Unification Ministry to slash budgets of bodies promoting inter-Korean projects

The Unification Ministry began downsizing key organizations supporting inter-Korean cooperation projects, including one advocating for the currently shuttered Kaesong Industrial Complex, according to various sources.

A view of the shuttered Kaesong Industrial Complex at the inter-Korean border from the Dora Observatory in the demilitarized zone (DMZ) in Paju, Gyeonggi, in May. [YONHAP]

The Unification Ministry began downsizing key organizations supporting inter-Korean cooperation projects, including one advocating for the currently shuttered Kaesong Industrial Complex, according to various sources.

This comes after President Yoon Suk Yeol recently told the ministry to stop acting as if its raison d'être is to help the North Korean regime, pointedly dubbing the agency the "ministry to support North Korea."

Major organizations under the Unification Ministry up for restructuring include the Kaeseong Industrial District Foundation and the South-North Korea Exchanges and Cooperation Support Association.

The JoongAng Ilbo first reported Tuesday that a plan was underway to drastically reduce, or even freeze, the budgets for Unification Ministry organizations supporting inter-Korean cooperation. Such organizations have received funding from the Inter-Korean Cooperation Fund, created to support mutual exchanges and cooperation between the South and North.

The paper quoted a high-ranking government official as saying Monday, "Last month, a reform plan centered on large-scale budget and personnel cuts was delivered to organizations under the Ministry of Unification related to inter-Korean cooperation."

In particular, the official said the Kaeseong Industrial District Foundation faces "intense restructuring" or even a budget freeze if organizational reforms yield no tangible results.

The foundation has for years supported the reopening of the Kaesong Industrial Complex, a symbol of inter-Korean reconciliation located just north of the demilitarized zone, as well as businesses impacted by its closing. The joint economic project in the border city of Kaesong in North Korea was suspended by the Park Geun-hye government in February 2016 in response to Pyongyang's nuclear and missile provocations.

"We have already been notified of the goal to reduce next year's budget by more than 30 percent compared to this year," another source familiar with the situation told the JoongAng Ilbo regarding the foundation.

The ministry is expected to come up with a reform plan by mid-July after an initial review and has already started providing information on other employment opportunities and voluntary retirement packages to employees starting last week, according to the source.

The Kaesong Industrial Complex has received 8 billion won ($6.16 million) a year from the Unification Ministry, despite being shuttered for over six years. This is almost as much money as it received when it was open, or around 9 to 10 billion won.

This comes amid reports that North Korea is trying to run the Kaesong Industrial Complex's factories without the South using Chinese investment.

In May, the Unification Ministry also said it detected signs that North Korea was illegally running the factories in the Kaesong Industrial Complex, warning of potential legal action to protect the property rights of South Korean owners.

Kim Yung-ho, the unification minister nominee, speaks to reporters Friday in front of the Office of the Inter-Korean Dialogue in Jongno District, central Seoul, his temporary office to prepare for a parliamentary confirmation hearing. [YONHAP]

Yoon last week tapped Kim Yung-ho, a political science and diplomacy professor at Sungshin Women's University known for his hardline stance against North Korea, as his new unification minister nominee, signaling a shakeup at the ministry.

Critics warn that the Yoon administration's move to reduce the Kaeseong Industrial District Foundation could hurt South Korean companies impacted by the shuttering of the complex. They stress the need to maintain at least a skeleton crew that could reopen the complex someday.

A senior official from Yoon's People Power Party (PPP) said even the Korean Peninsula Energy Development Organization (KEDO) secretariat kept a "one-person liaison office" even after liquidating the light water reactor nuclear power plant project. KEDO, launched in 1995 under the 1994 North Korea-U.S. Agreed Framework, has been defunct since 2006.

The South-North Korea Exchanges and Cooperation Support Association, founded in 2007 to promote cooperation projects, including mineral resource exploitation, is also being restructured.

Officials point out that budgets related to the association have been virtually frozen or suspended, with only minimum labor costs spent.

"Budget cuts for next year are unavoidable," said an official familiar with the association's situation, noting that members have been informed of a "minimum 30%" restructuring plan.

Officials at the association believe the "minimum" measures requested by the government suggest an open-ended restructuring drive that could lead to major changes at the Unification Ministry headquarters itself.

A Unification Ministry official also confirmed the JoongAng Ilbo report, telling reporters in a briefing Tuesday that the ministry "ordered each institution to prepare a budget plan," noting that the targets are the Kaeseong Industrial District Foundation and the South-North Korea Exchanges and Cooperation Support Association.

"Operations at the Kaesong Industrial Complex have been suspended, with exchanges and cooperation between the two Koreas virtually halted, so [the two organizations] are in a situation where their workload has decreased," the official added.

The ministry said it gave no further instructions regarding the plan to reduce personnel at the organizations.

However, given that the two organizations spend more than 90 percent of their budget on fixed costs such as rent and labor, a large-scale manpower reduction appears inevitable.

The Unification Ministry is tasked with establishing comprehensive policies on unification and inter-Korean dialogue, exchanges and cooperation, coordinating plans to carry out such policies, and handling education as well as other unification-related affairs.

The ministry shakeup also comes as the government prioritizes other issues, such as promoting awareness of the North Korean human rights situation.

The PPP official told the JoongAng Ilbo that President Yoon told the unification minister nominee and other new appointees that "North Korea policy should not deviate from the government's foreign policy position focusing on value diplomacy," adding that fundamental reform of the Unification Ministry will begin in earnest after candidate Kim Yung-ho's confirmation hearing is completed.

An employee cleans the Ministry of Unification signboard in front of the central government complex in Gwanghwamun, central Seoul. [JOONGANG PHOTOS]

BY SARAH KIM, KANG TAE-HWA [kim.sarah@joongang.co.kr]