In Gaeseong, labor on the cheap

Korea Herald
Matthew Lamers

“Would you rather pay $1,000 a month for a laborer in South Korea, or would you rather pay $60 a month for a laborer in North Korea? It is up to you.”

When Byun Ha-jung, general manager at Hyundai Asan, put that question to a bus full of potential investors visiting North Korea, a sputter of chuckles filled the air.

But he was serious.

Yesterday, Hyundai Asan invited just over 100 guests to tour North Korea’s Gaeseong industrial park, just a few kilometers away from the Demilitarized Zone.

The potential benefits of investing in Geaseong are enormous. Up for grabs for almost anyone willing to front the cash, are factories for 43,900 won ($47.32) per square meter, even cheaper than in China, and an educated and hard working labor force that demands only about $2 a day.

Development of the complex has been steaming ahead and senior vice president of Hyundai Asan, Jang Whan-bin, said that the reason is that South Korean corporations are essentially being squeezed by rising labor costs in China and elsewhere. “It is difficult to compete with Chinese companies. Some South Korean companies that have moved production facilities to China will have to return to Korea” to maintain competitiveness, “and Gaeseong is the best alternative.”

Gaeseong’s laborers are a fraction of the cost in comparison to workers in developing countries like China and Vietnam. The minimum wage for North Korean workers in the industrial park is $50 a month for a six-day work week. Each worker is entitled to 14 days holiday per year, and maternity leave is up to 150 days, 60 of which are paid.

In 2004, the first 255 North Koreans were hired to work in the complex and as of February 2007 there were over 11,000. That number is expected to swell north of 70,000 before the first phase of the complex’s development is completed.

Han Cheon-seung, co-CEO of Citigroup Global Markets Korea, said that the North is “one of the last frontiers for development. The workers’ quality is quite high here. I think this project is really going to work.” Han added that he thinks the biggest draws for Gaeseong are labor, quality and the Korean connection. “Labor is about 1/30 of the cost here,” and the logistics of having factories located on the peninsula “is much easier than having factories in Vietnam or China.”

“About 7,000 companies have moved abroad – 2,000 of those to China – but Gaeseong is much closer to home and there is no language barrier. One very important question is – can we trust the North Korean government.”

A pertinent question indeed. It is often quipped that the only thing reliable about the North’s government is its unpredictability.

Still, some potential investors were not fazed at all by the geo-political tension between South and North Korea. Others voiced great surprise that a project like Geaseong has been as successful as it has. “What impresses me is the (cooperation) for reunification, roads and railroads being reconnected, for example … In Germany, the Berlin Wall came down and that was it,” said Knut Kille, a native German, now executive vice president of Robert Bosch Korea.

Regarding the North’s nuclear programs, Hyundai Asan’s Jang said, “The overall development of the country is the most important thing. I am not concerned with only the nuclear issue.”


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