Kaesong Industrial Complex (KIC)

1. FB 09 Faculty of Linguistics, Cultures, and Arts Course: North and South Korean Economy Professor: Prof. Seiwan Kim June 17, 2013 Kaesong Industrial Complex (KIC) Contributor: Aziz Maamoody Yücel, David Moon, Un-Sun Yoon

2. Structure • Introduction • Founding • Production • Transport • Administration • KIC duringthecrisis • Criticism • Future Prospects

3. Introduction

4. Founding • Establishment was decided in May 2003 • Construction started in June 2003 • Hyundai Asanprepared the “Master plan” concept • Pilot phase: 2004 with 15 companies • Park opened in Dec. 2004, but isn’t still finished yet: plans haven’t been completely fulfilled

5. Founding

6. Founding • Establishment was decided in May 2003 • Construction started in June 2003 • Hyundai Asanprepared the “Master plan” concept • Pilot phase: 2004 with 15 companies • Park opened in Dec. 2014, but isn’t still finished yet: plans haven’t been completely fulfilled

7. Founding: Reasons Purposes: • Cooperation • Stability in the region • Further projects • Option for NK to reform & liberalize its economy • Business advantages

8. Produced Goods and Profits

9. Export Destinations of KIC Products

10. Who really profits from the KIC? SK small and medium sized companies: • cheap and flexible Human Resources • gov't backed political insurance • gov't support through providing infrastructure • gov't support through providing loans with below-market interest rates

11. Who really profits from the KIC? KIC South Korea Improvements in: international competitive advantage political leverage on NK political and regional stability influx of foreign currency (USD) fighting unemployment possibility to gain technological know-how North Korea made a 50-year lease on the entire KIC Area  all companies have to pay Hyundai Asanfor use Hyundai Asan

12. Transport rail: • KIC is served by Korean State Railway Pyongbu Line from PanmunStn. • KORAIL has access via Gyeongui Line • Agreement to re-establish freight services was made in 2007 • Closest SK Station is Dorasan Station which has also road access

13. Transport Road: • limited access available for workers from the South via South Korea National Route 1 to DMZ and then into Kaesong via Asian Highway 1

14. Transport Air: • closest NK airport is Sohung South Airport • however no South-bound flights • closest SK airports are  GimpoIntl' Airport  Incheon Intl' Airport (both: road access to KIC)

15. Transport

16. Administration Administrative Committee: • has been established in October 2004 • is responsible for the administration of the companies and production in KIC • has got also the function of the South Korean consulate in KIC

17. Electricity and other Basic Facilities • in 2007 the South Koreangov‘tgavefinancialsupporttothecompaniesforelectricityandotherbasicfacilities in KIC • in June 2007 a transmissiontowerhasbeenbuilt, whichsupplies 100.000KW per unitforfreefromSK • in September 2007 anduntil April 2008 basicfacilitieslikewatersupplyandwastetreatmenthasbeenprovided

18. Electricity and other Basic Facilities other Facilities: • therearevariousstoresforeverydemand • SK-Wonarenot accepted:onlyUS-Dollars • onlyforSK worker

19. KIC during the crisis Sinking of the SK destroyerCheonanin March 2010: • since May 23 SK government stopped the aid, trade and bilateral cooperation, with the exception of KIC • NK government closed the Administrative Committee Shelling of Yeonpyeong-Island in Nov 23, 2010: • entry into KIC has been stopped, only entry into SK was allowed  many companies in KIC lost sale contracts or had to take back the products

20. Crisis in 2013 April 3 entry into KIC has been stopped, only entry into SK was allowed April 8 the NK government withdraw the NK workers from KIC April 25 every SK workers came back to SK May 4 the KIC has been officially closed since June 8 the NK and SK government negotiate about KIC

21. Criticism • the average wage of a NK worker: $ 110-160 (1/5 of the SK minimum wage) • the wages don’t go to the workers directly, the NK government receives the money • after discounting of the social contribution cost and the exaggerated exchange rate of the US-Dollar,  there is not enough money left for the workers • besides the workers don’t get money, instead they get a kind of coupon

22. Future Prospects • We think: Park won’t be definitively closed KIC survived from a closure (New SK gov’t; NK nuclear test; Inter-Koreantensions 2010) • Both countries are seeking profits & advantages NK needs the money SK has already invested enormously; insurance payments could accrue • SK has further plans (expand KIC, train connection to China)

23. Companies at the pilot phase by Hyundai Asan

24. Where we got our sources.. Internet sources: • http://www.businessinsider.com/what-isthe-kaesong-industrial-complex-2013-4 • http://online.wsj.com/article/SB10001424127887323646604578399693853456424.html Article: • ‘The Kaesong North-South Korean Industrial’ Complex by the Congressional Research Service

25. Where we got our sources.. Internet sources: • http://www.hdasan.com/english/kaesong/intro_k01.jsp • http://www.spiegel.de/wirtschaft/soziales/industriezone-kaesong-nordkorea-beendet-den-wandel-durch-handel-a-892342.html • http://ko.wikipedia.org/wiki/개성공업지구 Books: A history of Korea: From Antiquity to the Present by Michael J. Seth