[imText1]The first phase of Kaesung Industrial Complex project, which comprises three phases, is nearing to an end. South Korean government announced on last Sunday that by April the rest of the area of the first phase development would be sold and the second part of the project would initiate after June. Approximately 350 billion won (equivalent to four hundred thousand dollars) in government and private money is already invested in Kaesung for the first phase.
Since the first part of the project completed and it is expected to create a role model of transferring market economy to North Korea, in a long term perspective, many argue for continued development of Kaesung Industrial Complex.
Firms with their factories built in Kaesung emphasize profitability of the industrial region.
Yet there are a number of obstacles to be overcome for Kaesung to be positively affecting North Korea’s ultimate transformation into market economy.
First of all, because North Korean regime is not moving toward opening the country and reforming its planned economy, Kaesung’s performance is limited to spill over. Also, cash investment is always possible to be exploited by the Kim Jong-Il regime.
In addition, South Korean NGOs warn possibility of failure if companies in Kaesung run on political objective instead of market principle.
◆ So far, whether Kaesung would be a Trojan horse of market economy in North Korea has been a point of controversy. Proponents of the Kaesung project, including South Korean government, consider the region as a bridgehead to lead further reform in NK.
As of now, 15 South Korean companies built factories in Kaesung. And 24 more are expected to come in soon. There are about ten thousand North Korean citizens employed by the fifteen companies. If the projects completed, total of 300 South Korean-invested factories will hire more than one hundred thousand North Korean labor forces in Kaesung Industrial Complex.
The hundred thousand North Koreans would meet South Korean personnel and be exposed to market economy. If one NK employee is accompanied by 3 other family members, total of four hundred thousand North Korean residents are to experience directly or indirectly capitalism. They are anticipated to lead market-friendly reform of North Korea.
Moreover, there will be an inflow of information to bureaucrats and intellectuals in NK via Kaesung.
Dong Yong-seung, director of Economic Security Department of the Samsung Institute stated in his recently published essay ‘As dimension of contact between South and North Koreans widen in Kaesung, change of thoughts in NK will follow.’
◆ Nonetheless, opponents are as vocal as advocates of the project. They doubt Kim Jong-Il regime’s commitment to use Kaesung as a lesson.
For North Korea to change, regime’s will to do so is the single most critical factor.
Also, they regard nationwide reform, which has not taken place in NK yet, necessary to follow the Kaesung project in order to result in open, competitive economy in North Korea, eventually.
Particularly since North Korea is alienated by the international society after nuclear test, pessimistic expectation over the Kaesung project has grown.
Yang Moon-soo, professor at the School of North Korean Studies, said in a policy symposium “Without nuclear issue solved, further development of Kaesung is difficult.”
