A Chinese company is going to be the first foreign enterprise to do business in the inter-Korean industrial park in the North Korean border city of Gaeseong, according to the Korea Land Corporation (KLC) Tuesday.
KLC officials said that Dashing Diva, the South Korean branch of Chinese artificial nail manufacturer Tianjin Jci Cosmetic, signed a contract to purchase a 6,000-square-meter lot in the Gaeseong Industrial Complex.
It marks the first time that a foreign company has bought a site in the inter-Korean joint venture, where about 15,000 North Korean workers commute to factories owned and operated by South Koreans.
While the first-phase pilot site has so far been occupied only by South Korean firms, the KLC designated a portion of land in Gaeseong for foreign businesses to boost the industrial complex’s international image and put the lots on sale in June.
Despite the South Korean government’s efforts to lure foreign investment there, no firms had come from outside the country until recently. Multinational sanitary goods maker Kimberly-Clark has also visited the complex to discuss investment there.
Located just north of the border, the Gaeseong Industrial Complex is a flagship project signifying reconciliation between the two Koreas, which remain still technically at war after a fratricidal conflict more than half a century ago.
Despite potential risks stemming from political uncertainty, the special zone has an inescapable economic logic: cheap labor and land of the North combined with the capital and technology of the South.
Gaeseong upbeat with foreign entrants
The recent submissions of applications by two Chinese companies hoping to build factories in the Gaeseong industrial park in North Korea have further brightened the outlook on the joint economic project between the two Koreas, industry sources said yesterday.
South Korean government agency, The Korea Land Corp., said both a Chinese artificial fingernail manufacturer and a plywood producer submitted documents on July 30 in hopes of securing 6,000 square meters and 29,000 square meters of land, respectively, at the Gaeseong industrial park.
The Korea Land Corp. rents land in Gaeseong to individual South Korean or foreign companies under 50-year leases. The company had initially announced in late May that there were six applications available for foreign companies for 1,750,000 square meters of land in Gaeseong. No foreign applications were received until the two Chinese companies submitted their applications in July, according to an official at Korea Land Corp., who declined to be named.
“For foreign companies to build factories in Gaeseong, they should establish entities in South Korea. So, we are waiting for the two Chinese companies to finish that procedure first,” the official said.
The contract with the two companies is expected to be completed late this month, the official said.
Experts say Chinese manufacturers may have decided to move factories to North Korea because China’s rapid economic growth is raising wages and prices.
Currently, an average North Korean employed by any one of the 26 South Korean companies operating in the Gaeseong Industrial Complex earns $60.37 per month.
There have been unconfirmed news reports that the U.S. paper-based consumer product maker Kimberly-Clark Corp. may try to invest in the North Korean city.
Kimberly-Clark CEO Thomas Falk earlier hinted that the company would be interested in investing in Gaeseong, after he visited the North Korean city in late February.
“Gaeseong industrial part has the best environment (skilled labor) and facilities for South Korean SMEs to step forward…. Kimberly-Clark will be very interested in investment (in Gaeseong),” he was quoted as saying by the local daily, Maeil Business, on March 1.
The unnamed official from The Korea Land Corp. said he could not comment on the Kimberly-Clark proposition because he is not at liberty to discuss which foreign companies are in contact with his company.
However, the official said many foreign companies have contacted the Korea Land Corp., inquiring about going into North Korea.
The entry of foreign companies into Gaeseong will clearly be a boon for Hyundai Asan, the South Korean operator of major business projects in North Korea, the company’s officials said. This good news comes in light of a second summit between the two Koreas, another upbeat announcement for the park, Hyundai Asan officials said.
Hyundai Asan is in charge of the construction of factories in Gaeseong industrial park and operates South Korea’s tour business to Mount Geumgang resort in North Korea.
The Gaeseong industrial park, near the border with South Korea, was established in 2000 following the first landmark summit between South Korea’s then-President Kim Dae-jung and North Korean leader Kim Jong-il.
Chinese want some Kaesong action
Joong Ang Daily
Two small Chinese light-industry companies have applied to build factories in an industrial complex in North Korea where South Korean companies are invested, a South Korean state land developer said on Saturday.
The Korea Land Corp. said a Chinese cosmetics manufacturer and a plywood firm submitted documents on June 30 requesting 6,000 and 2,000 square meters of land respectively in the Kaesong Industrial Complex near Kaesong, a North Korean city close to the border with South Korea.
It is the first time that foreign companies have applied to build plants at the complex where 26 South Korean labor-intensive companies are currently operating with a North Korean workforce of 15,000.
By 2012, it’s anticipated the complex will have several hundred South Korean plants employing as many as 500,000 North Koreans. South Korea is responsible for water, electricity and other infrastructure at the complex which opened three years ago.
The complex is a much-vaunted achievement of the first-ever inter-Korean summit of leaders in 2000 in the North Korean capital, Pyongyang. The second-ever summit of Korean leaders is scheduled to begin on Aug 28, also in Pyongyang.