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South Koreans hope to return to Kaesong factories

Friday - 4/19/2013, 1:52am  ET

A South Korean soldier walks by products made at Kaesong industrial complex in North Korea displayed at a showroom at the unification observation post near the border village of Panmunjom, that has separated the two Koreas since the Korean War, in Paju, north of Seoul, South Korea, Thursday, April 18, 2013. The South Korean entrepreneurs who invested up to 10 years and millions of dollars in the Kaesong industrial complex, a symbol of economic collaboration between the rival Koreas that is now shuttered by the North, have little more than hope to cling to as assembly lines sit idle day after day. (AP Photo/Lee Jin-man)

YOUKYUNG LEE
AP Business Writer

SEOUL, South Korea (AP) -- The South Korean entrepreneurs who invested up to 10 years and millions of dollars in the Kaesong industrial complex, a symbol of economic collaboration between the Koreas that is now shuttered by the North, have little more than hope to cling to as assembly lines sit idle day after day.

They say they want to go back to work. The sooner the better. They say they cannot abandon their investments in factories, or the cheap North Korean labor that helped them put aside misgivings about doing business with the South's unpredictable neighbor. Some were just getting over their beginners' mistakes and were starting to see the fruits of their work.

But North Korea has been unrelenting in its decision to bar South Koreans from entering the factory city just inside its border, and withdraw the 53,000 North Korean workers who manned assembly lines. As the lockout enters a third week, customers of the South Korean companies are growing impatient and losses are mounting. Some businesses are quietly mulling giving up on Kaesong altogether.

"We have built the Kaesong industrial complex by the sweat of our brows, believing in guarantees that we would be able to work freely," said Han Jae-kwon, chief of the association of South Korean factories in Kaesong. "We find the reality tragic and sad that we are unable to travel to our own factories."

The Kaesong complex has been nearly deserted since early April, when Pyongyang pulled the plug on its last significant economic link with the South. Most of the nearly 900 South Korean managers and entrepreneurs left soon after. Some 200 remain and are getting by on whatever food they had stored.

The shutdown was punishment for Seoul's decision to forge ahead with ongoing joint military drills with the United States that have incensed Pyongyang because it sees the exercises as a rehearsal for an invasion. Restricting travel through the heavily armed border is also a way to remind South Koreans that a state of war hangs over the Korean Peninsula, 60 years after the Korean War ended with a truce. Pyongyang also is angry with Seoul for backing tightened U.N. sanctions on North Korea for conducting a banned nuclear test in February.

The industrial zone was supposed to be above politics, and the complex was seen as a test case for reunification, combining South Korean initiative, capital and technology with the North's cheap labor. After breaking ground in 2003, earlier South Korean governments paved roads and erected buildings in the zone, which lies in a guarded, gated complex on the outskirts of North Korea's third-largest city.

Small and medium-sized, labor-intensive industries began arriving, often apparel and electronics companies. If the pay would be dismissed as paltry in the South, Kaesong residents flocked to work there, and the number of South Korean companies swelled to more than 120. Last year, the factories produced goods worth $470 million.

For years, things went along fairly smoothly. Most South Korean managers commuted to Kaesong on Mondays, bringing their own food, managing factories through the week and returning home for the weekend. Raw materials came from South Korea, with finished goods later sent back south through the heavily armed border.

As Korean relations soured in recent years, amid changing governments in Seoul and a North Korean attack on a South Korean island, many inter-Korean projects were abandoned. Kaesong, though, seemed set to survive. A temporary 2009 shutdown passed quickly.

On April 9, though, no North Koreans showed up to work. North Korea refused to allow entry from the South starting April 3.

On Wednesday, North Korea again denied the entry of South Korean businessmen who asked to send a delegation to relay their worries to the North and send food and other necessities to the South Korean managers who still remain in Kaesong. North Korea cited the current tension, according to South Korea's Unification Ministry. A separate delegation consisting of former chairmen of the group representing Kaesong companies and a few experts on Korea issues is still awaiting a reply from the North to its request to visit on Monday.

Kaesong businesses hope the possibility of dialogue between Seoul and Pyongyang after the U.S.-South Korea military drills end April 30 will result in the industrial complex reopening.

Many of them would get some compensation if the shutdown lasted more than a month. About three quarters of the 123 companies at Kaesong are insured through a state-owned bank, which would cover losses up to 7 billion won ($6.3 million).

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