Kaesong production increases in first half of 2012

Yonhap reports that the Kaesong Industrial Zone has experienced growth in both the nominal dollar value of its output (I do not know what exchange rate is used to determine the dollar value for accounting and reporting purposes) and the number of employed North Korean workers.

According to Yonhap:

Output in North Korea’s Kaesong industrial park jumped 23 percent in the first half of this year from a year earlier as more North Korean laborers worked at the South-North joint industrial project, Seoul said Tuesday.

The value of products manufactured at the industrial zone in the North Korean border city amounted to US$236.08 million during the January-June period of this year, compared with $192.01 million for the same period last year, according to the Unification Ministry, which handles inter-Korean issues.

The Kaesong Industrial Complex’s monthly production value surpassed the $40-million level for the first time in March before nearing $43 million in both May and June, according to the ministry.

The total number of North Korean workers in the Kaesong park stood at 51,310 as of the end of June after touching the 50,000-level in January. The number for January last year was 46,194, the ministry said.

Mentioned before on this web page, but nowhere else in English as far as I have seen, is the notion of foreign exchange risk built into the procedures that govern the Kaesong Industrial Complex.  The exchange rate risk stems from the fact that costs (payments made to the North Koreans) are denominated in US dollars whereas revenues (the output produced in Kaesong sold in South Korea) are denominated in South Korean won.  This means that if the dollar was to unexpectedly appreciate against the South Korean won, firms in the Kaesong Zone would find themselves in a bind with prices paid for inputs rising relative to the revenues received from sales. I am not sure what contingencies the architects of the Kaesong Zone have built in preparation for this scenario so if you seen anything about it, please let me know.

Previous posts on the Kaesong Industrial Zone here.

Read the full story here:
Kaesong industrial park’s output up 23 pct in H1


Comments are closed.