20.02.2016 Author: Konstantin Asmolov

The Kaesong Complex Called Off: Another Scandal

2342323432Recently we discussed the story of how the South Korean intelligence service tried to accuse Russia of assisting the North Korean missile project, but under the pressure of circumstances and facts was forced to dismiss the statement, shifting the blame to a Member of Parliament, who might have got something wrong (link to the article “Russian trace” of the North Korean missile).

A few days later, a similar scandal unfolded in South Korean society, during which a high-standing official first broke out with some sensational news, and then was forced to explain that he had meant something quite different, and was thus misunderstood.

As we mentioned before, the problems associated with the closure of the Kaesong Industrial Complex force the authorities of the Republic of Korea to justify their decision to the public (link to the article – “Closing down the Kaesong Industrial Complex: Economic Impact”). And on February 12, 2016 Yong-Pyo Hong, Minister for Unification of the Republic of Korea, speaking at a press conference at the Central Government Complex in Seoul, came up with a world sensation. Pyongyang’s revenues from the Kaesong Industrial Complex went to the development of nuclear weapons and ballistic missiles. The South Korean government is said to have enough evidence that the weapons of mass destruction program was funded by the wages of North Korean workers, as well as income from sales of products. However, the Minister could not give any specific examples, which did not go unnoticed even by media loyal to the government such as Radio Korea International.

Hong was never forced to speak and two days later he repeated the accusations in a more expanded form, speaking on February 14 in one of the KBS 1TV programs. 70% of wages of North Korean workers at the Kaesong Industrial Complex were said to be accumulated by the Department of the WPK Central Committee, which is responsible for the party’s finances. Then the funds were redirected to the development of the nuclear program, political activities of the North Korean leader Kim Jong-un, the purchase of luxury goods, and other similar purposes. The Government of the Republic of Korea is said to have received numerous items of evidence from several sources. The official also added that for the whole period of the Kaesong Industrial Complex operations, Seoul transferred about 616 billion won (about $560 million) to Pyongyang, last year alone North Korea received about 132 billion won ($110 million).

Any foreign currency flowing into North Korea goes to the WPK. The money is then used for the development of nuclear weapons and missiles or spent on luxury goods”, said the Minister, again failing to provide any evidence and noting that other details cannot be made public.

I must say that the strategy “We have something, but we will not tell you about it” was already used during the Dreyfus affair. At that time, the military made assurances that they had the evidence, but they were secret and could not be published. Something similar happened with Syngman Rhee, when his political opponents were imprisoned and executed based on the testimony of secret witnesses who never appeared in court.

It is different today, and Yong-Pyo Hong’s statements led to a dispute. How did they get such important information? How do we know exactly that it was 70%, which in theory can be known only from certain accounting documents? Why did not the South Korean intelligence report such a sensation?

On February 15, during a meeting between Hong and Members of the National Assembly, deputy Won Hye Jiyeon of the Democratic Party Toburo asked the Minister to provide concrete proof that the North Korean income from the Kaesong Industrial Complex was used for the development of the North Korean nuclear program. Another deputy from the opposition, Jeong Se Kyung, said that if the government continued to cooperate with Pyongyang in Kaesong, knowing the above facts, it was a violation of UN Security Council resolutions.

As O. Kiryanov said, Hong was “pinned to the wall”. “If you have proof of what has been said about the use of Pyongyang’s money, but you do not want to speak out for privacy considerations, let’s hold a meeting behind closed doors, so that you are able to prove everything. And if you did say something that is not true, then you should take responsibility for these accusations.”

And this is where the authorities fell into a nasty trap. Perhaps the right-wing were trying to once again kick the opposition for its “Sunshine policy”, which is considered by the Conservatives as irresponsible appeasement of the North. Indeed, the Kaesong Complex appeared during the left-wing rule, and while the Conservatives were in the opposition, many of them criticized the Complex as a deliberately unprofitable politicized project that pumped money into the Pyongyang regime. But then a question arises: why, once in power, did they not close the Complex at the very first sign of the worsening of the inter-Korean relations, and why three years ago, when the North attempted to close the Complex, they declared loudly they would not sacrifice the business and would fight for the project. It turns out that the Conservatives tolerated the use of the Southern money, too. They knew it and continued to indirectly sponsor Pyongyang despite the fact that it was formally Seoul that was the main supporter of the most rigid sanctions regime.

As a result, on February 15, 2016 Hong took back his words, stating there was no definitive evidence. There are suggestions that the North used the money in this way, but he did not say they were indisputable. What he knew was that 70% of the wages of North Korean workers in the KIC were made available to the WPK secretariat. With respect to its further use, he expressed concerns without making any specific conclusions, and the South Korean government does not know exactly how Pyongyang made use of this money afterwards. So, his statement was interpreted incorrectly.

The press secretary of the Ministry for Unification, Chung Joon Hee, made a similar statement. She said that there were some concerns, “but the importance and performance of the industrial park have been recognized by the international community. That’s the way it should be understood.” Like Hong, she also refused to give any further clarifications despite her rather ambiguous statements.

However, the problem is that Hong’s “I’ve been misunderstood” justification attempts look very pale, given that videos with his statements are available in the Internet and they clearly show there was no misinterpretation. The official meant exactly what he said.

The matter was concluded by President Park Geun-hye in her speech (see ); on February 16 in which she announced that there are strong presumptions that “most of the money flowed to the ruling WPK, which is responsible for the nuclear and missile programs, instead of being used to improve the lives of ordinary people.” In other words, we believe that the money was not used correctly, and whether there is evidence or not, the project is now closed.

This is another story about another project cut short before its time , which leaves us with a question: “What were the real reasons for the administration of Park Geun-hye to close the Kaesong project?” We will analyze it in our next article.

Konstantin Asmolov, Ph.D, Chief Research Fellow of the Center for Korean Studies, Institute of Far Eastern Studies, Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook.



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