pyongyang Roh to Visit Gaeseong Industrial Park
By Ryu Jin
Staff Reporter
President Roh Moo-hyun is scheduled to visit the industrial park on his way back to Seoul on Oct. 4 after a three-day stay in Pyongyang for his summit with North Korean leader Kim Jong-il.
The Gaeseong Industrial Complex (GIC), a joint venture between the two Koreas, is catching the eyes of the world once again ahead of the 2007 South-North Korean summit, as South Korea has drawn up a grand aid plan to help the poverty-stricken North.
If the summit is successful, the ongoing project in the border city of Gaeseong will take another crucial leap forward, with Seoul considering large-scale economic aid to the North such as social overhead capital (SOC) investment, according to officials.
Besides South Korean manufacturers, now a growing number of foreign investors seem eager to do business in the special economic zone, where nearly 15,000 North Koreans churn out garments, watches and other products worth nearly $100 million a year.
While the industrial park shows a brighter future of the isolated state, the experiment in the small capitalist enclave is also anticipated to be a steppingstone to future economic integration of the two Koreas, which are still technically at war.
Guage of Security Situation
Launched more than three years ago, the Gaeseong complex has been a gauge of the volatile security situation on the Korean Peninsula, the last flashpoint of the Cold War era where hundreds of thousands of troops confront each other across the border.
Operations in the zone, for example, nearly stopped late last year in the wake of a nuclear test by Pyongyang. Since the Feb. 13 denuclearization agreement, however, the businesses have returned to normal.
Currently, more than 20 firms are producing clothes, shoes, watches and kitchen pots in the 3.3 million-square-meter pilot site of the park, which is planned to sprawl over a total 66 million square meters in the coming years.
Since the first products came out in December 2004, annual output of the firms _ mostly small- and medium-sized enterprises _ has increased from $14.9 million (13.8 billion won) in 2005 to $73.7 million (68.4 billion won) in 2006.
Despite potential risks stemming from political uncertainty, the special zone has an inescapable economic logic: cheap labor and land in the North combined with the capital and technology from outside, largely the South.
Proximity also makes for an attractive alternative for South Korean firms to locating plants in other countries such as China. The distribution costs at Gaeseong are one-tenth that of China; the land price, one-fifteenth; and labor costs, one-twentieth, according to statistics.
By the first half of 2008, the first-stage experimental site is expected to accommodate some 300 companies, hiring up to 100,000 North Koreans, according to the Gaeseong Industrial District Management Committee (GIDMAC).
``It means that an up-and-coming new city will be created near the border area with a total population of about 300,000 to 400,000, when the families of the workers are counted,'' GIDMAC Chairman Kim Dong-keun said.
Gaeseong hopes to employ 350,000 workers in 3,000 firms by the mid-2010s, when the full-fledged complex (the same size of Changwon) is completed with hotels, apartment houses, shopping centers and even an amusement park and golf course.
Stepping stone to Integration
North Koreans also anticipated the businesses with South Korea, which started in the wake of the historic first-ever summit in 2000, to bring money into the cash-strapped country.
Gaeseong, seated about 140 kilometers south of Pyongyang and some 60 kilometers north of Seoul, is a point of strategic importance in the case of a military conflict. North Korea even yielded some kilometers withdrawing its conventional artillery.
For South Korean decision-makers, Gaeseong has already become a site to experiment in transplanting capitalism to the communist state, plagued by an inefficient bureaucracy as well as pervasive malnutrition.
While its ambition is grand and lofty, Gaeseong still faces major hurdles _ both from inside and outside _ such as U.S. sanctions, labor conditions and insufficient investment from large enterprises and foreign capital.
But the free trade agreement (FTA) between South Korea and the United States, which opened up the possibility of Gaeseong products being exported to America with a ``Made in Korea'' label, would breathe fresh enthusiasm into the industrial zone.
``Gaeseong Industrial Complex is a win-win game for both the Koreas,'' Kim, the GIDMAC chairman said. ``Both economies will complement each other through the zone, which will be a steppingstone to economic integration and unification.''
Chief Presidential secretary for unification, foreign and security policy Baek Jong-chun indicated last Thursday that Roh might propose a ``second industrial complex'' possibly in Haeju, Hwanghae Province, located west of Gaeseong.
``We would have to think about several more joint industrial projects like Gaeseong on our way to inter-Korean economic integration,'' he told a press briefing. ``It is a picture that we can imagine in our minds and realize in reality.''