Foreign buyer cancels contract with S. Korean firm at Kaesong complex

Foreign buyer cancels contract with S. Korean firm at Kaesong complex. April. 20, 2013 07:28. yhkang@donga.com.

Just 15 days after North Korea restricted South Koreans’ entry into the inter-Korean industrial complex in the North Korean city of Kaesong, there was the first case in which a South Korean company operating in the complex was asked by an overseas buyer to cancel a supply contract and to return production facilities the buyer invested in.

Yoo Dong-ok, chairman of Daehwa Fuel Pump Co., which is operating at the Kaesong Industrial Complex, told the Dong-A Ilbo Thursday that an Indian auto parts maker, one of Daehwa’s business partners, sent an e-mail to the South Korean company expressing distrust in the Kaesong complex and requesting that it return molding equipment in which the Indian buyer invested in.

Daehwa and its subsidiary Uniworld Auto Tech have been producing auto parts at the Kaesong Industrial Complex since 2005. The two companies have invested 12.5 billion won (1.1 million U.S. dollars) in the Kaesong facilities.

In the e-mail, the Indian company said it would buy all parts in the United States, demanding that Daehwa return the molding equipment or make cash compensation for it within a week.