SEOUL — The 18th and 19th of each month were busy days at the Woori bank branch in the Kaesong industrial complex.
Salaries for the 54,000 North Koreans who worked in the interKorean economic zone, on the northern side of the demilitarized zone that separates the estranged countries, were due by the 20th.
So the managers of the 123 South Korean companies operating there would head to the Woori branch a couple of days before to withdraw cash. Always in U.S. dollars and usually in $100 or $50 notes.
“Every month, the accountant would tally the hours of each worker, and each worker would check their hours and sign a list,” said Ok Sung-seok, head of Nine Mode, a clothing company that hired 300 North Koreans until the zone was closed this month.
“The manager of the factory would go to the Woori branch in Kaesong and take out the money in U.S. dollars,” Ok said. The cost for hiring each worker was between $180 and $200 a month.
Then, with the cash in an Woori bank paper bag, the company representative would drive five minutes down the road to a management office and hand over the cash to the North Korean officials there.
For more than a decade, South Korean companies have been handing over bags of greenbacks to the North Korean regime in this way.
When it was opened in 2004, the idea was that the Kaesong industrial complex would help lessen the economic gap between North and South, and at the same time expose a few isolated North Koreans to the outside world. The government theory went that these benefits outweighed concerns about what the north might do with the money.
But now, that has all changed.
Park Geun-hye, the South Korean president, has acted with unusual decisiveness — and acted alone, following her gut instinct, advisers say — to close down the complex in the wake of North Korea’s nuclear and missile tests, and with it the “sunshine policy” era of engagement.
“She’s the president. The buck stops with her,” said a senior government official, speaking on the condition of anonymity to discuss internal deliberations.
In an address last week, Park said that the money South Korea was sending through Kaesong was helping “the runaway Kim Jong Un regime.” This echoes what critics of the project had been saying for a decade.
South Korea’s government estimates that it has sent more than half a billion dollars to North Korea through Kaesong over the past 12 years, including $120 million last year alone. By the time it closed this month, 54,000 North Koreans were working in 124 Southern-owned factories in the zone, making an average of about $160 a month.
They did not receive any of the money, instead being paid in vouchers that they could use in local stores. No ones knows what proportion of the monthly payment each worker received, but the Daily NK, a South Korean website with sources inside the North, estimated that it was about 20 percent — or about $30.
The $560 million sent through Kaesong was in addition to the $487 million it sent through the Kumgangsan tourist resort in the years it was open, according to unification ministry statistics, and the $2.2 billion in fertilizer, rice and disaster assistance from South to North since the mid-1990s.
Park’s decision to end the last major engagement project with North Korea was the result not just of North Korea’s actions, but also of China’s.
In the three years since she took office, Park has made concerted efforts to woo China, including risking annoying Washington by attending a military extravaganza in Beijing last year.
Yet after North Korea conducted its nuclear test at the beginning of January, Chinese President Xi Jinping refused to take a phone call from Park for a month, according to multiple people with knowledge of the situation. When they finally talked, the Chinese leader didn’t say anything that hadn’t already been said in the official media, anything that couldn’t have been said the day of the test, said one person, who spoke on the condition of anonymity to discuss private conversations.
Park’s decision to close Kaesong — and also to open discussions with the United States about hosting an advanced missile defense system that China staunchly opposes — is meant as a signal that South Korea will do everything it can to punish North Korea, and it expects other countries to do what they can, analysts say.
China, which shares a long border with North Korea, is by far its largest trading partner, and therefore has the most leverage over its errant neighbor.
The Kaesong complex was shut down once before — by North Korea, which withdrew its workers during a period of heightened tensions in 2013. But experts think that this time, the closure is permanent.
“Realistically, it’s closed for good,” said Lee Jong-seok, who was South Korea’s minister of unification during the “sunshine policy” years and remains a strong proponent of engagement. “Now that the South Korean government has alleged that the money is going into North Korea’s nuclear program, there’s no way they can reopen this.”
Park had tried to find a middle ground between the sunshine policy and the hard-line tendencies of her predecessor, pursuing what she called a “trustpolitik” approach to North Korea — a combination of carrots and sticks. But the nuclear test and missile launch forced her to call an end to this approach.
“She’s come to realize that trustpolitik doesn’t work,” said Chun Yung-woo, national security adviser to Park’s predecessor and an advocate of a much tougher approach to the North. “She’s now decided to speak the language that North Korea understands: the language of sanctions and regime change.”
Yoonjung Seo contributed to this report.