뉴욕타임즈 / 개성공단

[ensconce]

February 28, 2006

An Industrial Park in North Korea Nears a Growth Spurt

By JAMES BROOKE

KAESONG, North Korea, Feb. 27 — On a cavernous factory floor here, where hundreds of North Korean women diligently cut and sewed women's jackets on Monday, a South Korean businessman seemed to have found an answer to China: wages of 26 cents an hour.

"Kaesong has more advantages than Vietnam, China or Guatemala," Hwang Woo Seung, president of the Shinwon Ebenezer Company, said, citing other countries where his company produces clothes. "We opened here last March and we are already starting to build another factory here twice the size of this one."

If the leaders of the two Koreas have their way, Mr. Hwang's factory, with its 326 North Korean workers and 7 South Korean managers, will be the face of future economic cooperation for the long-divided Korean peninsula.

"Kaesong Industrial Park, a place where the South's capital and technology and the North's land and labor are being combined to make a new prosperity," an American-accented voice announced on a peppy information video shown to the first group of foreign reporters to tour the site, which is several hundred yards north of the demilitarized zone.

Almost six years after the initial agreement for the park, the legal building blocks finally seem in place for promising growth. Over the next year, the number of South Korean factories and North Korean workers could nearly quadruple, reaching 39 factories employing 15,000 people.

Already, $220 million in public and private investment is planned here by the end of 2007. By 2012, the industrial park is supposed to spread over 26 square miles and employ 730,000 North Koreans, almost 8 percent of the work force in this impoverished nation of 23 million people.

South Korea hopes that Kaesong will be an escape hatch for hundreds of its labor-intensive companies that can no longer afford to operate in the south, a country that is increasingly middle class.

Insecurity over Chinese inroads into North Korea is also spurring South Korea to channel investment northward. Since 2003, according to the International Crisis Group, an independent nonprofit group based in Brussels that is dedicated to resolving conflict, more than 150 Chinese companies have begun operating inside or trading with North Korea. The agency says that as much as 80 percent of consumer goods in North Korea are made in China, and that 40 percent of North Korea's trade is with China.

But while North Korea's trade with China grew by 15 percent last year, to $1.6 billion, trade between the two Koreas jumped by 51 percent last year, topping $1 billion for the first time, according to the Korea International Trade Association.

"For South Korean companies, the reality is that you don't have to go to China," said Byun Ha Jung, a senior manager at the Hyundai Asan Corporation, the South Korean company and unit of the Hyundai Corporation that is developing the park.

Wage rates in Kaesong, he said, are about half of China's. South and North Koreans speak the same language and the 40-mile drive from Seoul across the border to the industrial park is becoming increasingly routine.

Other industrial zones established by North Korea near its border have not prospered. One, near China, never got started after Chinese authorities arrested the newly appointed zone director and convicted the official for tax evasion. Another near Russia faltered because of low confidence in North Korea's commitment to protect investments and allow free enterprise.

Hyundai Asan, the only large South Korean company to invest in the North, runs a growing resort in North Korea's Kumgang Mountains. Last year, the resort drew nearly 300,000 tourists, turning its first profit in its eight years.

But last fall, North Korean officials temporarily cut by half the number of permitted visitors because they were angry that Hyundai had fired an executive with ties to Kim Jong Il, North Korea's leader.

"We have invested how much in the North? One billion dollars?" Byun Ha Jung, a Hyundai Asan senior manager, asked reporters here. "And how much have we made? Three million dollars? We do this for the nation."

South Korean company presidents interviewed here predicted that their operations would be profitable this year or next. They noted that Kaesong exempts foreign investors from paying corporate income taxes for the first five years, and that the industrial park's maximum tax rate is 14 percent, which they said was lower than comparable investment zones in China.

Last month, a South Korean telephone company opened 340 of 10,000 planned lines to Kaesong. Next month, work is to start on increasing electric power supplied by South Korea to 154,000 kilowatts.

Last fall, to iron out bureaucratic difficulties for South Korean and foreign investors, South Korea opened its first government office in the North. The industrial park is an odd melding of capitalism and communism, with sales clerks wearing badges of Kim Il Sung, North Korea's founder, working at a South Korean bank and convenience store.

"We have plans to build a factory here four times the size of this complex," Oh Sung-Chang, senior managing director of Taesung Hata Company, a manufacturer of packaging for cosmetics. With his plans to start construction this summer, he added: "The Northern side has been very cooperative."

Despite its initial reluctance, the North has thrown its weight behind the industrial park, which is now the isolated nation's largest center of foreign investment. After 60 years of communism and the Kim family's dynastic rule, wages in North Korea are among the lowest in Asia. Independent labor unions are banned.

"Strikes?" Moon Chang Seop, president of Samduk Stafield, a Posen-based shoe manufacturer, replied dismissively in response to a reporter's question. Raising crossed arms, he said with a slight smile: "Absolutely not."

For now, Kaesong's 11 factories produce almost entirely for the South Korean market.

To grow as planned, the park will have to win access to world markets. With North Korea's nuclear weapons program provoking opposition in Japan, Europe and the United States, the threat of commercial sanctions against North Korean products hangs over Kaesong Industrial Park. American officials are not encouraging South Korean hopes that products made here will enter the United States under a future free trade pact.

"In our view, the agreement applies to goods produced only in South Korea and the United States," an American Embassy official in Seoul told reporters. "We hope that the Kaesong issue won't be a major hurdle in reaching the comprehensive goal of signing the free trade agreement."

In the United States, American labor and human rights activists may object to employment conditions at Kaesong. The minimum wage for the 48-hour week is $57.50. But $7.50 is deducted for "social charges" paid to the North Korean government. The remaining $50 is paid to a North Korean government labor broker. None of the South Korean factory managers here would guess how much of the $50 salary ends up in the pockets of workers.

"The exact amount is determined by North Korean authorities," said Kim Dong Keun, a South Korean who is chairman of the Kaesong Industrial District Management Committee.

Mr. Hwang, of Shinwon, said: "We pay the broker. So we have no idea."

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