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Gaesong Complex Is Unification Test

Posted April. 01, 2006 03:00,   


The Gaesong Industrial Complex (GIC) is a “small-scale economic unification testing ground” that combines the South’s skill and capital and the North’s cheap labor and land.

The monthly wage in North Korea is about $60 (60,000 won), 1/30th of comparable labor costs in the South. Factory costs, which are distributed by the Korea Land Corporation (KLC), are about half of what it would cost to build similar facilities in the South, or about 150,000 won per pyeong.

But after taking a look at the factory, it appears there are obstacles to doing business here.

The biggest problem is the quality of manpower. Rhyu Nam-yeol, a director of a cosmetic case manufacturer that moved to the GIC seven months ago, said, “Unlike foreigners, North Koreans share the same language with the South and are apt at learning skills. However, their labor productivity is merely 50 to 60 percent of the South,” and pointed out that unconditional employment of the labor force selected by the North is another problem, as the South has no right to choose the workers.

In addition, distribution costs are 20 to 30 percent higher than they were in the South because the companies operating here bring all the materials they need from the South. As a result, it costs the company twice as much to build in North Korea than it does in South Korea. An official of the shoe-making company Samdukstafild noted, “We have to bear huge distribution costs as we have to send finished goods back to Busan after bringing raw materials to the North from Busan for production.”

Jeong Ha-seok, Ehwa Diamond Industrial Corporation president, who visited the GIC as an inspector, noted, “The land costs of a Chinese industrial park are less than half of the GIC, and the distribution and factory construction costs are much lower,” and also added that the GIC wouldn’t draw much attraction outside the labor-intensive field.

Less Attractive as a Tourist Destination-

I went to the town of Gaesong by bus. It felt like it was a movie set for Korea in the 1960s.

Phrases about Kim Il Sung and Kim Jong Il were stuck to buildings. The North Korean residents I encountered in the street were tanned and skinny. The North’s staff accompanying me strictly prohibited taking pictures of the town.

Twenty kinds of Gaesong food were prepared in a luncheon meeting room of a hotel that my bus stopped at. The food tasted good. But a businessman who was sitting at a table said, “I lost my appetite after seeing poor residents.”

The Goryo Traditional Museum I visited after the meal had both real and replica articles. The facility was not great either. A businessman said of Gaesong, “Unlike the Mt. Geumgang tour with its scenic views, Gaesong is a city tour and there are not many things to look at.”

The bus returned to the South after the city tour. Though the South entrepreneurs went to the GIC dreaming of the “golden city of El Dorado,” they were in low spirits on their way back home.

It seemed that the GIC still has a long and bumpy road ahead to make it a business- and tourism-friendly place.

Jeong-Hun Park sunshade@donga.com