Inter-Korean Talks Break Down With ‘Pushing and Shoving’

Talks between the two Koreas aimed at reopening the jointly-operated Gaeseong factory park broke down yesterday, with negotiators from both sides “pushing and shoving” and no agreement for dialogue to resume.

The scuffle broke out when North Korea’s chief negotiator Pak Chol Su and about 20 officials entered a room of South Korean journalists to explain their position, according to a pool report distributed yesterday by the South’s Unification Ministry. “There was some pushing and shoving” after about 10 South Korean officials tried to break up the briefing, according to the report.

Negotiators at Gaeseong, 10 kilometers (6 miles) north of the border, couldn’t agree on a system that would prevent the North from unilaterally closing the factory park, the ministry said in a separate statement. North Korea withdrew its workers from the zone on April 8 to protest United Nations sanctions and U.S.-South Korean military drills, during a period of heightened tension that included threats of preemptive nuclear strikes by Kim Jong Un’s regime.

South Korea will be forced to take “grave action” if North Korea doesn’t show “sincerity” on guarantees against future closures, ministry spokesman Kim Hyung Suk told reporters today, without giving details. While the talks may have “virtually broken down,” neither side has officially called them off, he said.

The hotline at the Panmunjom border village is working normally and any future talks will be arranged through that phone line, Kim said.

Accounting for Damages

Vice Unification Minister Kim Nam Sik and chief negotiator Kim Kiwoong met with representatives of Gaeseong-based companies today to assess damages incurred by their businesses, Kim said. While the government in May rolled out a 300 billion won ($270 million) emergency fund and introduced low-interest rate loan programs to address the companies’ losses, executives have said the measures aren’t enough.

The businesses reported about 1.6 trillion won in losses as of June 7, according to the results of a survey by the Unification Ministry released on June 25.

Prime Minister Chung Hong Won’s office will convene an inter-ministerial conference later today to find ways to address continued damages being incurred by the South Korean companies operating in Gaeseong, Kim said.

North’s Guarantee

Shares of companies operating in Gaeseong plunged after yesterday’s talks fall-out. As of 11:25 a.m. local time, leather goods producer Emerson Pacific Inc. (025980) and mobile phone parts maker Jaeyoung Solutec Co. (049630) dropped by the daily limit 15 percent. Good People Co. (033340), an underwear maker, declined 3.5 percent and battery and computer network power source maker Ehwa Technologies Information Co. (024810) fell 8.8 percent.

The benchmark Kospi index of stocks rose 0.2 percent while the won gained 0.4 percent.

North Korea “guarantees that there won’t be a future closure,” according to the statement given by the North’s head negotiator Pak to the South Korean journalists. “We share the same interest in preventing future closures,” the North said. The statement was distributed by the Unification Ministry.

The North Korean military may re-occupy the zone if the Gaeseong project fails, Pak said, adding that the North has the ability to run Gaeseong without South Korea.

’Unwilling to Compromise’

“The incident shows that the North isn’t willing to compromise on the fundamental differences that it has with the South because if they do, they think their social system and the entire Kim dynasty is being defeated by the South,” Kim Kwang Jin, a senior research fellow at the Institute For National Security Strategy in Seoul, said by phone.

Closing Gaeseong deprived Kim’s regime of a key source of hard currency. North Korea earned $100 million each year from the zone, according to Yang Moo Jin, a professor at the University of North Korean Studies in Seoul. More than 53,000 North Korean workers were employed by 123 South Korean companies at the park.

Ahead of the negotiations, the North had toned down its rhetoric after China, its biggest backer, joined the U.S. and South Korea in condemning its nuclear ambitions. Last month, North Korea requested talks with the South on Gaeseong, then scrapped the offer over a protocol dispute, and less than a week later suggested high-level talks with the U.S. on a peace treaty to formally end the Korean War.

’Commitment Problem’

“In general, they have a commitment problem,” Daniel Pinkston, a senior analyst in Seoul at the Brussels-based International Crisis Group, said by phone yesterday before the talks. “A dictator can wake up tomorrow and change his mind.”

In addition to reopening the Gaeseong factory park, North Korea has also sought an agreement on resuming visits by South Korean tourists to the Mount Geumgang resort and a reunion for families divided by the Korean War. The “Diamond Mountain” resort, opened by the two Koreas in 1998, has been closed since 2008, when North Korean troops shot and killed a South Korean guest walking on a restricted beach.

South Korean President Park Geun Hye’s government has said it won’t engage the North until it gives up its nuclear weapons, aside from talks on joint economic projects and humanitarian issues.

“It will take some time for the two countries to come to an agreement,” Nam Sung Wook, a North Korea studies professor at Korea University in Sejong, south of Seoul, said by phone yesterday before the talks. “If the North doesn’t give the answer that the South demands about a system to prevent future closures, I don’t see the talks making progress any time soon.”

To contact the reporters on this story: Heesu Lee in Seoul at hlee425@bloomberg.net; Sangwon Yoon in Seoul at syoon32@bloomberg.net

To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net

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