Gordon Flake, Executive Director of the Maureen and Mike Mansfield Foundation

The Korean and English versions of the expression “seeing is believing” have slightly different nuances. To say “it is better to see once than to hear a hundred times” (Baekmunibulyoilgyon) does not necessarily imply a suspension of disbelief. The Korean version is, as such, a more accurate description of my first-ever visit to the Kaesong (Gaeseong) Industrial Complex this past mid-November. Prior to my visit, I had read numerous academic reports and news articles about Kaesong. In conversations about the gap between U.S. and South Korean policy toward North Korea, the Kaesong project was a frequent point of focus. Inevitably, South Korean government officials were almost evangelical in their support of the Kaesong project, while a range of American and other South Korean voices were equally polemical in their criticisms of Kaesong as a crutch for the North Korean regime, which abused North Korean workers and at the same time served to undermine nuclear diplomacy.

While a single day’s visit does not an expert make, visiting Kaesong in person did indeed have a tremendous impact on my views of the project. First and foremost, despite having seen pictures, maps, and charts, nothing prepared me for the scale of the project or for the pace with which it is currently expanding. Like many others, after the October 2006 North Korean nuclear test, I was somewhat frustrated with the South Korean government’s unwillingness to abandon what I viewed as a symbolic, but insignificant, clustering of marginal South Korean firms in Kaesong. The amount of planning and resources that the South has poured into this project: modern highways, railways and stations, immigration and customs facilities on both sides of the DMZ, electricity, telecommunications, and a massive water purification system for a zone in which the first phase alone is half again larger than the Yeouido district in Seoul - far exceeded my expectations and helped me understand the tenacity of the South Korean government’s support. Love it or hate it, it is apparent that stopping an initiative the scale of the Kaesong project is not something that can be done lightly by any South Korean government.

Likewise, now that South Korea has taken the brakes off the expansion of the zone, following both real and imagined progress on the nuclear issue, I think most in the U.S. would be surprised with the scope and pace of new construction. The first phase of 251 lots has been fully subscribed, with nearly two and a half times as many applicants as lots. While exact numbers are a moving target, currently approximately 52 factories are under full operation, with four more under construction and an additional 195 factories in the design phase. Officials in the zone estimate by that by the end of 2008, some 150 to 200 firms will have commenced production within the zone. Furthermore, site preparation work has already begun for the larger second phase of the project. Perceptions of the zone that have focused for years on the 15 firms invested in the initial pilot industrial site have clearly been rendered outdated by developments on the ground.

One presumption that continues to colour perceptions of the viability of the Kaesong project is that all activities are so heavily subsidized by the South Korean government as to be non-market based. While there remains a need for more transparency and further balanced assessments of the cumulative effect of South Korean government support, the relative importance of such “subsidies” depends on the perspective in which it is viewed. The varied company representatives I spoke with predictably discounted the importance of South Korean government support in their decision-making processes to invest and operate in Kaesong. From an investor’s perspective the most significant support provided by the South Korean government, that being the infrastructure base provided by the Korea Land Corporation, is not significantly different than conditions provided by host governments in similar zones in China or Vietnam. The real difference is, of course, that South Korea has assumed the role of “host government.” This means that from a South Korean taxpayer’s perspective, the subsidies are indeed significant. However, as they are provided through the North-South Cooperation Fund, they arguably serve a mandate that is much more political than economic.

In many respects, it is the same South Korean government role that makes the current development of the Kaesong zone possible and that complicates objective evaluations of the merits of the Kaesong initiative. The contentious issue of wage rates, payment mechanisms, and lack of adherence to ILO standards, is made more controversial still by the role of the South Korean government in negotiating with the North Korean government to keep wages low and limit the rights of workers in the zone - thus inverting the roles normally played by governments and the private sector and raising the question of who is looking out for the interests of the North Korean workers. This is clearly less of an issue for products bound solely for South Korea, but becomes much more sensitive for products intended for international markets.

The South Korean government role also raises questions about the presumed objective of promoting reform and opening in North Korea through the Kaesong project. There is no question that continued contact between North and South Koreans in Kaesong will serve to instigate some form of change in North Korea over the long term, particularly if the number of North Korean workers expands as envisioned. The question that should be asked is whether or not the political imperatives of inter-Korean relations have led South Korean planners to accept conditions that serve to shield North Korea and North Korean workers from outside realities more than they would be otherwise. In other words, the comparison should not be between the existence or absence of the Kaesong project, but between the project as it is currently constituted and one that screens out much of South Korea’s greatest means of influence, such as the media, music, the Internet, etc. The more open and unrestricted the interaction within the zone, the greater will be the potential for effecting significant change in North Korea.

Perhaps the most obvious conclusion that can be drawn from a visit to Kaesong is that it is a world away from the politics of Washington and even from Seoul. At least from the perspective of the individuals and firms involved with Kaesong, this project has been fully de-linked from the nuclear issue. If something as serious as North Korea’s withdrawal from the nuclear non-proliferation treaty and its test of a nuclear weapon was but little more than a speed bump in the expansion of the Kaesong project, it is difficult to imagine a scenario in which it will be subsequently slowed. Such separate tracks give little cause for concern as long as progress in the six-party talks over North Korea’s nuclear program continues, but will likely come under closer scrutiny as the more difficult negotiations directly related to North Korea’s actual nuclear weapons capability begin. For better or for worse, Kaesong’s future is inextricably linked with that of North Korea. To see the pace and scope of current efforts in the zone is to understand the vision that South Korea has for the future of the Peninsula, if not necessarily to believe in its ultimate outcome.