North Korean Economy Watch

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).