Archive for the ‘Kaesong Industrial Complex (KIC)’ Category

Kim Jong Il’s Yacht, UNESCO, Golf, and the Taean Glass Factory

Tuesday, July 31st, 2007

Now available on Google Earth! 
(click above to download to your own Google Earth)

North Korea Uncovered v.3

Google Earth added a high-resolution overlay of the area between Pyongyang and Nampo.  In it, most of the Koguryo tombs listed with UNESCO are now distinguishable.  In addition, viewers can see the latest Kim Jong Il palace (including a yacht), the DPRK’s premier golf course, and the Chinese-built Taean Glass factory.  I have also made some progress in mapping out the DPRK electricity grid.

This is the most authoritative map of North Korea that exists publicly today.  Agriculture, aviation, cultural institutions, manufacturing, railroad, energy, politics, sports, military, religion, leisure, national parks…they are all here, and will captivate anyone interested in North Korea for hours.

Naturally, I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds on the more “controversial” locations. In time, I hope to expand this further by adding canal and road networks.

I hope this post will launch a new interest in North Korea. There is still plenty more to learn, and I look forward to hearing about improvements that can be made.

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N.K. demands pay raise for workers in inter-Korean industrial complex

Friday, July 27th, 2007

Yonhap
7/27/2007

North Korea has demanded a 15 percent pay raise for its workers from South Korean companies at an inter-Korean industrial complex just north of the border, sources said Friday.

In a bid to press for their demand, the North notified South Korea that North Korean workers will refuse to work extra hours or on weekends and holidays starting from August, they said.

In the Kaesong industrial complex, North Korean workers earn about US$57 a month, including a $7 insurance payment, so their basic wages will increase to $66 if the North’s demand is accepted, according to officials.

No pay raise has been given since the complex began operations in late 2004, in spite of such demands being made several times.

“It seems like North Korea is demanding a pay increase accrued since 2004. We will decide on a pay raise at a reasonable level after consultations with the North Korean authorities,” a Unification Ministry official said.

Currently, 26 South Korean companies employ about 15,000 North Korean workers in Kaesong, including construction and office workers, at the site developed on a trial basis.

The number of North Korean workers is expected to increase to more than 350,000 when the complex becomes fully operational by 2012. Monthly production in the complex exceeds US$10 million.

“If the basic wage is increased to $66 and North Koreans work extra hours or weekends, South Korean companies will have to pay an average of $118 per month. Then the advantage of cheap labor in Kaesong will decrease,” said Kim Kyu-cheol, president of the South-North Korea Forum.

The industrial complex, the crowning achievement of a landmark summit between the leaders of the two Koreas in 2000, is one of the two major cross-border projects that South Korea has kept afloat in spite of United Nations sanctions on the the North following its nuclear weapon test in October. The two Koreas also run a joint tourism project at the North’s scenic Mount Geumgang.

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EU Rejects Inter-Korean Industrial Zone

Thursday, July 19th, 2007

Korea Times
7/19/2007

The European Union shunned South Korea’s request to include goods made in an inter-Korean industrial park in North Korea in a potential free trade agreement between the two sides, Seoul’s chief negotiator said.

South Korea launched free trade talks with the 27-country economic bloc in Seoul in May, only a month after it successfully concluded similar trade talks with the United States. A second round of South Korea-EU free trade talks began in Brussels on Monday.

“The EU side told us that it’s difficult for trade negotiators to deal with the Gaeseong issue because it’s complex legally and politically,” Deputy Trade Minister Kim Han-soo told reporters on the third day of the five-day negotiations this week, referring to the South Korean-built industrial complex in the North Korean border city of Gaeseong.

But the EU left open the possibility of a compromise, depending on the progress both sides will make in upcoming meetings, Kim said.

Before the second round began, Kim had expressed optimism over the Gaeseong issue.

“The Gaeseong issue is one of our top priorities. So we will keep pushing the EU to accept our request,” he said.

South Korea considers the industrial park, located just north of the world’s most heavily fortified border, to be a model for inter-Korean economic cooperation. About 15,000 North Korean workers are employed by 23 South Korean companies, producing garments, kitchenware and a number of other goods.

The industrial park is one of the prominent symbols of inter-Korean reconciliation efforts following a landmark summit in 2000 between then South Korean president Kim Dae-jung and North Korean leader Kim Jong-il.

The Gaeseong matter was one of thorniest issues during the 10 months of tough negotiations between South Korea and the U.S., but the two sides made an artful compromise, allowing them to discuss the issue later, depending on progress in international efforts to dismantle the North’s nuclear weapons program.

Kim and his European counterpart, Ignacio Garcia Bercero, director of bilateral trade relations at the European Commission, are leading the negotiations to move a deal forward between South Korea and the EU.

This week’s talks were centered on the pace of tariff reductions on automobiles. The EU asked South Korea to phase out its 8 percent tariff on auto imports within three years, instead of the seven years suggested by Seoul. according to a South Korean delegate who asked not to be named.

Other potential sticking points in the negotiations are South Korea’s protective pharmaceuticals and cosmetics markets. In addition, the EU wants better access to South Korea’s services market, particularly for law firms and hospitals, Kim said earlier.

Some progress has been reported, as the EU agreed to soften its anti-dumping rules for South Korean goods.

“So far, talks have been underway at a pace that we expected,” Kim told reporters. However, he admitted this week’s negotiations were aimed at clarifying each side’s positions, rather than bargaining.

No discussion was held on the agriculture sector. South Korea initially offered to exclude some 250 agricultural products such as rice, pork and chicken.

Officials at the EU delegation were unavailable for comment.

The EU is the second-largest trading partner of South Korea, with US$79 billion in bilateral trade in 2006. Unofficial studies suggest a deal would boost the figure by as much as 40 percent.

A third round of talks was scheduled for September in Brussels.

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Number of foreign visitors to Kaesong rises sharply this year

Tuesday, July 10th, 2007

Korea Herald
7/10/2007

An increasing number of foreigners have visited an inter-Korean industrial complex in the North Korean border city of Gaeseong this year as the North’s relations with foreign countries thaw after the communist state took steps to denuclearize, Yonhap News Agency reported.

In the first half of this year, 324 foreigners, including ambassadors and potential investors, toured the capitalist enclave where South Korean businesses use low-cost, skilled North Korean workers to produce goods, according to government data released Tuesday.

“The Gaeseong industrial complex combines the South’s capital and technology with the North’s labor and land to show foreigners the future of the Korean Peninsula,” a Unification Ministry official said.

Only five foreigners visited the complex in 2005 when the North first permitted foreign visits. In the first half of last year, the number increased to 295, but it dwindled to 104 in the second half as North Korea conducted missile and nuclear weapons tests.

The industrial complex, the crowning achievement of a landmark summit between the leaders of the two Koreas in 2000, is one of two major cross-border projects that South Korea has kept afloat in spite of United Nations sanctions against the the North following its nuclear weapons test in October. The two Koreas also run a joint tourism project at the North’s scenic Mount Geumgang on the east coast.

N. Korea Refuses to Accept Visitors
Korea Times
Jung Sung-ki
7/10/2007

South Korea’s Unification Ministry said Tuesday that the operation of the inter-Korean industrial complex in North Korea’s border city of Gaeseong will be not affected by Pyongyang’s abrupt cancellation of scheduled events for South Korean visitors this week.

On Monday, North Korea asked South Korea to postpone South Koreans’ visits to the economic zone without specifying any reasons, ministry officials said.

Some local media reported various speculations about the North’s ulterior motive. The DongA Ilbo newspaper said North Korean leader Kim Jong-il could visit Gaeseong and that might be a reason for the cancellation.

“The North didn’t specify reasons, but company executives and workers in Gaeseong are commuting to the complex freely as usual,’’ ministry spokesman Kim Nam-sik told reporters.

About 100 South Korean government officials and journalists were scheduled to visit the business compound Tuesday, followed by visits by hundreds of South Korean business officials on Wednesday and Thursday.

The Gaeseong complex, just north of the heavily fortified Korean border, is considered one of the main achievements of the landmark inter-Korean summit in 2000. The zone is called a testing ground for mixing South Korean capitalism and technology with the North’ cheap labor.

Twenty three South Korean firms produce goods ranging from clothes to kitchenware there, employing about 15,000 North Korean workers. The number of North Korean employees is expected to increase to more than 350,000 when the complex becomes fully operational by 2012, officials said.

Monthly production in the complex exceeds $10 million.

The inter-Korean economic zone has gained attention from foreign countries with the number of foreign tourists steadily increasing, according to the ministry.

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Gaesong & Industrial Park

Tuesday, July 3rd, 2007

Korea Times
Tong Kim
7/1/2007

Recently I visited Gaeseong with a South Korean humanitarian group that provides anthracite for fuel to underprivileged people in both Koreas. The group carries out a voluntary campaign in the name of “sharing love and anthracite.’’ It so far has provided the poor with over ten million pieces of processed anthracite.

Our trip to Gaeseong was to deliver another 50,000 pieces of processed anthracite in five large trucks. From Seoul we drove only about 45 minutes to reach the southern border of the Demilitarized Zone (DMZ). I had passed through the Panmunjeom Joint Security Area a couple of times traveling to Pyongyang before, but it was the first time for me to travel on the paved direct highway to the Gaeseong Industrial Complex.

Upon arrival at the Bongdukni railroad station _ about a few miles north of the complex _ we were welcomed by the vice chairman of the Gaeseong People’s Committee, who appreciated the provision of anthracite as well as our offer to help North Koreans unload the anthracite.

From Bongdukni we went to Gaeseong City, where we visited several famous historic sites of the old capital of the Goryeo Dynasty (918-1392), including the Seonjuk bridge, where the stain of bloodshed by a king’s royal servant remains, still detectable. Standing at the courtyard of Sungkyunkwan, which was the dynasty’s highest royal educational institute, were gigantic ginkgo trees more than a thousand years old.

The buildings were impressively well maintained. On display inside the buildings were neatly arranged historical artifacts, which help visitors see what life was like in Korea a millennium ago. With other cultural assets, like the royal tombs and an old Buddhist temple, I thought Gaeseong would present itself as an excellent tourist attraction.

Then we went to a “hotel district’’ where many traditional tiled Korean homes remain undamaged as if they had never withstood the Korean War. An able tourist guide told us that these buildings are now used as lodging for tourists. We were led into one of the homes, where we had a good traditional dinner served in Korean brassware.

From there we went to the complex, which I knew was controversial from a political perspective since its inception. Opponents ask why South Korea should help North Korea when it spends scare resources on the development of missiles and nuclear weapons. Proponents argue it is a constructive approach to the eventual resolution of security and political issues.

After I saw the vast area of the industrial park _ one million pyeong (approximately 25 square miles) _ I felt there would be no way to reverse the course of inter-Korean economic cooperation. Under a 50-year lease, Hyundai Asan has cleared the land by leveling off the hills and filling the rice paddies and fields, and it is still building the necessary infrastructure to support the industrial park.

At present 22 South Korean companies _ mostly small- and medium-sized firms _ are operating in the complex and five new plants are under construction. On this North Korean territory, about 12,000 North Korean employees are working with 680 South Koreans, who are largely managers. By 2012, the complex is expected to employ over 100,000 North Koreans.

These companies produce goods _ including shoes, clothes, watches, kitchenware, plastic containers and electric cords _ mostly for South Korean consumers. Under a neo-liberal policy pursued by the ROK government, the complex makes sense as the average monthly wage is only $57, which is only half of Chinese labor costs and less than 5 percent of South Korean counterparts’ salaries.

After an overview briefing at the Hyundai Asan Control Center, we went to the Shinwon Clothing Plant, where 880 North Korean women _ who looked between 20 to 40 years-of-age _ were working hard concentrating on their jobs along the 15 production lines on two floors. There were no dividing walls on each floor. The uniformed workers all looked healthy and productive.

The plant’s manager told me he has only nine people from the South to work with the North Koreans. His company began operating in February 2005 with 330 workers on two production lines. He said his company is satisfied with the productivity and the workmanship of its North Korean employees. His company provides many facilities for the workers, including a large dining hall where the workers receive free meals, recreation rooms, showers and even a Christian chapel.

Perhaps the future of the expanding industrial park depends very much on the exportability of its products to overseas markets including the United States. This brings up two points: resolution of the North Korean nuclear issue and the inclusion of the complex as an “outward processing zone’’ as discussed but still pending resolution in the agreed Free Trade Agreement with the United States.

Without exportability, which I doubt would be fully feasible before North Korean denuclearization, the industrial complex may not be able to attract big international companies who keep looking for lower labor costs to compete in the contemporary neo-liberal global market.

There are other problems with the inter-Korean industrial park, including the transparency of the payment system, labor practices and environmental concerns. But these are only peripheral issues compared to the issue of war and peace, which also affects the South Korean economy. As the nuclear issue seems to be moving forward, and as I believe it will be resolved at the end, I do see good prospects for success of the complex.

We went to Gaeseong, a city of 300,000 people, through some poverty-stricken rural villages. It was heartbreaking to see North Korean people who looked undernourished and poorly sheltered in their rundown homes with broken windows. I saw children looking skinny, underdeveloped and hungry _ walking home after school, with their arms on the shoulders of their buddies, just like I used to do when I was their age.

I visited North Korea many times but I never had an opportunity to observe the economic plight of the North Korean people in the rural areas. I could see only a little bit of the deprivation last month when I went to Inner Geumgang Mountain through a few under-populated villages beyond the DMZ.

I know the conservatives blame the North Korean regime for this. My problem with them is such blame or hard-line policy has not helped alleviate the hardship of the poor people whose poverty is not their fault. I support humanitarian aid to the North, despite some negative views.

I know North Korea is trying hard to improve its economy in order to better feed, clothe and house its people. I have seen some encouraging indicators of change in North Korea. Once it feels free of perceived threat from outside, I expect the North to give up its nuclear program and concentrate on transforming the economy, which will eventually lead to political and social transformation as well.

It is time to work harder to resolve the security issue, while providing minimum humanitarian aid to the people in the North. Providing anthracite is a good example of humanitarian assistance, which I believe should enlist broad support from the South Korean public. What’s your take?

Tong Kim is former senior interpreter at the U.S. State Department and now a research professor at Korea University and a visiting scholar at Johns Hopkins School of Advanced International Studies (SAIS).

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Officials from two Koreas made joint on-site visit to overseas companies

Monday, July 2nd, 2007

Yonhap
7/2/2007

In a sign of burgeoning economic ties, a group of South and North Korean officials jointly visited South Korean companies in China and Vietnam, the Unification Ministry said Monday.

The delegation consisting of seven South Koreans and as many North Koreans working at a joint management office of the Kaesong industrial complex visited the companies in Shanghai, Shenzen, Guangzhou, Hanoi and Ho Chi Mihn City for 10 days from June 19. They were given tours and received briefings on the companies’ operations, the ministry said.

“It was a good opportunity for North Korean economic officials to learn from rapidly developing socialist countries,” a senior ministry official said, asking to remain anonymous. “They must have shared the need to further promote inter-Korean economic ties.”

It marks the first time that South and North Korean officials made an overseas trip together to assess the development of South Korean companies, the official added.

In the North Korean border city of Kaesong, a capitalist enclave, South Korean businesses use low-cost skilled North Korean labor to produce goods. Monthly production in the complex exceeds US$10 million.

Currently, 23 South Korean companies employ about 15,000 North Korean workers at the site developed on a trial basis. These include construction workers and workers at a management office. The number of North Korean workers is expected to increase to more than 350,000 when the complex becomes fully operational in 2012.

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Kaesong complex factory-apartment to open in September

Monday, June 25th, 2007

Yonhap
Lee Joon-seung
6/25/2007

A factory-apartment being built in the inter-Korean industrial complex in Kaesong, North Korea will be opened to South Korean clothing and stuffed goods manufacturers in September, a state-run industrial complex operator said Monday.

The 21 billion won (US$22.6 million) manufacturing and residential facility will house 33 companies and 2,500 workers from both South and North Korea, the Korea Industrial Complex Corp. (KICOX) said.

“More than 100 companies want to use the factory apartment,” said KICOX President Kim Chil-doo, indicating the level of interest by local companies. He said one of the chief merits of moving operations to the complex is cheap labor costs of around US$58 a month.

Kim said wages can only go up by less than 5 percent on an annual basis in accordance with pre-set agreements.

Most companies that wanting to use the new facilities are small- and medium-sized enterprises struggling to deal with the flood of cheap imports from China and Southeast Asia.

Construction on the five-story building began in May 2006, and the facility includes manufacturing areas, living quarters and a training center for North Koreans.

Kaesong park is the most prominent outcome of inter-Korean rapprochement that began with the landmark 2000 summit between their leaders.

At present there are 23 companies operating in the special economic cooperation region and 16 in the process of starting operations there. About 260,000 square meters are currently being used, but this is being expanded to 3.3 million square meters by the end of the year. The extra space could hold 300 companies.

KICOX said the factory-apartment has considerable advantages over other plants in Kaesong since it provides comprehensive support for small companies under a single roof, cutting operational costs in electricity, water and training of North Korean workers.

The corporation, which operates 32 state-run industrial parks in South Korea, said companies are expected to move into the factory-apartment in August ahead of the official opening.

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Power Transmission Links Restored After 59 Years

Saturday, June 23rd, 2007

Daily NK
Park Hyun Min
6/23/2007

Power transmission lines not used since May 1948 have been reopened to supply electricity to North Korea. The Ministry of Commerce, Industry, and Energy and the Korea Electric Power Corporation (KEPCO) held a commemoration ceremony for the completion of the Pyonghwa (Peace) Substation on June 21st. The substation will supply electricity to a first-phrase zone (3,3mn square meters) in the Kaesung Industrial Complex. Kim Young Joo, the Minister of Commerce, Industry, and Energy, Lee Won Gul, the CEO of KEPCO, and Lee Yoon Sung, a member of National Assembly participated in the ceremony.

Natural sources of electricity were abundant in North Korea before the Korean War because most electronic power facilities built during Japanese colonial period were concentrated in the North. Southern provinces of the Korean peninsula received electricity from the North through the 154kV power-transmission line between Pyongyang and Susaek Substation in Seoul until May 14, 1948.

The new substation was completed at a cost of 35bl dollars. The line runs 16km from Munsan Substation in Paju, Gyeonggi, South Korea, through the DMZ, and terminates at the Kaesung Complex. It consists of 48 pylons, 154kV power-transmission wire, and outdoor substations in Kaesung. The substation is supplying 100 thousand kilowatts of electricity to approximately 300 factories located in the first-phrase zone of the Kaesung Complex. As demand increases, the amount of electricity supplied by KEPCO could double. KEPCO has already been supplying electricity to specific factories in the Kaesung Complex since March, 2005.

In his congratulatory speech, Kim Young Joo compared “the historic linkage of power transmission lines to repairing blood vessels between the South and North, which were ruptured in May 14th, 1948.” He added that “Completing the construction of Pyonghwa Substation will strengthen the foundation of Korean Peninsula peace. North-South cooperation can flourish by supplying a stable source of electricity to the Kaesung Complex.”

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In Gaeseong, labor on the cheap

Thursday, June 21st, 2007

Korea Herald
Matthew Lamers
6/21/2007

“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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Seoul Begins Large-Scale Power Supply to NK

Thursday, June 21st, 2007

Korea Times
Ryu Jin
6/21/2007

South Korea began large-scale supply of electricity to the inter-Korean industrial park in North Korea’s border town of Gaeseong, Thursday, opening the way for power transmission through high-voltage cables between the two sides for the first time in about six decades.

Power distribution to the industrial complex has so far been carried out through pylons for more than two years, but now it will be distributed by a transformer substation.

South Korea’s state-run Korea Electric Power Corp. (KEPCO) said it has completed the construction of the Pyeonghwa (peace) Substation in Gaeseong to provide factories in the first-phase, 3.3-million-square-meter site of the joint industrial complex with ample electricity.

According to the Ministry of Commerce, Industry and Energy, the newly built substation receives 100,000 kilowatts of electricity — enough to serve up to 30,000 households — from the South via 154-kilovolt transmission cables that cross the Demilitarized Zone (DMZ).

Since March 2005, KEPCO provided the industrial complex with 15,000 kilowatts of electricity through 22.9-kilovolt power lines. But, in late 2004, the two Koreas agreed on the larger-scale power supply for the industrial park.

Construction of the substation and erecting the 48 pylons that carry the power lines for 16 kilometers across the DMZ began in April last year with a budget of 35 billion won ($37.7 million).

Currently, 23 South Korean companies — mostly small- and medium-sized enterprises — operate in the complex, located some 60 kilometers northwest of Seoul, with an additional 16 preparing to start operations.

Officials managing the joint industrial park hope to lure up to 300 South Korean firms and possibly some foreign companies once the first phase of construction is completed later this year.

“Coming just after the reconnection of the railroads last month, the reconnection of the power transmission line between the two Koreas has a historic meaning linking the blood vessels of the two sides,’’ said Minister of Commerce, Industry and Energy Kim Young-ju in a ceremony.

In May 1948, North Korea unilaterally cut off power to the South, which consumed an average 103,000 kilowatts of electricity a month before the suspension. Two years later, the Korean War (1950-53) broke out and most links between the two Koreas remained severed until the late 1990s.

Exchanges and cooperation between the two sides, including various cross-border economic projects such as the Gaeseong industrial park and Mt. Geumgang tourism projects, have expanded drastically since the first-ever inter-Korean summit in June 2000.

Deputy Energy Minister Ahn Chul-shik said the electricity will be used only in the industrial complex and that any outside use will be contingent upon separate arrangements between Seoul and Pyongyang.

North Korea has the capacity to generate up to 7 million kilowatts of electricity, according to KEPCO, but the poverty-stricken Stalinist state only produces around 2 million kilowatts due to a lack of fuel and dilapidated infrastructure.

South Korea has the capacity for 67.5 million kilowatts and produces up to 61.5 million kilowatts during peak summer months, according to the ministry and the state-run electric power corporation.

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