VZCZCXYZ0000
OO RUEHWEB

DE RUEHUL #0815/01 1410801
ZNR UUUUU ZZH
O 210801Z MAY 09
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4412
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 5913
RUEHMO/AMEMBASSY MOSCOW PRIORITY 9745
RUEHKO/AMEMBASSY TOKYO PRIORITY 6002
RUEHSH/AMCONSUL SHENYANG PRIORITY 4419
RHMFISS/COMUSKOREA J5 SEOUL KOR PRIORITY
RUACAAA/COMUSKOREA INTEL SEOUL KOR PRIORITY
RHMFISS/COMUSFK SEOUL KOR PRIORITY
RHHMUNA/CDR USPACOM HONOLULU HI PRIORITY

UNCLAS SEOUL 000815 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON KS KN
SUBJECT: GROWING FRUSTRATION BY KIC COMPANIES, BUT NO SIGNS 
OF WAY FORWARD 
 
¶1.  (SBU) SUMMARY: On May 19, Representative Kwon Young-seh 
(GNP) hosted a forum at the National Assembly to discuss the 
current situation at the Kaesong Industrial Complex (KIC). 
Speakers and discussants included MOU Director General for 
KIC Project Bureau Kim Young-tak, former head of the Korea 
Land Corporation Kim Eun-jong, Vice Chair of the Corporate 
Council of KIC Yoo Chang-keun, and other experts from 
academia.  The two-hour session included a desperate plea 
from the KIC CEOs who called for President Lee's involvement 
in "saving KIC" and suggestions from experts for a need to 
build dormitories, among other steps, to address the broader 
inter-Korean framework in the KIC.  MOU remained firm on the 
ROK citizen's safety as top priority and left "no room for 
negotiation."  Other law makers, journalists, and KIC 
managers also attended.  END SUMMARY. 
 
---------------------------- 
MOU: No Room For Negotiation 
---------------------------- 
 
¶2.  (SBU) As the ROKG point man for the KIC, MOU 
Director-General Kim Young-tak emphasized the ROKG's 
inability to overlook the detainee case.  Kim said that the 
ROKG view remained unchanged: there was "no room for 
negotiation" in regard to the South Korean detainee; the rest 
of the KIC agenda would have to be solved through dialogue, 
with perseverance. 
 
¶3.  (SBU) Recalling the 22-minute KIC meeting between the two 
Koreas on April 21 which he attended, Kim said that the 
ROKG's top three priorities were: 1) guaranteed employee 
safety; 2) guaranteed freedom of access, crossing and 
communication; and 3) increase in number of North Korean 
workers from outside of Kaesong area, as 40,000 out of 50,000 
eligible workforce in Kaesong City are already employed by 
the KIC and more than 100,000 North Korean workers are needed 
once construction is complete.  The most recent ROKG attempt 
to meet with the DPRK was made on May 18, to which the North 
did not respond.  On May 15, North Korea sent a message 
threatening to close the KIC, if the ROKG continued to 
disrespect the spirit of the June 2000 Joint Statement, and 
announcing that existing contracts were void. 
 
¶4.  (SBU) Mr. Yu, a Hyundai Asan employee, has been detained 
by the North since March 30, or 53 days.  According to Kim, 
Yu's detainment is a clear violation of the KIC Agreement, 
Chapter 10, Articles 2 and 4, which calls for the two Koreas' 
cooperation in solving any KIC problems and guarantees the 
accused basic rights. 
 
---------------------------------- 
North Wants Dorms, not KIC Closure 
---------------------------------- 
 
¶5.  (SBU) North Korean Studies University professor Yang 
Moon-soo interpreted current DPRK behavior as an expression 
of frustration over slow progress in the promised expansion. 
The present KIC problems, according to Yang, stemmed not from 
KIC itself, which North Korean wanted to expand more rapidly, 
but from the South's anti-reconciliatory behavior such as 
cancellation of food and fertilizer assistance and refusal to 
build dormitories to allow an increased number of North 
Korean workers.  North Koreans saw the construction of 
dormitories as an important symbol for KIC expansion and ROKG 
commitment.  According to Yang, now may not be the right time 
to show this commitment, but "no action means slowly killing 
the KIC," which would lead to the end of inter-Korean 
relations.  "The ball is in South Korea's court," Yang said. 
 
¶6.  (SBU) Yim Eul-chul, Kyungnam University professor, former 
reporter and a close observer of KIC since its inception, 
suggested solving current KIC issues by addressing a bigger 
inter-Korean framework; first by providing fertilizer and 
food aid to win the North's confidence, and second, by 
negotiating wages and land lease fees through dialogue.  Yim 
did not believe North Korea's April 21 request for wage and 
land lease increase stemmed from the North's greed for 
profit.  In reality, North Korea suffered a great deal from 
the Lee administration's decision to cut off aid last year 
and a slight increase in wage would partially help the 
difficult situation.  Yim said the biggest problem between 
the two Koreas is lack of communication, not KIC.  Once the 
"big picture" (aid) is solved, the rest (wages and Yu's case) 
would be easily addressed, Yim said. 
 
 
¶7.  (SBU) Turning to the detainee case, Yim believed that 
North Korean treatment of Hyundai Asan employee Yu, a 
representative of a South Korean company with a long history 
of a friendly working relationship with North Korea, would be 
humane.  Yim argued that the current ROKG handling of Mr. Yu 
-- number one agenda item and precondition for future 
meetings -- was counterproductive to Yu's fate. 
 
--------------------------------------------- --- 
KIC Companies Vow to Remain Even After Closure 
--------------------------------------------- --- 
 
¶8.  (SBU) Companies blamed the ROKG, not the DPRK, for the 
current state of KIC and believed the construction of 
dormitories would send a positive message to the North.  Vice 
Chair of the Corporate Council of KIC and CEO of S.J. Tech 
Co., Ltd. Yoo Chang-geun described the current situation as a 
"grave South-South problem, not a North-South problem." 
Expressing frustrations with the ROKG which continues to 
solicit "endless patience" from the companies without 
offering a way forward, Yoo demanded President Lee's 
immediate attention to the KIC situation.  Yoo said he could 
not understand how his government could allow inter-Korean 
relations to deteriorate to this extent because of one ROK 
citizen, when in fact over 1,000 ROK citizens' livelihood 
depended on KIC's operation.  In case of KIC closure, Yoo and 
other CEOs operating in the KIC, said that they were prepared 
to "send workers home and remain (themselves) in the KIC." 
 
¶9.  (SBU) Rep. Kwon (GNP) cautioned against "a quick fix" for 
the current situation and over-emphasis on dormitory 
construction.  Kwon said border difficulties also occurred 
between former East and West Germany and called for a 
careful, comprehensive approach to the current KIC challenge. 
 
 
------------------ 
KIC May 2009 Stats 
------------------ 
 
¶10.  (SBU) As of May 2009, 106 factories (63 textile; 22 
machinery/ metal; 11 electronics; 7 chemical; 2 food; 1 
timber/ paper) are operational in the KIC and 28 are under 
construction, scheduled to be completed by end of 2009. 
40,134 North Korean workers (84 percent female in 20s and 
30s) are employed by the KIC.  In 2005 and 2006, the ROKG 
subsidized 50 percent of the companies' costs at KIC, but the 
sizable subsidy was replaced by optional "insurance," which 
the companies had to purchase independently, in 2006. 
STANTON