ⓒ KBS

On June 8, a team of South Korean officials visited the Gaeseong Industrial Complex in North Korea to prepare for the establishment of an inter-Korean liaison office, as agreed upon in the Panmunjom Declaration that was adopted at the inter-Korean summit in late April. It was the first time that South Korean officials visited there since February 2016 when the joint industrial park was shut down. The visit raised hopes for resuming the closed factory park. Of course, the South Korean government has made it clear that the envisioned liaison office has nothing to do with the Gaeseong Industrial Park, as negotiations over North Korea’s denuclearization are still underway and North Korea is still subject to international sanctions. But if South and North Korea start discussing their economic cooperation in earnest, the resumption of the industrial complex will likely top the agenda. Today, we’ll review the history of the Gaeseong Industrial Complex, the symbol of inter-Korean economic cooperation, which represented mutual respect, reconciliation and cooperation, and peace and prosperity. 

At the historic first inter-Korean summit in June 2000, the South and the North agreed to create a joint industrial park in Gaeseong. Officials from South Korea’s Hyundai Asan and North Korea attended the ground-breaking ceremony for the Gaeseong Industrial Complex in 2003. And kitchen pots, the first products from Gaeseong, were released in South Korea on December 15, 2004, as far as I remember. 

You just heard Shin Han-yong, president of the Corporate Association of the Gaeseong Industrial Complex. As Mr. Shin just explained, the origin of the industrial park dates back to the June 15 Joint Declaration adopted at the first inter-Korean summit in 2000. Let’s hear from then-South Korean President Kim Dae-jung’s speech.  

South-North relations should be mutually beneficial, not being good for one side only. That’s the ironclad rule. Only then, can the two sides maintain their ties for a long time and promote reconciliation and cooperation. South and North Korea should pursue a win-win relationship. 

The leaders of the two Koreas announced the June 15 Joint Declaration and agreed on bilateral cooperation. In August that year, Hyundai Group, which had pushed for inter-Korean economic projects, and North Korea agreed to develop 66-million-square-meter industrial complex in Gaeseong. Construction began in June 2003. When the news spread, a number of South Korean manufacturers expressed their hope to do business at the industrial complex. Daewha Fuel Pump was one of the companies that first entered there. Let’s hear from company CEO You Dong-ok. 

Each of North Korean workers received a basic salary of 71 US dollars per month, and we paid a mere 150-thousand won, which is about 130 US dollars, per square meter for the factory site. The educated and excellent North Korean workforce is another strongpoint, and the workers’ turnover rate is zero. There are no tariffs on the goods produced there, and it only takes an hour to transport the products to Seoul. Given these benefits, the industrial park is far more advantageous than factories in China or Vietnam. 

The biggest benefit of the joint industrial complex is its positive economic effects. In the initial stage, the price to lease the factory site was one-twentieth of that of South Korea. When the complex started operation in 2004, the monthly wage for each North Korean laborer was 70 dollars, one-third of that of workers in industrial parks in China. Gaeseong is 78 kilometers away from Seoul, an hour’s drive. Moreover, North Korean workers speak the same Korean language. In 2004, 1,500 South Korean firms hoped to enter the industrial park, and 23 of them were chosen to manufacture goods at the model complex. In December 2004, the first product of the industrial complex was released. 

The 1,000 kitchenware pieces, the result of the combination of South Korea’s capital and technology with North Korea’s land and workforce, crossed the military demarcation line into South Korea at 2 p.m. on December 15. At 6 p.m., they were delivered to a department store in Seoul to meet South Korean consumers. The so-called “unification pots” sold out in just two days, raising hopes for the success of the inter-Korean joint economic project. In 2005, South Korea’s telecom giant KT began to offer communication services to South Korean companies operating in Gaeseong. In addition to the communication infrastructure, the Korea Electric Power Corporation built power lines that could supply 100-thousand kilowatts of electricity to Gaeseong in 2006. With the 23 companies that entered the model complex going into full operation, the industrial complex were beginning to take root as the first example of economic integration of the two Koreas. It was 2007 when Shin Han-yong’s company entered the complex. Here again is Mr. Shin. 

My company manufactures fishing nets. It happened that one of the discussion topics of the second inter-Korean summit in 2007 was the establishment of a special zone in the West Sea for joint fishing. If South and North Korean fishermen were allowed to jointly operate their boats in the area, using the fishing nets produced at the Gaeseong Industrial Park, they would be able to achieve unification at least on the sea. With this hope in mind, I entered the industrial park in 2007. I was excited and impressed at the thought of going to the industrial complex in unexplored North Korean land and doing business at the very site symbolizing inter-Korean economic cooperation. At the time, many said that the industrial park was the place that created unification every day. 

Mr. Shin’s firm, Shinhan Trading Company, is a supplier of fishing equipment. After the 2007 inter-Korean summit, he entered the Gaeseong Industrial Complex, dreaming of providing fishing nets to the sea area jointly operated by the South and the North. He was proud of being part of the unification efforts. The Gaeseong Industrial Complex was launched amid high hopes for the successful implementation of South-North economic cooperation. It was a small stage for unification, where the two Koreas worked in cooperation. It encouraged the socialist North to learn a market economy and examined the potential of an inter-Korean economic community. Mr. Shin continues. 

The purpose of the industrial park was to induce changes and opening of the North, right? North Korea was actually opening itself gradually, consciously or unconsciously. During the first two years, we, South Koreans, didn’t really feel free to talk with North Korean workers there. But as time went by, we became familiar to them, feeling even closer than our own relatives in the South. I was sure that the process contributed to eliciting a change from North Korea. The North Korean laborers had no idea of what delivery, claim or credit was, as their economic systems were completely different from ours. But they came to know the South Korean economy, and I believe it also prompted the North to change. I saw their eyes changing, and I felt once again that we were all the same Korean people. If we build ten industrial parks, like the one in Gaeseong, all across North Korea, I think we can find a shortcut to unification without having to paying unification costs. 

The joint business venture, which had only existed in a political agreement for a long time, grew rapidly. Let’s hear again from Mr. Shin.

123 South Korean manufacturers were operating factories in Gaeseong. And there were about 80 firms that were doing business, like restaurants and stores, for those manufacturers. So, about 200 firms were engaging in business at the factory park. The park’s production in 2005 amounted to 15 million US dollars, and the figure jumped to a record high of 560 million dollars in 2015, when the industrial park business was at its peak. Its accumulated output is worth about 3.3 billion dollars.