South and North clashing over wage hike at Kaesong complex

Jeong Ki-seop, chairman of the Corporate Association of Kaesong Industrial Complex takes questions from reporters at the Inter-Korean Transit Office in Paju, Gyeonggi Province, Mar. 18, before crossing the border to meet North Korean authorities. (Yonhap News)

Tenant companies being urged to not comply with North Korea’s unilateral hiking of workers’ wages

Another inter-Korean conflict is escalating after North Korea unilaterally announced a wage hike for its workers at the Kaesong Industrial Complex.

North and South Korean authorities called separate briefings for tenant companies on Mar. 17 in a sign of an intensifying conflict that has the businesses caught in the middle feeling increasingly anxious.

But while the South Korean briefing went ahead as scheduled on Mar. 17, the North Korean one was canceled after South Korean companies declined to respond.

North Korea attempted to summon the head of tenant companies for a meeting on the morning of Mar. 17 at the office of its Central Special Development Guidance Bureau at the Kaesong Complex, but the event did not take place.

“North Korea sent a message through the Kaesong Complex management committee yesterday summoning the local office chiefs of the South Korean businesses to ‘explain the recently amended labor regulations,’” explained an official with South Korea‘s Ministry of Unification.

“The companies didn’t comply, and the meeting was eventually canceled,” the official added.

Shortly after North Korea sent the message, the South Korean government issued orders for companies not to respond. It also sent its own message to Pyongyang stating that it would prefer that company heads be briefed directly on the situation, rather than the company representatives in Kaesong. Heads of the South Korean tenant companies are now planning to visit the complex on Mar. 18 to deliver a document to the North urging a resolution.

Seoul also staged an afternoon briefing for tenant companies at the Korea Federation of SMEs offices in Seoul’s Yeouido neighborhood to call for their cooperation by “not complying with the North’s demands for a wage hike.” They were also told that economic cooperation insurance would be paid out to companies suffering damages as a consequence.

“If we comply with the North‘s wage increase demands, it will go on to unilaterally amend the 15 other regulations on things like taxation and insurance,” warned Lee Kang-woo, head of the Unification Ministry’s planning team for inter-Korean cooperation zone development.

“Companies that actively go along with the North may be subject not only to financial [penalties] on a trial basis, but also to cancelation of their project approval,” he cautioned.

The businesses themselves expressed serious concerns.

“A company that can’t pay for economic cooperation insurance because of capital encroachment can’t receive a payout either,” said one business representative who attended the briefing. “The government’s policy on this is to leave us all twisting in the wind.”

North Korea has already amended 13 of the complex’s labor regulations to give its own Central Special Development Guidance Bureau authority over them rather than deciding them by agreement with the South. In November 2014, it abolished a 5% ceiling on yearly minimum wage hikes. In February of this year, it announced plans to raise the minimum wage from US$70.35 to US$74 a month as of March.

Last month, it gave notice that the monthly minimum wage was being raised by 5.18% and social insurance premiums by 5.5% as of March. The South Korean government refused to comply, expressing a message of “deep dismay” at the move. It also proposed a joint committee meeting to discuss wage issues. The North refused to agree, arguing that it had “legitimately exercised its legal rights.”

The March wages that North Korea declared an increase on are not paid to North Korean workers until between Apr. 10 and 20, raising the specter of frictions on the ground as wage settlement begins later this month. The complex currently has 124 companies and 91 offices operating out of it. There is a high possibility that more hard-line tactics from North Korea, like those seen when it unilaterally pulled out its workers in 2013, could lead to a long-term shutdown.

Meanwhile, the Ministry of Unification announced plans to crack down on the possible use of drones by North Korean refugee groups to scatter propaganda leaflets over North Korea for the fifth anniversary of the ROKS Cheonan sinking of Mar. 26.

“The use of drones to scatter propaganda leaflets violates the law,” it warned.

Sources said the administration considers the drones to be illegal because they can be manipulated from the ground, unlike the balloons traditionally used for the launches.

　

By Kim Ji-hoon, staff reporter

　

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