North and South Korea agreed to reopen their jointly run industrial complex next week, the latest step in reducing tensions between the two countries that flared after a nuclear test by the North earlier this year.
The accord on a time-line to open Gaeseong by Sept. 16 will end a near six-month shutdown caused by Kim Jong Un’s regime pulling out its 53,000 workers as relations soured between the two countries. North Korea also agreed to exempt South Korean companies at Gaeseong from taxes this year. Shares of Korean companies operating at Gaeseong gained.
“Both sides’ determination to restore Gaeseong through dialog contributed to this agreement,” Yang Moo Jin, a professor at the University of North Korean Studies in Seoul, said by phone. “This is a positive signal for President Park Geun Hye’s fledgling North Korea policy.”
Gaeseong, located north of the fortified border that divides the two countries, provides cheap labor for 120 South Korean companies producing at the site and is a source of hard currency for the North. The Kim regime shuttered the park after the United Nations tightened sanctions against the country in response to North Korea’s third nuclear test in February, followed by threats of a preemptive attack against the South and the U.S.
Romanson Co. (026040), which manufactures wrist watches at Gaeseong, gained as much as 7.1 percent, the biggest intra-day gain since Aug. 8., before trading up 3.1 percent at 12:34 p.m. in Seoul. Shinwon Corp. (009270), an apparel maker with a factory at Gaeseong, added as much as 4 percent. The benchmark Kospi index of stocks fell 0.1 percent.
Gaeseong represented the only vestige of cooperation between the countries before the shutdown. Since the preliminary accord on Aug. 14 to reopen the site, the two Koreas have also agreed to resume reunions of families separated by the Korean War and restarted a military hot-line to improve communication.
Later today, the North may allow the South Korean flag to be hoisted and the national anthem played for the first time in Pyongyang at the opening ceremony of an Asian weightlifting competition that the South is joining.
As part of today’s accord, the two Koreas also agreed to hold a business fair at Gaeseong next month in an effort to draw foreign investment, according to South’s Unification Ministry.
“I doubt it’ll be successful because foreign companies won’t feel comfortable moving operations to Gaeseong at a time North Korea is under sanctions,” Yang said.
Glyn Davies, the top U.S. envoy for North Korea, told reporters in South Korea yesterday the U.S. ruled out the possibility of a quick resumption of six-nation talks offering the North aid in return for giving up its nuclear ambitions unless Kim Jong Un’s regime halts its nuclear weapons program.
To contact the reporter on this story: Sam Kim in Seoul at firstname.lastname@example.org
To contact the editor responsible for this story: Rosalind Mathieson at email@example.com