Revisiting the Kaesong Industrial Park

Over the past few months, I have admittedly neglected wrapping up my case study on the Kaesong Industrial Complex (KIC), and although I intend to return to the topic by the end of the year, I will more than likely have to update my previous case study pieces. Remaining for me to touch on are the political, security and people pieces related to the KIC.

But I was fortunate just now to have browsed The Financial Times Online, as it has a journal written by FT columnist Anna Fifield, who has recently visited the KIC for the seventh time over the past 2 years. Since most of the development at Kaesong has occured over the past 2 years, the author's perspective on the KIC's progress is interesting and, I feel, trustworthy.

It is worth reading the entire column, but I will focus on the reflections on progress. The author early on quotes a North Korean presenter, Ryu Jin-mi, at the complex:

Here in a high-tech presentation suite in the South Korean-built Kaesong industrial complex in North Korea, the 22-year-old graduate of the Pyongyang University of Foreign Studies explains the merits of this capitalist zone to potential investors from the US, Japan and Switzerland.

"Kaesong will be the logistics hub of north-east Asia,” Ms Ryu says, using a phrase spoken every day in the South. "This will help North Korean companies overcome their economic difficulties."

Those who have delved into my case study will understand the hub vision regarding the KIC, so I won't go into that in detail here. After Ms. Fifield sorts through the difficulties so far in getting North Korea to open up, she offers her own assessment of the KIC, supporting it with what she sees as evidence of progress in the right direction:

"...despite the obvious moral dubiousness of paying money to a regime that lets its people starve while all the while developing nuclear weapons, the positives of Kaesong still outweigh the negatives...Indeed, there is plenty of evidence to suggest that engagement is making a difference.

"The trip to Kaesong marked my seventh visit to North Korea in the last two years. Even in that short time it has become apparent to me that economic links are having an impact in this most closed and communist of societies.

"I have haggled with the managers of a state-run art gallery as they jacked up their prices by 20 per cent in six months, and I have sat in on joint venture discussions between a Chinese businessman and the men who run the Pyongyang soap factory, discussions that taught the North Koreans about remittances and guarantees.

"These anecdotes might represent only a baby step towards marketisation, but in a country like North Korea, which has barely changed in the last five decades, they represent significant steps."

In regards to workers on the floor, Ms. Fifield indicates that interaction with outsiders at the KIC takes on huge significance given its rarity anywhere else in the world, perhaps except the area on the China-North Korea border: 

"The 9,500 North Koreans now working at the Kaesong complex every day see how much taller, healthier and wealthier South Koreans are. If even 10 per cent of them go home and talk about their Southern colleagues, or about the foreigners who intermittently visit this park, that will have a profound effect. This will only be amplified if Kaesong develops according to plans. It is projected to employ 500,000 North Koreans when it is completed in 2012.

"South Korea knows this. "We never talk about this but the real reason behind engagement is to show the North Koreans that their system is based on lies," one senior government official confides. "This will destroy the ideas that sustain their system. They can’t keep out these ideas of freedom and prosperity. It’s what is invisible that is most important.""

For those managing operations at the KIC on a daily basis, it seems there is gradually evidence of the desired effect:

"Indeed, Hong Heung-joo, the South Korean executive director of the Kaesong Industrial District Management Committee, says he has already noticed significant attitude changes since the complex opened.

""The most important change is that North Koreans have realised the importance of production. Under the North Korean system there is no sense of profit, but here North Korean workers are working to targets and asking for extra hours. That means they are becoming aware of market economics.""

Of course the nature of people flows is still strictly enforced:

"Personal contact does remain limited – the two sides eat lunch separately and conversation rarely strays outside work-related matters. Indeed, the tip sheet given to visitors by Southern authorities advises that North Koreans are "generally simple, naïve and emotional."

"Visitors should refrain from commenting on “the economic situation of either the North or the South, liberal democracy, the superiority of the market economy, unification-related matters, the North Korean leadership, education systems, human rights and/or other potentially sensitive issues," the sheet says.

"And the complex is not free of ideology. Indeed, the South Korean-made model of the completed development that Ms Ryu used features an illuminated statue of Kim Il-sung, the nation’s founder and father of the current leader."

Ah, there is no place in North Korea where the Kim brand is not marketed for the populace to see. But in the end, Ms. Fifield sees hope behind the prominence of controls, ideology and symbols:

"...there can be no doubt that engagement is having a psychological impact. I sat with Ms Ryu while we watched a promotional video shown to potential investors showing a Kaesong industrial park of glittering glass high rises, parks and fountains right here in North Korea.

""Can you imagine this place ever looking like that?" I asked her as the video was running.

""Yes," she replied immediately. "Three years ago this whole area was just fields. I couldn’t imagine then that it would like this even now.""

One of course has to be skeptical of those interviewed in this column--most seem deeply involved in the project and thus could have a predisposed bias towards seeing progress and a successful outcome. None of those interviewed are workers themselves. The key question is whether such a project is appropriate at this stage of North Korean leadership, or would be better initiated later after the current regime either changes or undertakes a significant transformation in trade and foreign policy.