Bribery Required to Work at the Kaesong Complex

This should not be a surprise to anyone who is familiar with how socialist and highly regulated economies actually function.  If there is a profit opportunity to be had by breaking a regulation, there will generally be a bureaucrat there willing to pocket some of the earnings to look the other way.

The fact that ordinary North Koreans are willing to pay to get access to Kaesong jobs should send a powerful signal to those who call for the zone’s abolition. Wages and working conditions at the complex, though not popular with Western activists, are relatively better than those on the local collective farm.  When the average Kaesong resident figures out that working there will lead to a better life, baksheesh is inevitable. 

Claudia Rosette covered a similar phenomenon with North Korean loggers in Russia.

The Daily NK covers the Kaesong phenomenon specifically:

Known as a “dream place of employment” among North Koreans, citizens of the North are paying hundreds of thousands of won in the form of bribes to gain employment in the facility.

“They say that one can find a job in the Kaesong Industrial Complex by giving 700,000 North Korean won in bribes for males and 200,000 won for females. If I had used the 200 USD (approximately 700,000 won) spent in obtaining a passport as a bribe, I could have entered the Complex.”

As for the why the Kaesong Complex is so popular, Kim explained, “Commodity provision tickets, equivalent to a worker’s salary, are given to laborers in Kaesong and if one uses these tickets well, he or she can make a huge profit.”

Currently, the official salary for laborers at the Kaesong Industrial Complex is around 60 USD, a small amount of which is distributed as cash and the rest in the form of “commodity provision tickets.”

In the Kaesong Industrial Complex, there are several shops that can only be frequented by Kaesong laborers and the prices at these stores are at inexpensive compared to prices in the jangmadang.

Laborers at the Kaesong Industrial Complex use their “commodity tickets” to purchase products at a cheap price and can make a huge profit by selling the goods, giving the difference to middlemen (currency traders who mediate deals).

Recently, there have even been cases where the middlemen had specific orders for certain items from the Kaesong laborers, asking them to procure a certain amount of rice, oil, and so on. The middlemen can easily make an exorbitant amount of money by selling these goods at the jangmadang.

ADDENDUM REVISITED (The Daily NK is transalted into English and as a result is even less clear than my writing somethimes, so I have revised this post several times to clarify the text):

Opinions of the complex seemingly hinge on one’s policy goals.  If the primary goal is to raise living standards in the North and open the people up to outside influences, then Kaesong seems like progress (although maybe not the most cost effective).  If the primary goal is to minimize the income of the DPRK government, then the Kaesong zone probably is not a good idea…. 

Taking the latter point of view, Joshua at OneFree Korea emphasises the point that  the North Korean government keeps most of the cash wages paid to the workers, and that zone employees survive on the supplemental “commodity tickets”–either consuming the goods they purchase in the company store or selling them to local markets for cash.

Theoretically, though, if the thousands of workers employed in Kaesong were re-selling subsidized goods to the Kaesong public markets, this would have the (short run) effect of lowering or stabilizing food prices for the general public (since Zone employees do not need to purchase food at local markets and their clandestine re-selling of commodities to the markets increases the supply of cheaper goods).  This also means that  in general re-selling to the market is not terribly profitable to any zone employee, except when there is a temporary mismatch beteen supply and demand (which might be common depending on the reliability of the DPRK’s market supply chains).  How the price decrease would affect domestic food producers (and the long term price) is probably a bit more complicated since we are not sure how much North Korean farmers respond to price changes. 

Additionally, even though the North Korean government keeps most of the cash wages, the commodity coupons still give the worker approximately $60 in purchasing power –a decent income in North Korea. 

However, given that the South Koreans pay all cash wages go to the North Korean government and the workers themselves receive an additional $60 in script to use at the company stores, means that the average economic cost of a North Korean worker in  Kaesong is closer to $120/month! 

The whole article can be found here:
Bribery Required to Work at the Kaesong Complex
Daily NK
Jung Kwon Ho


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