Dealing with North Korea: The Case for the Kaesong Industrial Complex

by K. Edmund White

Does the solution to menacing North Korean regime rest in a North Korean industrial complex?

No. But a large part of that solution just might.

The Kaesong Industrial Facility represents a joint North and South Korean business venture. Here’s a good, if slightly out-of-date, description of the site:

The KIC opened in June 2004 under a contract between North Korea and South Korea’s Hyundai Asan Corporation and South Korea’s state-owned Korea Land Corporation. The complex is located between the North Korean city of Kaesong and the western border between the two Koreas. The workers produce goods mostly for the South Korean market, including watches, shoes, clothes, kitchenware, plastic containers, electrical cords and car parts, among other items. As of August, more than 8,000 [note: now closer to 13,000] North Korean workers were employed by 13 South Korean companies.

In essence it’s a grand bargain. North Korea gets tax revenue it desperately needs to survive. Meanwhile, South Korea gets cheap labor that speaks the same language. And both sides can push it as proof-positive of the natural connection between the two Koreas.

But this site may also play a role within the Korean nuclear crisis. It may serve, in the short term, as a carrot (that can be dangled) to force North Korea to give up their WMD program.

And, in the long term, it could yield the following outcomes:

1) The Kaesong Complex, reflecting South Korean economic standards, will show North Koreans first-hand the backwardness of their economic system

2) Any eventual reunification plan—which could see America lose influence in Korea—will come at a steep price: the disparity between the two Koreas is extreme. But joint ventures such as Kaesong can, if properly implemented, help dull the profound economic divide between North and South.

Making Kaesong a sucess reflects good policy and reaffirms America’s message to the world: dovetailing economic and political freedom (i.e. free market, liberal governing principles) not only reflect a more humane belief system, but provide all peoples greater material rewards.

Charles Pritchard, author of Failed Diplomacy, worked the North Korea problem in both the Bill Clinton and George W. Bush administrations—as special assistant to the president for national security affairs and as U.S. Ambassador and special envoy for negotiations with the Democratic People’s Republic of Korea, respectively. We discussed Kaesong, and the Bush administration’s refusal to view these products as South Korean (thereby making them less marketable):

Pritchard: It’s a paradox. Even if the Bush administration desired the downfall of North Korea, if that were policy of the President, and he really wanted to see that, then he should then tell the South Koreans to make Kaesong bigger, better, faster now. Hire many more North Koreans. Have 100,000 workers there. Because the more North Koreans are exposed to work conditions and state of the art equipment—the welfare, the food, all of that stuff in stark contrast to what they have in North Korea—the faster there will be a public unease about the nature of their own regime.

That’s the silliness of the Bush administration. They ought to be promoting Kaesong even if they don’t like the regime, for those very reasons. And if you want to enhance US-South Korea relationship, you ought to be promoting joint ventures between the Koreas.

And in the long-term, providing larger-scale opportunities for North Koreans to see the benefits of something that’s close to market economy is a minimum to reinforcing the economic reforms of July 2002. That reform has since gone sputtering along. So Kaesong, from a negative and positive view, is a good deal and we’re just no making enough out of it.” (June 8^th interview)

But critics of Kaesong point to troublesome workers’ rights record. From a October 2006 Human Rights Watch article:

Human Rights Watch also found that South Korean companies are violating the existing KIC Labor Law, which stipulates that employers should pay workers directly in cash. An employers’ representative told Human Rights Watch that the South Korean companies have been asked instead to pay workers’ wages in U.S. dollars directly to the North Korean government, which in turn pays the workers in North Korean won after deducting a mandatory 30 percent contribution to a social welfare fund.

“The fact that North Korea has already managed to get South Korean companies to violate worker’s rights on wage payments is not only an embarrassment, but also raises concerns about other violations at Kaesong,” said Richardson.