[Photo by Korea Press Pool]
A majority of South Korean companies that were forced to abandon facilities and businesses in the inter-Korean industrial park in Kaesong, North Korea, after government-led shutdown three years ago wish to return to the complex and resume joint-venture business despite mounting losses.
According to a survey on 108 South Korean tenants of the Kaesong Industrial Complex conducted by the Korea Federation of Small and Medium Business (KBIZ), 76.9 percent said their business conditions have worsened after the suspension of their business in North Korea, and another 9.3 percent responded they were on the verge of bankruptcy.
The Kaesong Industrial Complex located in North Korea has been the first and longest-sustained inter-Korean venture but its South Korean tenants were forced to pack out in February 2016 after Seoul closed the park in retaliation against Pyongyang’s nuclear and missile provocations.
Despite the losses stemming from the geopolitical risk, the business owners are hoping to return to their worksite after the leaders of the two Koreas agreed during a summit held in Pyongyang last September that they would put a priority on resuming the operation of the industrial park.
Asked about the biggest challenge to their business after the shutdown of the industrial park, the largest 61.1 percent cited difficulties in securing funds for business operation such as paying for supplies and salaries to workers. It was followed by a shortage of new orders due to the loss of clients (23.1 percent) and investing in production facilities (13.0 percent).
Despite the challenging situation, 98.2 percent responded they would go back to the Kaesong Industrial Complex once it resumes operation, with 56.2 percent of the respondents saying they would return under any circumstances, doubled from previous year’s response of 26.7 percent. A 41.7 percent said they would review business conditions and related policies prior to making a decision to return.
The main reason behind the South Korean tenants’ desire to resume their operation in the Kaesong Industrial Complex was that they found running their business there was more cost-effective and provided them with more chances to find new markets amid slowing demand in the South (72.6 percent).
A KBIZ official said the Kaesong Industrial Complex’s tenants hope the government can speed up the process to resume the operation. The companies are asking the government not only to provide them with subsidies but also to allow them to visit the industrial complex to check their assets and properties, the official added.
By Seo Chan-dong and Cho Jeehyun
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]