South Korean Firms Seek Compensation and Debt Relief as Cross-Border Business Hopes Fade
Companies tied to suspended inter-Korean projects are asking Seoul for additional compensation and debt write-offs as they seek to close businesses burdened by frozen assets and years of stalled exchanges.
South Korean companies that invested in inter-Korean economic projects are pressing the government for additional compensation and debt relief, arguing that the prolonged suspension of cross-border business has left them unable to recover assets or close their operations cleanly.
The Association of Inter-Korean Economic Cooperation Organizations said Tuesday that Seoul should write off debts held by affected firms and provide further compensation for investment assets stranded in North Korea. The group said the companies no longer see a realistic path toward restarting their businesses as relations between Seoul and Pyongyang remain deeply strained.
Association head Choi Yo-sik said assets left in North Korea have been inaccessible since South Korea halted inter-Korean exchanges on May 24, 2010, following the sinking of the South Korean warship Cheonan. The lengthy freeze has turned what companies once viewed as temporary disruption into a long-term financial burden.
About 1,000 South Korean businesses were once involved in cross-border commercial activity, but only 385 remain in operation, according to the association. It said roughly 50 to 60 firms have joined the latest appeal for more compensation and assistance in winding down their businesses.
For some operators, outstanding loans and accumulated interest have made closure difficult. Jung Tae-won, president of clothing manufacturer GP, said business debts would become personal liabilities once a company shuts down. That risk has left owners caught between maintaining inactive companies and assuming debt in their own names.
The government offered compensation in 2018 to businesses involved in Mount Kumgang tourism and other inter-Korean projects. The payment was calculated at 45 percent of investment assets, using the same framework applied to uninsured firms from the Kaesong Industrial Complex. Choi said companies accepted the arrangement because they expected projects might eventually resume after government pledges to revive economic cooperation.
The association now argues that the effective compensation received was closer to 10 percent and estimates that about 60 billion won, or approximately $44.2 million, would be needed to address the remaining claims.
North Korea's description of inter-Korean relations as ties between two hostile states has further weakened expectations of a near-term reopening. The companies say resolving the frozen investments is also important for the credibility of any future cross-border economic initiative. The latest demand follows a July protest in which association members shaved their heads outside the presidential office to highlight what they described as years of false hope.