Bloomberg News

North Korea Warns Foreigners to Leave Seoul Amid Tensions

April 09, 2013

North Korean Employees Don’t Report for Work at Gaeseong Complex

The inter-Korean industrial complex of Gaeseong is seen from a South Korean observation tower in Paju near the Demilitarized Zone dividing the two Koreas. South Korean companies employ more than 53,000 North Korean workers at Gaeseong. Photographer: Jung Yeon-JE/AFP/Getty Images

North Korea said foreigners in South Korea could be in danger and pulled its workers from an industrial park jointly run with the South, as Kim Jong Un escalated his campaign to raise tensions on the peninsula.

Foreigners including business executives and tourists should prepare measures for shelter and evacuation in case of war, North Korean’s official Korean Central News Agency reported, citing the state-run Korea Asia-Pacific Peace Committee. South Korea’s government has said North Korea may conduct a nuclear test or launch a missile as soon as tomorrow.

The North’s warning follows threats by Kim’s regime to launch pre-emptive nuclear strikes against the U.S. and South Korea, and after it pulled workers from the jointly run Gaeseong industrial complex. The threats are an attempt to gain attention rather than a sign of an imminent war, according to Huh Moon Young, director of the state-run Korea Institute for National Unification’s North Korean studies Center.

“North Korea is not looking to self-destruct,” Huh said in a phone interview today. “It’s trying to raise an issue with the international community and also grab the U.S. and China’s attention in a highly calculated manner.”

South Korea’s military saw no immediate signs of North Korea making preparations for an attack, Defense Ministry spokesman Kim Min Seok said today, a day after he confirmed the North has been ready since February to conduct a fourth underground atomic weapon test at its Punggye-ri site.

Psychological Warfare

The North’s warning was “psychological warfare,” and foreigners aren’t showing signs of agitation, South Korean presidential spokeswoman Kim Haing said in a phone interview.

North Korea doesn’t want foreigners to be harmed in case of war with South Korea, the statement carried by KCNA said. National Security Chief Kim Jang Soo said April 7 the North may stage a provocation including a ballistic missile test tomorrow. North Korea has completed preparation for a mid-range missile launch, Yonhap News reported today, citing South Korean government officials it didn’t identify.

Earlier today, North Koreans employed at a joint industrial complex with South Korea didn’t report for work, severing the last exchange link between the two countries as tensions rise over Kim Jong Un’s nuclear program.

South Korea is in communication with its northern counterparts at the Gaeseong complex, Unification Ministry spokeswoman Park Soo Jin said by phone today. It was the first time since the industrial park opened in 2005 that North Korean employees didn’t show up for work, Park said.

Brinkmanship Tactic

Shuttering Gaeseong is “a brinkmanship tactic,” Kim Choong Whan, a lawmaker in the ruling New Fronter Party until April 2012 who led the National Assembly’s foreign affairs committee, said by phone today. “We’re unlikely to see the Gaeseong complex closing down permanently as it would really be bad for North Korea’s plans to attract foreign investment.”

South Korean companies employ more than 53,000 North Korean workers at Gaeseong, located about 10 miles (16 kilometers) north of the demilitarized zone between the two countries. Removing the workers denies Kim’s impoverished regime a source of foreign currency and indicates the North thinks it has nothing left to lose given the sanctions, said Koh Yu Hwan, a North Korean studies professor at Dongguk University in Seoul.

If North Korea aimed to start a war, “it would have shut down Gaeseong at once and held remaining South Koreans hostage,” the Korea Institute for National Unification’s Huh said. “Instead the North has suspended operations, leaving room for a possible closure.”

Shares Fall

Shares of companies operating in Gaeseong fell in Seoul. Shinwon Corp. (009270), an apparel maker, declined 2 percent and watchmaker Romanson Co (026040). slumped 3.6 percent. Good People Co (033340)., an underwear maker, fell 1 percent.

Overseas investors have pulled some $1.9 billion from Korean stocks since the North conducted its third nuclear test on Feb. 12, helping drive the Kospi index down 1.5 percent and contributing to a 3.6 percent slide in the won.

Still, the Kospi’s 3.8 percent drop this year is less than the 4.1 percent decline in the MSCI Emerging Markets Index and the won is only 1 percent weaker than its average level for the past three years.

As North Korea withdrew its workers, neighboring countries made preparations against a possible missile launch. Japan has deployed PAC-3 missile interceptors including around Tokyo, Japan’s Chief Cabinet Secretary Yoshihide Suga told reporters today.

Various Devices

Taiwan’s Ministry of National Defense will use various devices, including radar, to monitor developments on the Korean peninsula, spokesman David Lo said by phone. He said he was unaware of any request for Taiwan’s air force to strengthen early warning systems, after the China Post reported Taiwan had boosted its long-range radar sweeps at the urging of the U.S.

The North’s development of nuclear weapons and long-range missiles poses a “direct threat” to the U.S. and its allies, Admiral Samuel Locklear, the head of the U.S. Pacific Command, said in prepared testimony for a Senate Armed Services Committee hearing set for today.

Representatives of the South Korean companies at Gaeseong held an emergency meeting in Seoul today. The companies urged President Park Geun Hye’s government to send a delegation to the North to discuss resuming work at the complex, said Han Jae Kwon, who heads the group of businesses.

Damage Estimates

While Han couldn’t provide an estimate for damages incurred since the suspension, he said the companies cannot afford to have the situation “further dither.”

The complex last year produced about $1.3 million of goods a day or $470 million for all of 2012, the highest since the park opened eight years ago, Unification Ministry data show.

President Park Geun Hye called the Gaeseong halt “very disappointing” and expressed concern that a 1.83 trillion won ($1.6 billion) inter-Korean cooperation fund will be used to cover business losses rather than on future ventures.

“No company nor country will want to invest in North Korea if it continues to break promises with the international community and hinder Gaeseong operations,” Park told her cabinet today, according to a statement on her website.

Only 50 billion won from the fund is earmarked for insurance for inter-Korean projects, according to the Unification Ministry’s 2013 plan for the fund.

None of Shinwon’s 2,200 North Korean workers at Gaeseong reported for work today, according to a company spokeswoman who declined to be identified. The company is considering ways to replace production at Gaeseong at its factories in Myanmar, China or in South Korea, the spokeswoman said.

Workers Leave

Seventy-one South Koreans exited Gaeseong today, leaving behind 408 in the complex, the Unification Ministry said in a text message. More than 110 plan to leave the complex tomorrow.

The North generates $100 million in profits annually from the project and South Korea makes quadruple that amount, according to Yang Moo Jin, a professor at the University of North Korean Studies in Seoul.

“Factories haven’t been able to operate at full capacity anyway because of North Korea’s entry ban on South Koreans and raw materials from the South,” said Yoo Dong Ok, a spokesman for the South Korean businesses operating in the zone.

To contact the reporters on this story: Sangwon Yoon in Seoul at syoon32@bloomberg.net; Rose Kim in Seoul at rkim76@bloomberg.net; Cynthia Kim in Seoul at ckim170@bloomberg.net

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


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