92% of Kaesong Industrial Complex Tenants "Want to Reoccupy"... Appeal for Government Support

Korea Federation of SMEs Announces 5th Anniversary Survey on Business Suspension
76.6% of Companies Report Sales Decline Compared to 2015
Increased Dissatisfaction with Government Follow-up Support... "Must Actively Work to Resume Operations"

Asia Economy DB=Photo by Honam Moon munonam@

[Asia Economy Reporter Kim Bo-kyung] More than 70% of the companies residing in the Kaesong Industrial Complex experienced a decline in sales last year compared to 2015, facing management difficulties. The majority (91.9%) of these companies expressed a desire to re-enter the Kaesong Industrial Complex.

The Korea Federation of SMEs announced the results of the "5th Anniversary Survey of Companies in the Kaesong Industrial Complex after Suspension of Operations" conducted on 111 resident companies on the 8th.

Among the respondents, 99 companies have maintained operations since the suspension in 2016, 11 companies are dormant on paper, and 5 companies have closed (including non-respondents).

According to the survey, 76.6% of the resident companies saw a decrease in sales in 2020 compared to 2015.

The average sales of companies with sales between 5 billion KRW and less than 10 billion KRW dropped from 10.67 billion KRW in 2015 to 6.6 billion KRW in 2020, a decrease of 38.1%.

For small companies with sales under 5 billion KRW, sales fell from an average of 6.53 billion KRW to 1.56 billion KRW, a 76.1% decrease, indicating that smaller companies suffered greater damage.

Efforts to maintain business after the suspension of operations included "expanding domestic private sales (79.3%)" as the most cited. This was followed by "export or overseas expansion (36.9%)" and "entry into new businesses such as quarantine supplies (26.1%)."

The main difficulties faced in business maintenance efforts were "difficulty in financing due to accumulated debt (38.7%)," "finding sales channels and business partners (28.8%)," and "decline in price competitiveness compared to major competing countries (19.8%)."

Regarding satisfaction with government support after the comprehensive support measures ended from 2016 to the following year, more than 70% (71.2%) of the responding companies expressed dissatisfaction. The biggest reason for dissatisfaction was "lack of willingness to support resident companies (65.8%)."

The response indicating a desire to re-enter was high at 91.9%. When asked about their intention to re-enter upon the future reopening of the Kaesong Industrial Complex, 38.7% said they would "re-enter immediately," and 53.2% said they would "enter depending on the reopening conditions set by our government and the North."

The biggest difficulties in re-entry were reported as "repair costs for machinery and equipment (36.9%)," "lump-sum repayment of inter-Korean cooperation insurance funds (35.9%)," and "insufficient laws and systems related to management stability (15.5%)."

The expected costs for re-entry were estimated at a total of 2.46 billion KRW, including 1.17 billion KRW for equipment maintenance and repair and 1.29 billion KRW for additional investment.

To prepare for the resumption of inter-Korean economic cooperation, the most necessary policy was "establishing grounds for compensation for damages related to government policy decisions (45.9%)." Regarding the future operation method of the Kaesong Industrial Complex, "attracting foreign companies (58.6%)" was the most desired.

Regarding the prospects for reopening the Kaesong Industrial Complex following the inauguration of the Biden administration, 45.9% of companies responded that it would proceed gradually along with North Korean nuclear negotiations, and 40.5% said a long-term wait-and-see approach is necessary. Companies that said "reopening will be very difficult" accounted for 9.0%, and those who responded "reopening is possible in the near future" were 4.5%.

The most urgent action for resident companies was "visiting North Korea for equipment inspection and status assessment (45.9%)." This was followed by "support for sales channels and funding to stabilize management (36.9%)" and "legal judgments such as constitutional complaints related to suspension of operations (17.1%)."

Moon Chang-seop, Vice Chairman of the Korea Federation of SMEs and Chairman of the National Kaesong Industrial Complex Business Cooperative, pointed out, "Although government support has been provided following the decision to close the Kaesong Industrial Complex, compensation for business losses has not yet been made."

He added, "As the closure period lengthens, more companies are leaving overseas or closing due to inability to endure difficulties, so additional support and compensation for the revival of resident companies are urgently needed."

He emphasized, "Since many resident companies hope to re-enter the Kaesong Industrial Complex even while maintaining their companies in a dormant state, the government must actively take steps to reopen the Kaesong Industrial Complex this year, the 5th anniversary of its closure."

This content was produced with the assistance of AI translation services.