South Korea is in the process of setting up rules for foreign investment in an inter-Korean industrial complex in North Korea, a government official said Monday.
The unification ministry official, who declined to be identified, said that while Seoul has no plans to modify its blanket ban on new investment by domestic firms, it wants to invite foreign companies to set up operations at the Kaesong Industrial Complex.
The ban, also called the "May 24 sanction," was implemented after South Korea accused North Korea of sinking one of its warships in 2010 near the inter-Korea sea border.
"The sanctions are primarily aimed at halting new investments by local businesses and does not include foreign firms," the insider said.
He, however, said that policymakers are in the process of determining how to deal with joint ventures involving local and foreign firms or overseas companies that set up legal corporate entities in South Korea to use as a base to operate in North Korea.
"Direct foreign investment is straightforward and not complicated, but the other two types need to be looked at in detail because it can violate sanctions guidelines," he said.
The official said joint investments, in which the foreign partner control more that 50 percent stake, or other investments involving a foreign firm registered in the South can be seen as breaking the sanctions.
"If this happens, local companies who want to build factories at the Kaesong complex can demand the same kind of treatment and pose challenges for policymakers," he pointed out. There are some 70 companies who put off making fresh investments at the industrial zone after the sinking of the Cheonan warship that claimed the lives of 46 South Korean sailors.
He said that rules will be set before Oct. 31 when foreign companies with operations in South Korea are set to tour Kaesong to explore the options of investment there.
The official did not give details on how many companies are set to attend the investors relations event in the North.
Meanwhile, the working level official, who attended many meetings with North Korean negotiators, said media reports about all discussion aimed at easing travel and communications restrictions being halted are not entirely accurate.
Media outlets claimed that the two Koreas lost interest in dialogue after the factory park reopened for business on Sept. 16, after being halted for more than five months.
"It is true that no joint management committee or sub-panel meeting has been held since Sept. 26, but this does not mean talks cannot take place," he said. The official pointed out that issues related to the movement of personnel and cargo over the land border as well as issues on Internet connectivity are more technical in nature and really do not warrant an actual meeting.
In many cases, the secretariat for the joint management committee tasked with running the industrial park can act as a liaison for exchan
"In many cases, political decisions are not required," he claimed.
He then pointed out that Seoul's main priority and those of the 123 South companies that have factories in Kaesong are freer movement of people and cargo to and from Kaesong and Internet connection.
"Issues like mobile phone use that may require more sensitive negotiations are not too high on the priority list," he said.
The ministry official, meanwhile, said that upgrading infrastructure at Kaesong, such as building another fire station and day care center as well as expanding roads, is not viewed as fresh investments and is not in violation of existing sanction rules.