South Korean MP: 80 Per Cent of Firms in North's Kaesong Making Loss

Oct 07, 04:20 AM

Current Headlines: Text of report in English by South Korean news agency Yonhap

[Yonhap headline: "Over 80 Per cent Of S. Korean Firms In Kaesong Operate In Red: Report"]

Seoul, Oct. 7 (Yonhap) - Eight out of 10 South Korean companies with plants in the South-invested industrial park in North Korea's border town of Kaesong [Kaeso'ng] are operating in the red, an opposition lawmaker said Sunday.

The statistics come just days after President Roh Moo-hyun [No Mu- hyo'n] and North Korean leader Kim Jong Il [Kim Cho'ng-il] agreed in the second-ever inter-Korean summit last week to further expand the Kaesong [Kaeso'ng] industrial park and pursue similar projects in other parts of the North.

Roh has stressed that smooth operation of the industrial park will be helpful to South Korea's external economic credibility, small businesses struggling with rising labour costs and peace on the Korean Peninsula, pledging to accelerate investment in North Korea's Kaesong [Kaeso'ng] industrial park, regarding it as part of South Korea's "unification expenses."

The industrial park is one of two flagship projects South Korea operates for reconciliation with North Korea, along with tours of the North's scenic Mount Geumgang [Ku'mgang]. Over 13,000 North Korean workers are now employed in Kaesong [Kaeso'ng] by the South Korean firms producing garments, footgear, utensils and other labour- intensive goods.

Rep. Lee Hahn-koo of the main opposition Grand National Party said in a report that 13, or 81.3 per cent, of the 16 South Korean firms operating at the Kaesong [Kaeso'ng] industrial complex sustained a loss in 2006.

"The operational performance of the 16 Kaesong-based business entities has gradually improved, but as many as 13 of them are still mired in losses," said Lee in the report.

The average debt-to-equity ratio for the 16 firms stood at 438.8 per cent, about 4.4 times as much as South Korean manufacturing sector's average debt ratio of 98.9 per cent, he noted.

Moreover, the average turnover and asset volume of the Kaesong- based companies are dwarfed by South Korea's industrial average, he added.

"The South Korean government has to fully consider the problems associated with the Kaesong [Kaeso'ng] industrial park before expanding cross-border economic cooperation projects under the latest inter-Korean summit agreement," said Lee, warning against a rosy outlook for inter-Korean economic cooperation.

Meanwhile, Rep. Jin Young of the same party insisted that South Korea's government and private sector may be required to spend additional 16 trillion won (US$17.4 billion) by 2012 to complete the construction of the Kaesong [Kaeso'ng] industrial park.

Citing data released by the Unification Ministry, Jin said the government has already spent 125.5 billion won on the Kaesong [Kaeso'ng] complex and is to pour additional 1.19 trillion won between this year and 2011.

He also said that the state-run Korea Development Bank will separately spend a total of 14.8 trillion won on various construction works at the Kaesong [Kaeso'ng] complex.

"The government has to seek a national consensus on its massive investment plan for Kaesong [Kaeso'ng]," said the lawmaker.

Originally published by Yonhap news agency, Seoul, in English 0504 7 Oct 07.

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