North Korean Economy Watch

According to National Public Radio:

Conventional wisdom holds that the people of North Korea are trapped in a world of rigid conformity, totalitarian discipline and complete isolation from the rest of the world.

But increasingly another picture is emerging: North Koreans are far more aware of the outside world, according to evidence provided by North Korean refugees, South Korean humanitarian aid workers, Chinese traders and others.

It is rare for an American to travel to North Korea, and even rarer for an American to spend much time there. Steven Linton has done both.

“In general I think North Koreans are clearly growing in their awareness of the rest of the world. I think there’s no question about that,” Linton says.

Linton has been going to North Korea for many years. He is engaged in a campaign to combat tuberculosis there, and he says North Koreans are soaking up information about the rest of the world.

“One of the most underrated realities about North Korea is its very dynamic relationship with China, and the amount of information that flows across that border. Students; business people; it’s a continuous stream of traffic,” he says.

With that traffic come thousands of DVDs, CDs, cellular telephones, used computers and videotapes — many of them from China and South Korea.

Traders Fill Information Gap

Kim Heung Kwang came to South Korea from the North six years ago and created a group called North Korea Intellectuals Solidarity. He has his own network of people in both Koreas. Kim says market-oriented traders and smugglers in the provinces of China bordering on North Korea are filling the information gap.

He says that many Koreans in China make a living by setting up satellite TVs at their homes to receive South Korean media. Then, they burn CDs and DVDs of the programs and sell them to North Koreans — for a profit, not propaganda.

These media are so prevalent inside North Korea now that knowledge about South Korea has become commonplace, says Yoo Ho-yeol, a professor at Korea University in Seoul. Yoo regularly talks to students and refugees from North Korea.

“They are telling us that those people living along the border area, all of them know well about South Korean society or daily life,” he says.

Groups such as North Korea Intellectuals Solidarity also have managed to send cell phones across the Chinese border, and now thousands of people can call to South Korea, via cell phone systems in China, to provide news of developments inside North Korea. And they can receive text messages, photos and music via cell phones.

It was through channels such as these that news leaked out of North Korea late last year of the disastrous currency reform the government had imposed and widespread resistance to it.

Impossible To Stop Flow Of News

It is still not risk-free to possess these materials. But, says Kim of North Korea Intellectuals Solidarity, while possessing a videotape from South Korea in years past might bring a three-year prison or labor camp sentence, now the materials are so common that local authorities appear to understand they’ve already lost this battle.

“The efforts are ongoing to inspect and collect everything that they can find. But because the demand is so big and the activities are [going on in the] black market, the government is feeling that it is fundamentally impossible to eliminate all sources. So I feel that they are just going through the motion now,” he says.

And there is word of mouth. Humanitarian workers from South Korea who have brought medicine or food to North Korea say simple conversation can be transformative.

Hwang Jae-sung has done agricultural work in North Korea for an aid group from the South called Korean Sharing Movement.

“They saw what we were, and what we do and what we brought. And they go back to [their houses] and they just tell their wives and children and so on. The word spreads, a thousand miles,” Hwang says.

Sanctions Undermine Efforts

Ironically, the policies of the United States can get in the way of the freer flow of information. Some economic sanctions imposed by the U.S. have created problems for the North Korea Intellectuals Solidarity group. It has been sending USB drives that carry books, news articles, music, teaching materials and computer games to North Korea.

But North Koreans need more computers to use them, says Kim, the group’s director.

“The prerequisite for this program is enough computers in North Korea. But there are several regulations in place blocking our efforts. So I think that the United States needs to change its regulations on these matters,” he says.

The number of used computers from South Korea and Japan is enormous. But sanctions make it more difficult to get even these computers and more information into North Korea.

Read the full story and hear audio below:
Awareness Of Outside World Growing In North Korea
National Public Radio
Mike Schuster
6/15/2010

According to Barbara Demick at the Los Angeles Times:

The numbers change daily, but as of early this month, 818 South Koreans were still working alongside roughly 43,000 North Koreans. Despite the supposed ban on North Korean products, South Korea recently accepted delivery of 20 tons of peeled garlic as well as $17,000 worth of clothing and $250,000 of electrical sockets.

Lim, who is in touch with many workers and managers, says that on a human level, relations between the Koreans at Kaesong are not as hostile as one might imagine. He paraphrased North Korean bureaucrats whispering to South Koreans, “We hate Lee Myung-bak’s government but not you as people.”

The South Koreans at Kaesong either commute — downtown Seoul is only 30 miles away — or live for up to two weeks at a time in dormitories attached to the factories. There they can watch South Korean television and make telephone calls home, although they have no access to the Internet.

Since the recent crisis erupted, the South Korean government has ordered Kaesong’s factory owners to reduce their staffing, fearful of what might happen if the war of words were to erupt into an actual war.

South Korean Defense Minister Kim Tae-young said during parliamentary committee meetings last month that there was a “a great possibility” that South Korean workers could be taken hostage by the North Koreans.

To South Korean factory owners, the idea is preposterous.

“People who have never been to Kaesong and who are only watching the television news keep asking our employees, ‘Are you guys all right?’ ” said Park Yoon-gyu, president of South Korean menswear manufacturer Fine Renown, which has operated out of Kaesong since 2008.

“We South Koreans and North Koreans have become very close to each other,” he said. “Yesterday’s enemies are today’s friends.”

But a South Korean worker who spoke anonymously to the conservative Chosun Ilbo newspaper gave a less sanguine account of the atmosphere at Kaesong. He said that armed North Korean soldiers had been seen inside the compound, despite rules forbidding their presence.

The man also said that North Korean employees were stealing food, office supplies and toilet paper, and even grass seeds from a newly planted lawn, apparently following official orders to take whatever they could from South Korean companies.

Both North and South Korea have substantial amounts of money at stake in Kaesong, which lies just south of the 38th parallel — where the peninsula was divided at the end of World War II — but changed hands during the Korean War.

Kaesong is home to 120 South Korean factories, each of which required an investment of as much as $8 million, according to scholar Lim. For cash-starved North Korea, Kaesong is one of the dwindling sources of hard currency. The North Korean workers receive monthly salaries of $70 to $80, of which all but about $20 goes to the government.

Even in the crisis, the industrial park could help defuse tensions. South Korea hasn’t followed through on its threat to resume propaganda broadcasts at the DMZ, in part out of concern about what might happen to workers at Kaesong. Loudspeakers have been installed at 11 locations but remain quiet — for now, at least.

As an aside, Paul Romer is trying to push the founding of charter cities as a new strategy of reducing poverty in the developing world.  A brief summary of his work has been published in The Atlantic and is worth a read.

You can read the full Los Angeles Times story here:
For Koreas, business park remains a neutral zone
Los Angeles Times
Barbara Demick and Ju-min Park
6/13/2010

According to the Asahi Shimbun:

Seoul and Washington have confirmed that North Korea supplied Iran with submarines several years ago, showing that military exchanges between the two countries have reached a higher level, military sources said.

The exports were 130-ton Yono-class midget submarines, the same model as the one believed to have torpedoed the South Korean warship Cheonan near the disputed western sea border with North Korea, killing 46 sailors on March 26.

Iran and North Korea had initially cooperated in ballistic missile technology. They have expanded this cooperation to warships and uranium-enrichment technology in recent years, the sources said.

The U.S. government recently provided South Korea with several photos of a Yono-class submarine taken at an Iranian port around 2007, according to the sources.

The photos were given for the investigation into the sinking of the Cheonan.

One of the photos showed a crane moving a submarine and people believed to be Iranian officials, according to the sources.

South Korea’s Ministry of National Defense late last month said a Yono-class submarine was built in a shipyard for special vessels in Pyongyang in June 2004.

The submarine was likely built primarily for export, according to the sources.

Different sources said the South Korean and U.S. governments also confirmed around 2008 that Iran possessed a 120-ton Ghadir-class submarine, which looks almost identical to the Yono-class sub.

The Iranian submarine could have been a remodeled North Korean submarine or it may have been built based on North Korea’s design, according to the sources.

It has the potential to fire the CHT-02D torpedo, parts of which were found in the wreckage of the Cheonan, the sources said.

Iran imported the submarines likely for strategic purposes in the Straits of Hormuz in the Persian Gulf, according to one of the sources.

North Korea’s military cooperation with Iran moved into high gear after Pyongyang began supplying a number of advanced short-range Scud-B missiles around 1987.

Funds from Iran helped North Korea develop the Nodong medium-range missiles. The Nodong technology was used to develop Iran’s Shahab missiles.

Iran has also provided North Korea with uranium-enrichment technology, according to the sources.

Planeman has more. 

Daily NK has more.

Read the full story here:
North Korea supplied submarines to Iran
The Asahi Shimbun
Yoshihiro Makino
6/11/2010

According to Joong Ang Daily:

South Korean goods and services going in or out of North Korea will now have to be approved by the unification minister, according to the ministry yesterday. Trade with the Kaesong Industrial Complex will be the only exception to the rule, which takes effect Monday, the ministry said.

This is a follow-up to South Korea’s decision on May 24 to halt all inter-Korean trade, except that at Kaesong, as punishment for the sinking of the South Korean corvette Cheonan in March, which the South has blamed on the North.

“To effectively implement the government’s decision to halt inter-Korean trade, we revised the rules regarding the approval processes regarding goods and services crossing the inter-Korean border,” said Chun Hae-sung, spokesman for the ministry, in a media briefing.

Until yesterday, items traded with North Korea didn’t need to be individually approved. The report by the Korea Development Institute said the suspension of trade will cost North Korea about $280 million annually.

Read the full article here:
Ministry further restricts trade with North Korea
Joong Ang Daily
6/12/2010

According ot the Reuters (via Straits Times):

More than 100 countries may not be doing enough to implement punitive actions against North Korea, said a report from a United Nations panel that monitors compliance with sanctions on the North.

The latest report to the UN Security Council from the Panel of Experts on North Korea, obtained by Reuters, said 111 of the 192 UN member states, or 58 per cent – mostly developing nations – had not submitted reports on their implementation of the council’s two sanction resolutions.

Those resolutions – adopted in 2006 and last year in response to Pyongyang’s two nuclear tests – restricted arms deals, banned trade in technology usable in nuclear and other weapons of mass destruction, called for travel bans and asset freezes, and banned North Korean imports of luxury goods.

Some 30 countries submitted reports on their implementation of the first sanction resolution, No. 1718, but not the second, No. 1874.

‘Basically, what this tells us is there’s a lot more work that needs to be done to implement the North Korea sanctions,’ a Security Council diplomat said, on condition of anonymity.

Another envoy agreed: ‘Often, developing countries simply don’t have the resources to implement the sanctions properly.’ He added this created potential weak spots and openings for countries such as North Korea and Iran to skirt UN sanctions.

Read the full story here:
6 in 10 didn’t report sanctions
Reuters (via Straits Times)
6/14/2010

Daily NK
Hwang Ju Hee
6/7/2010

Showing Pyongyang’s desire to reach new markets, Uriminzokkiri (Being amongst Our Nation), a website managed by the North Korean Committee for the Peaceful Reunification of the Fatherland, recently covered “Rakbaek Makkoli,” taking its lead from an article published in the latest issue of monthly domestic publication “Deungdae” (Lighthouse).

Makkoli is a traditional Korean drink made from fermented rice which has its roots in agricultural areas. Recently it has experienced a resurgence of popularity in South Korea.

The Uriminzokkiri report explained of the North Korean makkoli, “The makkoli produced by Rakwon Department Store in Pyongyang is a healthy beverage and good to drink. It is consumed internationally as well as domestically.”

Given that Uriminzokkiri is targeted at South Koreans, the appearance of “Rakbaek Makkoli” looks like an attempt to profit from the thriving South Korean makkoli business.

Although North Korea has exported “Pyongyang Soju” to the U.S., Japan and China in the past, consumers didn’t take to it due to its expensive price and strong taste. Therefore, North Korea may be looking to makkoli.

One defector, who used to be involved in trade in North Korea, explained in an interview with The Daily NK, “Bottled makkoli is thought of as a luxury beverage, but the general populace can drink it only on holidays when the state distributes it.”

He added, “But the common people, especially those who live in agricultural areas, brew their own with spoiled rice or bread and yeast. Cadres don’t usually drink this.”

The South Korean makkoli industry is thriving under the influence of a South Korean cultural wave which is in evidence in Japan, China, Taiwan and even as far away as the U.S. The most famous traditional makkoli, which is made in the southwest provinces of South Korea, has recently begun to be produced for export, while marketing men in Seoul recently hit upon calling makkoli “Drunken Rice” in an attempt to forge an international makkoli brand image.

To that end, makkoli has been promoted several times at summits and other international events by South Korean President Lee Myung Bak.

UPDATE 2: According to the Daily NK:

The recent shooting of four Chinese smugglers on the border between North Korea and China by a North Korean border guard was due to a quarrel between the Chinese smugglers and North Korean border guards about an antiques smuggling ring, according to a local trader.

The North Korean border guard shot the four smugglers on June 4th; three were killed and one was wounded. Afterwards, the North Korean authorities apparently issued an apology for the accident to the Dandong municipal government and paid compensation to the victims’ families.

The trader, Kim, who lives in Dandong, reported the details of the shooting accident to The Daily NK earlier this week. The spot where the accident happened was on a boat around Hwanggeumpyeong on Shin Island at the mouth of the Yalu River, he explained, where the facilities of the Shinuiju Shoe Factory are located.

According to Kim, although it was reported in some quarters that the North Korean border guard did not know who was on the boat and fired at it in the dark, in fact, both sides already had close relations.

They were well acquainted with each other thanks to smuggling, Kim said; the North Korean guard had apparently passed several antiques which he had obtained in the North to the Chinese smugglers. However, the Chinese smugglers did not pay for them and severed contacts with him.

The antiques the North Korean guard had procured included rare pieces of white Chosun dynasty china, he said.

After the Chinese smugglers disappeared, the guard tried to find them for a while, but then encountered them by chance while on his patrols.

The guard chased and eventually caught them, then they argued, but the smugglers refused to pay money for the antiques, claiming they were all imitations.

After a while, the smugglers said they would give other goods of equivalent value instead of money and then tried to leave, at which point the guard apparently shot them.

Kim also reported the details of the North’s official response. After the Chinese Ministry of Foreign Affairs released a statement heavily critical of the shooting, the North sent a delegate to Dandong on the 15th to apologize, he explained.

In a meeting with Dandong governmental officials, the North’s delegate reportedly said it happened accidentally, and expressed the North’s sincere apologies for the accident.

The delegate apparently added that the North would restrict shooting towards the Chinese side and suggested that both sides should strengthen their mutual regulations on smuggling. He also paid $3,000 for each death as per the stipulations of a treaty between the two countries.

Kim said, “I thought the compensation was too low, so I asked once again, but their answer was that it is stipulated by the treaty.”

He added, “They promised the Chinese side that the border guard who shot the Chinese would be severely punished on suspicion of smuggling antiques and killing citizens of an allied country.”

UPDATE 1:  According to Reuters:

The isolated North made the effort to soothe China, its sole major economic and political supporter, after North Korean border guards last week shot at the Chinese nationals crossing the river border near the northeast Chinese city of Dandong.

Three were killed and a fourth was wounded.

Chinese Foreign Ministry spokesman Qin Gang said both countries were now “further investigating and handling the case”. He provided no other details.

On Tuesday, the Foreign Ministry made a rare public complaint about its neighbor and now North Korea appears to be seeking to placate Beijing.

North Korean border authorities said an initial investigation showed the incident was an “accident”, China’s official Xinhua news agency reported.

“The North Korean side expressed its grief over the Chinese deaths, and offered condolences to the families of the dead and to the injured, and will severely punish the perpetrators,” said the report.

“The North Korean border security authorities will further investigate this incident and prevent such incidents from recurring.”

ORIGINAL POST: According to the Associated Press:

A North Korean border guard shot and killed three Chinese citizens and wounded a fourth on the countries’ border last week, China said Tuesday after lodging a formal diplomatic protest.

The guard shot the four residents of the northeastern border town of Dandong last Friday, apparently on suspicion they were crossing the border for illegal trade, Foreign Ministry spokesman Qin Gang said.

“On the morning of June 4, some residents of Dandong, in Liaoning province, were shot by a DPRK border guard on suspicion of crossing the border for trade activities, leaving three dead and one injured,” he said at a regularly scheduled news conference. He used the acronym for North Korea’s formal name, the Democratic People’s Republic of Korea.

“China attaches great importance to that and has immediately raised a solemn representation with the DPRK. Now the case is under investigation,” he said.

Dandong is a major shipping point and rail link for goods going into and out of North Korea from China.

Qin did not give any further information. There have been some reports in South Korean media on the incident, though North Korea has not acknowledged the shootings.

And how did the South Koreans react?  According to the Los Angeles Times:

The irony of China’s protest over last week’s shooting was not lost on South Korea.

“This time it is their citizens who are killed, and they show they are not so naive after all about North Korea,” said Kim Tae Jin, a North Korean defector and human rights activist in Seoul. However, he applauded China’s protest of the shooting. China needs to show North Korean leader Kim Jong Il “that he can’t get away with whatever he wants,” Kim said.

China’s public protest is unusual in that relations between China and North Korea are normally shrouded in secrecy, to be discussed only in the politburos of the longtime communist allies.

“It is rare for China to publicly complain. Usually there is a private apology or money paid,” said Kim Heung Gwang, a former North Korean college professor and head of Seoul-based North Korea Intellectuals Solidarity.

The stretch of the Yalu just south of Dandong is frequently trafficked by smugglers, some of them bringing North Korean-made drugs into China or banned Chinese products, such as DVDs or cellphones, into North Korea.

The North Korean government is especially strict about the export of copper, which has been looted from factories, electrical and telecommunications facilities by Northerners desperate for money. But the North’s border guards do not normally shoot to kill — at least not when the smugglers are Chinese.

“Only their own people,” said Kim.

Read the full stories here:
China says NKorean border guard killed 3 Chinese
Associated Press
Tini Tran
6/8/2010

China makes rare public protest against North Korea over killing of 3
Los Angeles Times
Barbara Demick
6/9/2010

North Korea seeks to soothe China over border shootings
Reuters
6/10/2010

The interview (in German) can be found here. A reader, however, sent in an English version:

Klaus-Martin Meyer: Mr. Kelber, you were recently in North Korea for the first time. Was this trip in what is certainly a totally different world consistent with your expectations?

Ulrich Kelber: Though I prepared myself with both oral and written accounts, there were things, both positive and negative, that surprised me. Among the negative things were the uniformity and control; among the positive were how well educated the people are, and their effort to bring the country forward.

Klaus-Martin Meyer: The political climate of the Korean peninsula is currently more tense than ever. The North Koreans described their version of the fall of Cheonan. How realistic is it?

Ulrich Kelber: I’m not an expert on these sorts of questions, which prevents a very detailed assessment. North Korea’s November threats of retribution alone aroused suspicions. But, in fact, South Korea has to allow questions. Why can’t an independent commission examine the evidence? Why aren’t the survivors permitted to testify publicly?

Klaus-Martin Meyer: In Pyongyang you also visited a German joint venture with the company Nosotek. As a member of the Bundestag, what are your impressions of the working conditions and day-to-day work of software developers in this sector of the North Korean economy? Are you convinced that Nosotek is actually developing for the international market?

Ulrich Kelber: Yes, we saw typical products for the international market, which, as a computer scientist, greatly interested me. The programmers and graphic designers are obviously very highly trained, with technical equipment up to Western standards. One significant exception to this is the lack of internet access in the company itself. Of course, this makes business and customer support more difficult, but isn’t an obstacle for actual software development.

The working conditions were the same as I have seen at German start-ups or in developing countries. No one could comment on the wages, which is also the customary rule in Germany. However, I had the feeling that the employees were part of the middle class, to whatever extent it exists in North Korea.

Klaus-Martin Meyer: How do you rate the opportunities and risks for foreign entrepreneurs in North Korea?

Ulrich Kelber: That’s hard to say after a single visit, but at Nosotek there seems to be little standing in the way of economic success. Possible risks would be the regime further shutting the country off, or wider-reaching sanctions. The well-trained employees, which I also can affirm in other areas such as the trades and agriculture, represent a great opportunity for all businesses.

Klaus-Martin Meyer: As usual in closing, our standard question (not just in interviews about communist countries.) Where do you see North Korea being in five years?

Ulrich Kelber: If the regime doesn’t open up economically, the country will barely progress, in spite of any efforts, for example, to maintain their infrastructure. Even with a little more openness, North Korea could make enormous economic gains, since both infrastructure and well-trained workers are available. The possibility of a political thaw depends both on the ability of the North Korean regime to resolve the succession issue, as well as whether or not South Korea’s hardliners keep calling the shots.

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-06-07-1
6/7/2010

In 2009, North Korea’s foreign trade (not including inter-Korean trade) amounted to 3.41 billion dollars, 10.5 percent less than 2008, which saw the largest amount of DPRK overseas commerce since 1991. Exports were down 5.97 percent (1.06 billion USD), while imports were down 12.45 percent (2.35 billion USD), recording a 1.29 billion USD trade deficit.

These figures come from a KOTRA analysis of the Korea Business Center (KBC)’s statistics of trade with North Korea by foreign countries. Because North Korea does not reveal trade statistics, this ‘mirror analysis’ method of analyzing the statistics of its trading partners is the only method available.

Looking at each country’s trade figures individually reveals that China is the North’s largest trade partner. DPRK-PRC trade amounted to 2.68 billion USD last year, 78.5 percent of all the North’s foreign trade. The North exported 790 million USD worth of goods to China, while its imports from China amounted to 1.89 billion USD. As North Korea’s trade with China continues to grow relative to that with other countries, so too, does its economic dependence on Beijing. In 2003, DPRK-PRC trade amounted to 42.8 percent of its overall foreign trade. This grew to 48.5 percent in 2004, accounted for more than half (52.6 percent) in2005, hit 56.7 percent in 2006, 67.1 percent in 2007, and 73 percent in 2008.

North Korea’s main imports from China were crude oil and petroleum (330 million USD, down 44.2 percent from 2008), boiler and machinery parts (160 million USD, up 10 percent), and electrical components (130 million USD, up 31 percent). Top exports to China included coal (260 million USD, up 26 percent), minerals (140 million USD, down 34.1 percent), and textiles (90 million USD, up 20.7 percent).

Germany, Russia, India, and Singapore were the North’s 2nd thru 5th largest trade partners. Trade with Germany was up 33.7 percent, amounting to 70 million USD, while trade with Russia, India, and Singapore dropped off. After these countries, Hong Kong, Brazil, Thailand, Bangladesh, and the Netherlands made up the rest of the top 10 trade partners, which account for 92 percent of all the North’s overseas trade.

In addition, with continuing sanctions against the North by the United States and Japan, there were no exports to these countries, and imports from these countries amounted to a mere 2.7 million USD and 900,000 USD, respectively.

Inter-Korean trade for 2009 amounted to 1.68 billion USD. This was down 7.8 percent from the previous year. North Korean imports from the South were down 16.1 percent, recording 740 million USD. This was largely impacted by the closing of the Keumgang Mountain tourism project.

Combined, North Korea’s total foreign trade was down 9.7 percent, to 5.09 billion USD. 53 percent of this was with China, while 33 percent was with South Korea.

Continued international sanctions against the North and the possibility of additional unilateral sanctions from several countries means DPRK foreign trade will likely shrink more in 2010. It is also expected that the North’s economic dependency on China will continue to grow.

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-06-04-1
6/4/2010

In the aftermath of the Cheonan incident, the Lee Myung-bak administration has sought to strictly punish North Korea with the ‘May 24 Sanctions.’ As North Korea has reacted strongly to the South’s sanctions, there are many concerned over the safety of the ROK workers in the Kaesong Industrial Complex, and the economic implications of the ‘Korean Peninsular Risk’ are evident in the KOSPI and the value of the South Korean currency.

The South Korean government has yet to issue a detailed strategy in response to the Cheonan incident, and appears to risk falling into a quagmire as knee-jerk reactions severing economic ties and the ‘May 24 Measure’ are issued. When the government announced the ‘May 24 Measure’, Seoul stated that all inter-Korean exchanges (with the exception of the complex) were suspended and travel to the North was banned. In addition, North Korea ships are no longer allowed to use South Korean sea lanes and loudspeaker psychological warfare operations will restart along the DMZ.

However, 9 days later, there was still no change in South Korean military operations. An official with the Ministry of Defense stated that the plan of action was still being implemented, but that they were unable to implement the oiginal measures. It appears that the South Korean government is concerned about the response from Pyongyang.

After the announcement of the South Korean measures, North Korea declared that all inter-Korean relations were to be severed and that they would fire upon ROK loudspeakers projecting propaganda into the North. The North also alluded to restricting access for Kaesong Industrial Complex employees and evicted South Korean public officials from the area.

Now, South Korean authorities are contemplating the North’s announcement restricting access to the KIC. If North Korea were to cut off the complex and South Korean workers were trapped in the North, the ROK and U.S. Would have few options outside of the military, and military options, while still on the table, are very unpalatable. The May 24 Measure has impacted the South’s finances, as well. The KOSPI and the value of the South Korean currency are factors in ROK decision making.

The day after South Korea announced the new measures, the KOSPI dropped 5.88 percent. The government took several steps to stabilize the market, but could not push it back to levels seen prior to the announcement. Increasing talk of ‘Korea Risk’ impacts the government’s view on whether to close the Kaesong Industrial Complex. At first, the government decided not to close the complex but did not care whether or not the North ordered its shuttering. However, the concern of overseas investors drove Seoul to take more of an interest. In addition, it appears that international support for the South Korean’s Cheonan incident report will have little influence on the sole remaining inter-Korean economic cooperative venture.