South Korean firms say lost S$931 million due to Kaesong closure

South Korean soldiers stand guard on the road leading to the Kaesong joint industrial zone.
South Korean soldiers stand guard on the road leading to the Kaesong joint industrial zone.PHOTO: AFP

SEOUL (AFP) - South Korean firms which once operated factories in a now-shuttered joint economic zone in North Korea pleaded Monday (Feb 29) for urgent help from Seoul, saying they had lost more than US$663 million. (S$931 million)

The South on February 10 announced the pullout from the Seoul-funded Kaesong industrial complex in protest at North Korea's latest nuclear and long-range missile tests.

The shock announcement prompted the North to expel all South Koreans from the estate and freeze all assets there, shutting down the last symbol of cross-border economic cooperation.

The sudden closure took a heavy toll on more than 120 South Korean firms whose production machinery, raw materials and finished products are still trapped in Kaesong, said Jeong Gi-Seob, the head of an association representing them.

Such assets are valued at 820 billion won (S$931 million), he said, adding the closure is expected to make about 2,000 South Koreans jobless.

"When Kaesong first opened in 2004, we trusted the government's words that it would be safe from political situations," Jeong told reporters.

"Now we are left devastated... and in urgent need of help."

Seoul has announced a series of temporary measures to help the firms and will soon start an inquiry into the scale of the damages they face.

Jeong said the measures were "far from sufficient" to help many firms that were facing possible bankruptcy due to mounting debts and massive order cancellations.

"We were part of this precious, rare inter-Korea cooperation. The government can't just let us die like this," he said.

The estate employed more than 53,000 North Koreans making items such as textiles, footwear and cheap electronics.

Since its opening in 2004, South Korean firms have paid wages worth $560 million to the North's state authorities on behalf of the workers.

Seoul has said Pyongyang may have used part of the money to develop nuclear weapons and missiles.

Kaesong, born out of the "sunshine" reconciliation policy in the late 1990s, had previously remained largely immune to turbulence in inter-Korean ties.

The only exception was in 2013 during heightened cross-border tensions when Pyongyang effectively closed the zone for five months by withdrawing its workers.