hankyoreh

Gyeonggi Province

By Park Hyun, Staff Writer

The Kaesong Industrial Complex, a symbol of inter-Korean economic partnership, remains unfazed after the death of North Korean leader Kim Jong-il.

Other than the halting of operations at some companies Monday afternoon due to agitation among North Korean workers following news of the death, normal operations have continued for the past three days.

"North Korea is providing active assistance for us to carry out normal operations and to say nothing of the South Korean government," said Ok Sung-seok, vice chairman of the Corporate Association of Kaesong Industrial Complex, an organization of tenant businesses in the complex.

In addition to its status as the last remaining symbol of economic cooperation between the Koreas, the hale and hearty state of the complex is attributable to the considerable benefits it brings both countries. For Pyongyang, it is an important means of earning foreign currency. Based on an average monthly pay of $100 to $115 for the roughly 48,200 North Korean workers at the complex, the country's yearly earnings for personnel are estimated at some $50 million to $60 million.

Cho Bong-hyun, an analyst at the IBK Economic Research Institute, said net earnings after expenses amount to about $200 million of the $1.5 billion won in North Korean exports each year.

"The earnings at the Kaesong Complex are too high for the North Korean economy to ignore, amounting to fully one-quarter of its earnings through exports," Cho said.

The complex also contributes substantially to providing jobs. The population of Kaesong is estimated at around 200 thousand workers, with a productive population of about 150 thousand people aged 20 to 50. With some 48,200 of them working at the complex, each family has on average one member employed there. The ability to learn production techniques, management skills and benefit by the intense interest showed in the complex by Kim Jong-il were also cited as factors in the value accorded to it by Pyongyang.

The president of one tenant business said, "I've often heard from North Korean representatives that they have to make it succeed because it was created by Kim Jong-il."

For South Korea, the complex is a crucial means of sustaining inter-Korean relations. News of normal operations there has led to reduced perceptions of risk on the Korean Peninsula for the outside. It is also providing an important avenue for marginalized domestic SMEs to establish competitiveness. Currently, there are 123 tenant businesses, with five to six thousand companies supplying them with raw and subsidiary materials.

The Kaesong Complex has a major advantage over China and Southeast Asia in terms of its costs, including personnel and distribution. According to data from a Korea Small Business Institute analysis, the $115 per capita monthly wages for employees there are far lower than in competitor regions, including the $368 to $460 paid in Qingdao, China, and the $151 to $164 paid at the Tan Thuan industrial park in Vietnam.

In distribution terms, a round trip to Kaesong can be completed in two days, compared to several days for Qingdao.

Analysts said these factors have helped South Korean shoe and sewing businesses to reestablish some degree of competitiveness. Ok Sung-seok, the head of Nine Mode, a tenant company since 2007, said, "Had it not been for the Kaesong Complex, we would have already gone into China or Southeast Asia."

"Since we get all our raw and subsidiary materials from South Korea, there's a major ripple effect from the Kaesong Complex for the South Korean economy," Ok explained.

The trend is visible in the increasing scale of production and work force. Since 2005, production there has risen by fully 22 times from $14.91 million to $335.13 million for January to October of this year. Over the same period, the number of North Korean workers rose eightfold from 6,013 to 48,206.

Even after last year's May 24 measures restricting inter-Korean exchange in the wake of the Cheonan sinking, production rose by a monthly average of over 20%, and the number of workers by some 11%.

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