The Kaesong Industrial Complex: who gains?

Workers with their bicycles in Kaesong.

As an opportunity for investors, the results at Kaesong Industrial Complex (KIC) do not suggest stellar performance. For example, in 2011 (six years into operation), the average profits for the 123 companies at KIC barely equalled the annual salary of one worker employed by a South Korean company.

In the same year, the debt for the zone was twice the average found in South Korea (171%), at 347%. But at least it was an improvement on 2010, when it was 464%. In overall terms, there was a deficit of 1.7 billion won after an investment of 417 billion won. As a basic overview, the South Korean government invested around one trillion won and saw only deficits for seven years. If they had invested the same amount in China or somewhere else in South East Asia, the results would have certainly been better.

Nevertheless, the KIC may more aptly be called a philanthropic endeavour than an investment in the traditional sense. What benefits did North Korea receive? After an appeal for 18,000 more workers, in addition to the 51,000 already employed in 2011, North Korea put the resulting 78 million dollars (an amount that rivals the sum capital of the 123 companies at KIC) not into the pockets of the workers, but into the coffers of the ruling Kim. In contrast, only 1.2 million dollars went to the workers – a meagre 1.53%.

One additional fact: 84.6% of workers at KIC are chosen by North Korea.

What about benefits for the North Korean workers who are fortunate enough to be chosen? They may not be much more fortunate than their fellow countrymen. It has been suggested that residents of Kaesong may not even be better off than those of other major cities. Besides, almost nobody (except for the elite) in North Korea lives off state enterprises, but rather, off the illegal economy.

This is why North Korea, at various times, has pursued (disastrous) currency revaluations and has attempted to crack down on the illegal markets that pop up on every street corner. North Koreans don’t need to be taught about market forces; most North Koreans already rely on the illegal market economy for all their life’s needs. The KIC is not, therefore, a great boon for the North Korean people, though it lines the pockets of the elite.

It is in this context that the KIC is an enabler of the controlling state, and not of a reforming state. Bluntly put, the North Korean state has used the workers at KIC to make money for itself.

Finally, what about the symbolic value of the KIC, as a testament to collaborative efforts? North Korea, more than anybody, knows this best. This is why they’ve played the closure card; and now, having played their last significant card, are trying more creative pressures – such as asking foreigners to evacuate from South Korea.