Korea June 11, 2009, 10:47AM EST

North Korea's Kaesong Clamor

Demands for higher pay and recent border actions at the joint industrial park concern South Korean businessmen more than the regime's nuclear tests

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It's hard to believe a nation seeks talks to increase wages in a joint industrial park with its neighbor shortly after warning that a war with that neighbor might be imminent. But that's exactly what North Korea is doing just as the U.N. takes final steps to endorse sanctions for the country's May nuclear test. On June 11, South Korean negotiators, responding to a call for talks by Pyongyang, crossed the heavily fortified demilitarized zone to sit with their North Korean counterparts at the Kaesong Industrial Complex just north of their border.

The paradoxical approach sums up North Korea's precarious existence. The regime of ailing leader Kim Jong Il appears bent on maintaining the Kim family's Communist dynasty at all costs, but the country's rickety economy can hardly support the subsistence of its 23 million population. "If North Korea is totally cut off economically from the South, its hardship will be pushed to the brink within years," figures Koh Il Dong, who heads research on North Korea at the government-funded Korea Development Institute in Seoul.

Sure, since the fall of the Berlin Wall and the disintegration of the Soviet bloc 20 years ago, North Korea has defied predictions of the regime's demise. Koh and many North Korea watchers in Seoul believe the reclusive nation will again muddle through for a couple of years even in the face of international sanctions unless China, its main ally, pulls the plug.

The wild card, however, is South Korea. It has emerged as Pyongyang's second most important trading partner thanks to a decade of the "Sunshine" engagement policy that ended last year with the inauguration of conservative President Lee Myung Bak. Probably the most concrete sign of the 10-year period is the Kaesong complex. There, managers from more than 100 South Korean companies are working with a Communist Party workforce of nearly 40,000 who are employed at factories making clothes, shoes, watches, and other labor-intensive products.

Border Closures Take Toll on Output

Now, after more than a year of worsening relations and the North's second detonation of a nuclear device on May 25, the fate of the Kaesong complex is thrown into question. The pilot project is operated by a South Korea-run committee under a 50-year lease that began in 2004, but many in the South are now asking how much longer it can survive. The dangers to the viability of the industrial park weren't really posed by the recent belligerence of the North. After all, South Korean entrepreneurs who have lived with communist threats since the end of World War II are so accustomed to the North's rancor that it's been business as usual, despite the tensions. "As far as the production goes, nothing much has changed at Kaesong," says Yoo Chang Guen, president of South Korea's SJ Tech, which employs 430 North Korean workers there to make rubber and plastic parts for cars and semiconductor manufacturing equipment. "North Korean workers don't even know what's really going on outside Kaesong."

The real problem, rather, dates from December, when the North Korean military imposed restrictions on passage through the border. Pyongyang's action came after South Korean human rights groups dropped leaflets criticizing the Kim Jong Il regime from balloons. Three day-long closures of the border followed while the U.S. and South Korea carried out a major joint military exercise in March. The North also detained a South Korean man working at Kaesong in March for allegedly criticizing the Northern system.