Kaesong Update October 2011

Stephan Haggard (PIIE) and Jaesung Ryu (East Asia Institute)



According to Yonhap, the signs of increased flexibility on the part of the LMB government have now extended to concrete actions surrounding Kaesong. Following a visit to Kaesong by GNP leader Hong Jun-pyo last month, the MOU has released a detailed set of measures that provide room for a resumption of investment in the zone. The Ministry itself has also turned over, with the appointment of Ryu Woo-ik, a former Korean ambassador to the PRC and LMB's former Chief of Staff.

KBS News appeared to jump the gun a little bit with a headline saying "Suspension of the May 24 Measures, New Construction [Given] A Green Light in Kaesong."  The May 24 measures were the sanctions put in place in 2010 in response to the Cheonan incident; the Daily NK offered up a one-year retrospective earlier in the year.

In fact, the MOU release only mentions the May 24 measures as a reason why construction was halted, and does not announce an outright reversal of the entire package. But the MOU website did post up a list of discrete actions that certainly constitute a change in course (in Korean). Following is an un-authoritative translation that highlights the new measures:

1. Allows companies to resume construction on factories that were frozen since the May 24 measure (7 sites for initial approval, 5 more sites for future approval).

2. Calls for the construction of a fire station and an emergency medical facility. (Fire station: select contractor, initiate construction by November, complete by end of 2012. EM facility: introduce bill to the "Inter-Korean Exchange and Cooperation Initiative Committee," start construction by early 2012 and complete construction by end of 2012.)

3. Once agreed upon by the North, initiate repair/maintenance work for the commuter road between Kaesong city and the industrial complex (4.5km, about 2.8 miles), and expand the commuter shuttle service for long-distance North Korean commuters. (While the commuter road is outside the KIC, the decision was reached on the basis of the fact that it would be beneficial for South Korean companies. Commuter buses have been operating within a 20km (12.4 miles) radius of the complex. New plans are considering an expansion of the service area by 40km (24.8 miles) so that workers who live further outside the KIC can commute, bringing more North Korean workers into the ambit of the complex.)

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