily turn on Chinese investors the same way it had against the jointly-run Kaesong complex.

“We believe that the situation [between North Korea and China] has nothing to do with us,” he said.

“But if the Kaesong Industrial Complex is completely closed, Chinese entrepreneurs will be less willing to invest in North Korea.”

A Korean-Chinese businessman who has been running a construction supply factory in the Najin-Sonbong Free Economic Zone in northeastern North Korea’s Rason city for more than a year said that news of the friction between Beijing and Pyongyang had him on edge.

“Recently, I heard that the North Korean government has hard feelings about China. I won’t make any further investments in the Najin-Sonbong Free Economic Zone,” he said.

“I will pull my business out if the situation calls for it. Until then, I will do my best.”

The Kaesong complex is a key currency earner for cash-strapped North Korea.

A symbol of cooperation between the two countries, the complex had remained in operation through previous crises in intra-Korean relations in its nine-year history, including the sinking of a South Korean warship by North Korea and its shelling of Yeonpyeong Island in 2010.