South Korea businessmen travel to North's Kaesong joint industrial zone over wage row

SEOUL (AFP) - A group of South Korean businessmen travelled to the Kaesong joint industrial zone in North Korea on Tuesday to address a damaging wage dispute hanging over their companies there.

The North announced last month that it would unilaterally raise the wages of the roughly 54,000 North Korean workers employed at the 125 South Korean firms operating in Kaesong. South Korea demurred, insisting that employment conditions in the zone could be adjusted only with the agreement of both sides. With the North's unilateral proposal supposed to take effect on Friday, the South Korean owners are concerned their company managers might come under intense pressure to comply.

The 17-member delegation undertaking the one-day trip on Tuesday was led by Mr Chung Ki Sup, who heads the council of South Korean companies operating in Kaesong. Another delegation member, Mr Yoo Chang Geun, told reporters they would talk to the local company managers and push for a meeting with the North Korean authorities.

"We are going to Kaesong with hopes to settle the wage issue through dialogue,” Mr Chung told journalists before crossing the border. “We’re in a dilemma. As we operate plants in North Korea, we cannot simply reject the North’s demand. But we also have to follow the South Korean government guidelines.”

Until now, Pyongyang has rejected Seoul's requests for official talks on the dispute, arguing it has no need to consult over its "legitimate" right to amend working conditions in Kaesong.

The South has cited an existing agreement that any wage rise has to be agreed by a joint committee overseeing the management of the park, which lies some 10km on the North side of the border.

The North's proposal would increase the average monthly sum the South pays for each worker - including allowances, welfare and overtime - from US$155 to US$164.

Seoul's Unification Ministry has sent an official letter to the South Korean companies in Kaesong, reportedly threatening disciplinary measures if they yield to the North's pressure on the wage issue.

In 2013, the North effectively closed down the industrial park for five months by withdrawing its workers following a surge in military tensions.

Many of the South Korean firms operating there, mostly manufacturers of low-priced household goods, are still reeling from financial losses from the shutdown.

Born out of the "sunshine" reconciliation policy initiated in the late 1990s by then South Korean President Kim Dae Jung, Kaesong opened in 2004 and proved remarkably resilient, riding out repeated inter-Korean crises that closed down every other facet of cooperation.

The North's decision to pull out its workforce in 2013 took most by surprise, especially as it was the North that reaped the greatest financial benefit from its operations.

The hard currency wages paid by the South Korean firms in Kaesong are kept by the state, which passes on a fraction - in local currency - to the actual workers.

The South Korean businesses get cheap, Korean-language labour, as well as preferential loans and tax breaks from the South Korean government, which also effectively underwrites their investment.