The Role of Kaesong Industrial Complex

Download North Korea prayer points for January and February PDF .

Kaesong Industrial Complex (KIC) is an industrial park located in North Korea (Democratic People’s Republic of Korea), just 106 miles southeast of the DPRK’s capital, Pyongyang, and 43 miles north of Seoul, South Korea (Republic of Korea). The neighboring city of Kaesong, just 15 miles from KIC, was once the former capital of the Koryo dynasty, one of the strongest dynasties in Korean history, lasting from 918 to 1392. Nowadays, the city is a cultural tourist area boasting Korean traditional architecture, restaurants and its famous ginseng.
KIC is a unique enterprise since the complex was planned, developed and financed largely by the ROK (an initiative led by the Hyundai Group) although it is located in the North. Today, both Northern and Southern governments play a significant role in its operation. According to the Economic Intelligence Unit, the DPRK economy has three crying needs: deeper market reforms, greater openness, and massive investment to modernize old plants and infrastructure (link to PDF) .
Since KIC’s establishment back in 2003, KIC has grown to house over 50 medium-sized ROK companies using approximately 20,000 laborers from the North to manufacture various products (textiles, metals and machinery, electronic goods and chemical). The factories are spacious and are well-lit and well-equipped with modern safety features. Amenities include a convenience store, a bank and accommodation facilities. For the South, the general purposes of KIC have been to develop an industrial complex in which ROK businesses could create products using Northern labor which it is hoped in turn, will help the North to reform its economy and generally ease tensions across the peninsula. KIC has already played an important role in increasing the level of engagement between North and South, an important symbol of hope for the future.

For DPRK laborers, the monthly minimum wage is $50 ($57.50 including social insurance) which general workers receive. Team leaders receive $52 - $55 and company heads receive $75 per month (wages are paid in dollars). Employees also receive overtime pay of around $10 per month with an average of about six hours per week available (normal working hours are 48). Wages are first paid to a DPRK government agency that deducts around $22.50 dollars a month for social insurance taxes and the socio-cultural fee. The rest of an employee’s wage is paid in cash or chits that can be exchanged for daily food and necessities. Moreover, employees receive 14 days annual leave and female employees receive 60 days paid maternity leave. This works out as labor costs in KIC being approximately 8% of their South Korean counterpart.

In terms of benefits for the South, KIC is a duty-free zone with no visa required for entry or exit, and with no restrictions on the use of foreign currency or credit cards. It is connected to the South via a road, which sees more than 100 vehicles each day. It also provides the South access to a labor workforce that is cheaper than that in China or Vietnam and that speaks the same language as the South and is geographically situated in favor towards large markets in the South. In the future, South Korea hopes to become the hub of East Asia and would therefore like to see railway networks to China, Russia and Europe, which would mean passing through the DPRK.
So what role does KIC play on the international arena? As already mentioned, KIC is a business venture in which the South benefits from low cost labor and the North benefits from jobs for their workers without having to cross borders illegally. But KIC plays a bigger role than these: it can be viewed as a confidence-building activity between the two Koreas where hostility has been lingering since the end of the Korean War. As with relationships between China and Taiwan, economic interchange provides a bridge for communication and cultural interaction (2). But even more than that, KIC may be instrumental in attempts to reform, liberalize and modernize the DPRK economy. Back in 1978 in China, similar ventures were undertaken when foreign companies invested in special economic zones just like KIC (foreign businesses now generate more than half of China’s imports and exports). KIC gives North Koreans the opportunity to learn modern business methods and values.
Reports have also recently shown that economic reforms there are regressing; and most recently, many of the South Korean employees in KIC were told they could not work there due to increased tension in international relationships. Despite the hurdles, South Korea is hopeful for the eventual denuclearization of the DPRK and gradual reunification. Even so, the South is mindful of the experience of and great cost to West Germany when it reunited with East Germany when the Berlin Wall came down in the 1989. So these goals will not come without cost or prayerful effort.
At the present time, the sum of 20,000 North Korean employees, are too few to have a significant impact upon the rest of the country. Even so, if the project continues to develop as planned, then economic reforms, like those that have taken place in China, are surely possible. This in turn could lead to a little more freedom in the North and to liberalization in the rest of its economy, also helping the North develop relationships in the world with its neighbors. Let’s pray and seek God’s will on its future growth and influence. Hyundai has put together a forecasted plan where it hopes to provide jobs for 350,000 DPRK workers by 2012 through 1,500 ROK companies. Please pray that God will also use KIC as a place of economic and spiritual growth, a place where His Word can be both seen and heard. Let’s declare the words of Zechariah the prophet over them and pray for peace in this nation:
“Rejoice greatly, O daughter of Jerusalem, O Daughter of Zion!
Shout, Daughter of Jerusalem!
See, your King comes to you,
Righteous and having salvation,
Gentle and riding on a donkey,
On a colt, the foal of a donkey…
He will proclaim peace to the nations.
His rule will extend from sea to sea
And from the River to the ends of the earth…”
(Zech. 9: 9, 10)

Download North Korea prayer points for January and February PDF .

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