Hundreds of South Korean supervisory workers once again crossed the border between the two Koreas on September 16, to resume work at the Kaesong Industrial Complex (shown in photo), a joint venture located just six miles north of the Demilitarized Zone.
Located within a special administrative region established by North Korea, the park allows South Korean companies to employ low-wage North Korean workers, supervised by South Korean management. Despite the ongoing tensions between the two Koreas, North Korea accedes to this arrangement because it provides the North with a steady supply of foreign currency. The 53,000 Northern workers’ wages are paid directly to the North Korean government.
The 123 South Korea-based manufacturers who have set up facilities in Kaesong, such as BK Electronics Co., which sells parts to electronics products manufacturers such as Samsung, and Sunghwa Trading Co., which makes socks and underwear for Calvin Klein, H&M, and Old Navy, see the facility as a way to remain competitive with low-wage Chinese factories. The economic advantages to both sides are enough for the two Koreas, which are more often than not at each others’ throats over political differences, to cooperate in this venture.
The Wall Street Journal reported that the two adversaries formulated an agreement last week to reopen the Kaesong park, an indication that the two Koreas are once again cooperating following a heated verbal exchange between Pyongyang and Seoul following the North’s third nuclear weapons test in February.
However, the immediate cause of the shutdown that followed in April was Pyongyang’s determination to make a statement protesting the annual military drills between Seoul and Washington, as well as its perceived insults against North Korea’s leadership.
The Journal quoted Bae Hae-dong, president of Taesung Group Co. and former chairman of the Kaesong Industrial Council that represents the interests of South Korean companies in the complex, who said that South Korean companies were committed to staying at the complex, despite the long shutdown that closed operations for more than four months.
“There’s nowhere else to go for a small- or medium-sized company like us,” said Bae. “Labor costs are just too high in the South.”
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