Monday marked the 10th year since the start of operations at the Gaeseong industrial park in the North Korean border city of the same name. A South-North joint project the park was the brainchild of the late leaders Kim Dae-jung and Kim Jong-il, who held a historic summit in 2000.
Though there have been some hitches, the Gaeseong complex, combining the North’s cheap labor and land with the South’s capital and technology, has grown to become a model of economic cooperation between the two Koreas, which are still technically at war.
Statistics show that the growth of the industrial park has been impressive. In 2004, 25 South Korean firms started production there, employing 3,000 North Korean workers. After a decade, there are now 125 companies operating in the border city, with the North Korean workforce reaching 52,000.
The accumulated output from the factories run by South Korean firms is worth more than $2.3 billion and the two-way trade volume amounts to $9.45 billion. Each year, North Korea gets $87 million from the South Korean companies, including payments for workers. This is an important source of foreign currency for the North.
South Korean companies also benefit from cheap labor and land costs by operating production facilities in Gaeseong. The fact that not a single South Korean company has pulled out of the complex shows that it is a win-win project for both sides. Besides, the Gaeseong park symbolizes the two Koreas’ efforts for reconciliation and hope for eventual unification.
So there are ample reasons to expand the industrial park. Priority could be given to South Korean firms, considering advantages such as proximity and language. A recent survey showed that as many as 2,000 small- and medium-sized enterprises were interested in going into Gaeseong.
The most positive development is that foreign companies may join the South Korean firms in Gaeseong soon. Seoul officials say Groz-Beckert, a German firm supplying industrial needles, is likely to become the first foreign firm to move into the Gaeseong park.
The South Korean Unification Ministry said it has accepted the German firm’s plan to open a sales office in Gaeseong. Although the firm is seeking a sales outlet, not a production facility, the move could ease political and security apprehensions about investing in North Korea.
Also encouraging is the possibility that more foreign firms will follow suit. Executives from European companies and ethnic Korean executives who run businesses overseas visited the Gaeseong park early this year. Now South Korean officials say about 20 foreign firms have expressed their willingness to invest in Gaeseong. They include a Russian marine products processing firm and a Chinese maker of artificial nails.
Firms from countries like Russia and China are more welcome since North Korea has close ties with the two countries. If the Gaeseong complex came to include firms from Russia and China, North Korea would no longer be able to treat firms operating there as it has sometimes treated South Korean firms.
Obligating North Korean authorities to abide by international standards and norms is important because they have sometimes tried to hamper normal operation of the plants in Gaeseong for reasons not directly related to the park. They took unilateral actions to limit cross-border travel and communication and demanded a radical pay raise. Last year, they even closed the industrial park for about five months, citing political strife with South Korea.
If North Korea wants to gain greater economic benefits from Gaeseong, it should make sure the park remains a “sanctuary,” free from any political and security problems. It goes without saying that abandoning its mass weapons of destruction like missiles and nuclear bombs and opting for peace with South Korea will be the shortest path to attracting more South Korean firms and foreign investors to Gaeseong.
