N. Korea Softens Economic Demands On South

South Korean cargo trucks head to the North Korean city of Kaesong, 01 Sept 2009North Korea has withdrawn its insistence on massive wage increases from South Korea at a jointly-run factory zone in the North. The move is widely seen as part of a broader charm offensive by Pyongyang, but comes as South Korea remains angry at a flood the North caused.

South Korean Unification Ministry spokeswoman Lee Jong-joo says North Korea has stepped back from a strident demand it made earlier this year.

She says North Korea has proposed the South raise wages at a jointly run industrial facility by five percent, to just under $58 a month. She adds that is in line with previous years.

South Korean companies employ nearly 40,000 North Koreans to produce basic manufactured goods at a special cooperative zone in the North Korean city of Kaesong. The project was a conceived as a practical laboratory for cooperation between the two Koreas, which remain technically at war.

S. Korean President Lee Myung-bak (File)
However, the zone encountered problems when North Korea became upset with the conservative policies of South Korean President Lee Myung-bak. Pyongyang announced in May it was cancelling all wage and rent agreements for the zone, and demanded that the South Korean companies sharply raise their payments.

Many North Korea experts see Friday's far more modest wage proposal in the context of a recent thaw Pyongyang's attitude toward the South - possibly aimed at boosting economic assistance as the North feels the pinch of international sanctions.

However, it also comes just days after North Korea enraged many South Koreans by releasing water from a hydroelectric dam. The resulting flood in the South left six people dead.

South Korea's Foreign Ministry on Friday condemned the North's action. Moon Tae-young, a ministry spokesman, says North Korea's actions on this occasion can be seen as having violated customary international law.

South Korean officials have demanded a formal apology from the North and say they have not yet decided whether and how to pursue the matter further.

Choi Jong-kun, an international relations professor at Seoul's Yonsei University, thinks the declaration that Pyongyang violated international law is mainly for the consumption of angry South Koreans.

"Basically, who are we trying to soothe, you know? We might release statements and whatnot, but are we going to sue them? I don't think so," he said.

Lim Eul-chul is a North Korea scholar at Kyungnam University's Institute for Far Eastern Studies. He sees a connection between the flooding incident and North's conciliatory proposal on Kaesong zone wages.

He says the North probably feels uncomfortable about worsening public opinion over the flooding, and does not want it to get in the way of improving relations with South Korea and the United States.