The Kaesŏng Industrial Region (KIR) or Kaesŏng Industrial Zone (KIZ) is a
special administrative industrial region of
North Korea
North Korea, officially the Democratic People's Republic of Korea (DPRK), is a country in East Asia. It constitutes the northern half of the Korea, Korean Peninsula and shares borders with China and Russia to the north, at the Yalu River, Y ...
(DPRK). It was formed in 2002 from part of the
Kaesŏng Directly-Governed City. On 10 February 2016, it was temporarily closed by the
South Korea
South Korea, officially the Republic of Korea (ROK), is a country in East Asia, constituting the southern part of the Korea, Korean Peninsula and sharing a Korean Demilitarized Zone, land border with North Korea. Its western border is formed ...
n government and all staff recalled by the
Park Geun-hye
Park Geun-hye (; ; often in English ; born 2 February 1952) is a South Korean politician who served as the 11th president of South Korea from 2013 to 2017, until she was impeached and convicted on related corruption charges.
Park was the fi ...
administration,
although the former
President of South Korea
The president of the Republic of Korea (), also known as the president of South Korea (often abbreviated to POTROK or POSK; ), is the head of state and head of government of the Republic of Korea. The president leads the State Council, and is ...
,
Moon Jae-in, signalled his desire to "reopen and expand" the region in 2017.
Its most notable feature is the Kaesŏng
industrial park
An industrial park (also known as industrial estate, trading estate) is an area zoned and planned for the purpose of industrial development. An industrial park can be thought of as a more "heavyweight" version of a business park or office park, ...
, which operated from 2004 to 2016 as a collaborative economic development with
South Korea
South Korea, officially the Republic of Korea (ROK), is a country in East Asia, constituting the southern part of the Korea, Korean Peninsula and sharing a Korean Demilitarized Zone, land border with North Korea. Its western border is formed ...
(ROK). The park is located ten kilometres (six miles) north of the
Korean Demilitarized Zone, an hour's drive from
Seoul
Seoul (; ; ), officially known as the Seoul Special City, is the capital and largest metropolis of South Korea.Before 1972, Seoul was the ''de jure'' capital of the Democratic People's Republic of Korea (North Korea) as stated iArticle 103 ...
, with direct road and rail access to
South Korea
South Korea, officially the Republic of Korea (ROK), is a country in East Asia, constituting the southern part of the Korea, Korean Peninsula and sharing a Korean Demilitarized Zone, land border with North Korea. Its western border is formed ...
. The park allows South Korean companies to employ cheap labour that is educated, skilled, and fluent in
Korean, whilst providing North Korea with an important source of foreign currency.
, 123 South Korean companies were employing approximately 53,000 DPRK workers and 800 ROK staff. Their wages, totalling $90 million each year, had been paid directly to the North Korean government.
At times of tension between North and South Korea, southern access to the Industrial Park has been restricted.
On 3 April 2013, during the
2013 Korean crisis
The following lists events that happened in 2013 in the Democratic People's Republic of Korea. In 2013, tensions between North Korea and South Korea, the United States, and Japan escalated because of United Nations Security Council Resolution 2087 ...
, North Korea blocked access to the region to all South Korean citizens. On 8 April 2013, the North Korean government removed all 53,000 North Korean workers from the Kaesŏng industrial park, which effectively shut down all activities.
On 15 August 2013, both countries agreed that the industrial park should be reopened.
[
On 10 February 2016, the South Korean Ministry of Unification announced that the industrial park would be "temporarily" closed down and all staff recalled, partly in protest over continued North Korean provocations, including a satellite launch and a claimed hydrogen bomb test in January 2016.] The next day, the North announced it was expelling all South Korean workers and said it will freeze all South Korean assets and equipment at the jointly run factory park. All 280 South Korean workers present at Kaesŏng left hours after the announcement by the North.
Kaesong Industrial Park
Construction started in June 2003, and in August 2003 North and South Korea ratified four tax and accountancy agreements to support investment. Pilot construction was completed in June 2004, and the industrial park opened in December 2004.
Initial phase
In the park's initial phase, 15 South Korean companies constructed manufacturing facilities. Three of the companies started operations by March 2005. First phase plans envisaged participation by 250 South Korean companies from 2006, employing 100,000 people by 2007.
The planned final phase
The park was expected to be complete in 2012, covering 65 km2 and employing 700,000 people. The plan also called for a supporting zone, roughly a third the size of the industrial zone, that was meant for life-quality operations. Specifically, this meant the creation of residential areas, hospitals, shopping centers, and even a proposed theme park to attract tourists.
Organization
The Kaesong Industrial Park is run by a South Korea
South Korea, officially the Republic of Korea (ROK), is a country in East Asia, constituting the southern part of the Korea, Korean Peninsula and sharing a Korean Demilitarized Zone, land border with North Korea. Its western border is formed ...
n committee that has a 50-year lease that began in 2004. Hyundai Asan, a division of South Korean conglomerate Hyundai Hyundai is a South Korean industrial conglomerate ("chaebol"), which was restructured into the following groups:
* Hyundai Group, parts of the former conglomerate which have not been divested
** Hyundai Mobis, Korean car parts company
** Hyundai ...
, has been hired by Pyongyang to develop the land.[An Oasis of Capitalism]
Newsweek
''Newsweek'' is an American weekly online news magazine co-owned 50 percent each by Dev Pragad, its president and CEO, and Johnathan Davis (businessman), Johnathan Davis, who has no operational role at ''Newsweek''. Founded as a weekly print m ...
, 19 September 2005. Retrieved at the Internet Archive
The Internet Archive is an American digital library with the stated mission of "universal access to all knowledge". It provides free public access to collections of digitized materials, including websites, software applications/games, music, ...
on 19 January 2008 The firms are taking advantage of low-cost labor available in the North to compete with China
China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
to create low-end goods such as shoes, clothes, and watches.
Park Suhk-sam, senior economist at the Bank of Korea
The Bank of Korea (BOK; ) is the central bank of the Republic of Korea and issuer of Korean Republic won. It was established on 12 June 1950 in Seoul, South Korea.
The bank's primary purpose is price stability. For that, the bank targets in ...
, predicted the industrial zone could create 725,000 jobs and generate $500 million in annual wage income for the North Korean economy by 2012. Five years later, another $1.78 billion would be earned from annual corporate taxes levied on South Korean companies participating in the industrial project.[Bridging the Korean Economic Divide]
Business Week
''Bloomberg Businessweek'', previously known as ''BusinessWeek'', is an American weekly business magazine published fifty times a year. Since 2009, the magazine is owned by New York City-based Bloomberg L.P. The magazine debuted in New York City ...
, 8 March 2006. Retrieved 19 January 2008
Firms operating within the park
By the end of the first full year of operation, 11 South Korean firms were operating in the KIR. By 2006, the 15 initial firms had all begun production including JCCOM, Yongin Electronics, TS Precision Machinery, JY Solutec, Magic Micro, Hosan Ace, Romanson, Munchang Co., Daewha Fuel Pump, Taesong Industrial, Bucheon Industrial, Samduk Trading, Shinwon, SJ Tech, and Sonoko Cuisine Ware. In February 2016, shortly before the park was closed for the last time, the number of South Korean firms operating in the park had increased to 124. The different types of manufacturing performed in the park broke down to 71 textile and clothing firms, 9 chemical product firms, 23 that dealt in metals and machinery, 13 that produced electronics, and 8 firms of other kinds of production.
Obstacles
The zone faces a number of obstacles. Among the most pressing are U.S. economic sanctions against the North, prohibiting imports of key technologies and goods, such as computers.
Wage and rent agreements
In May 2009, Pyongyang announced it unilaterally scrapped wage and rent agreements at the industrial park. In June 2009, they also demanded new salaries of $300 a month for its 40,000 workers, compared with the $75 they had been receiving prior.
In September 2009, a visit to North Korea by the Hyundai Group
Hyundai Group (; ) is a South Korean conglomerate founded by Chung Ju-yung. The first company in the group was founded in 1947 as a construction company. With government assistance, Chung and his family members rapidly expanded into various in ...
chairwoman led to a resolution to the North's demands, with mild wage increases and no change in land rents.
In 2012, wages were estimated at $160 per month, about one-fifth of the South Korean minimum wage, and about a quarter of typical Chinese wages.
Taxes and revenue
In 2012, the Ministry of Unification was informed that 8 of the current 123 companies had received a tax collection notice. The notices were made by a unilateral decision by North Korea. The eight companies were informed of a notice to pay ₩170,208,077 ($160,000 US) in taxes; two of the companies have already paid $20,000 in taxes to the North Koreans.
Unilateral decisions by the Central Special Direct General Bureau (CSDGB) to amend bylaws is a violation of Kaesŏng Industrial District Law, which requires that any revision of the laws be negotiated between the North and the South.
For the first time, in 2011, the companies in the KIR recorded an average operating profit of ₩56 million ($56,241 US), finally operating in the black after years in deficit.[
]
Green Doctors
Green Doctors, an NGO founded in Busan
Busan (), officially known as is South Korea's most populous city after Seoul, with a population of over 3.4 million inhabitants. Formerly romanized as Pusan, it is the economic, cultural and educational center of southeastern South Korea, w ...
in January 2004, received official government permission to open a hospital in the region in 2005. Since then, it has provided medical treatment to the workers at Kaesŏng until the closure of the complex. The doctors who work there received no salary.
''Cheonan'' incident
In May 2010, following the sinking of the ROKS ''Cheonan'' and South Korea's response, North Korea severed ties with South Korea and shut its Consultative Office; however, existing activities in the zone maintained production activities, and transport and telephones to South Korea were operating normally.
2013 closure and reopening
On 3 April 2013, North Korea began to deny South Korean employees access to the Kaesong Industrial region. This came as tensions began escalating rapidly between Seoul and Pyongyang. On 8 April, North Korea recalled all 53,000 North Korean workers from the Kaesong Industrial complex, fully suspending its operations. However, 406 South Koreans remained at the complex after its effective closure.
On 17 April, North Korea barred a delegation of 10 South Korean businessmen from delivering food and supplies to the 200 South Korean staff who remained in the industrial zone. On 26 April 2013, South Korea decided to withdraw all remaining staff, and on 4 May, the last seven South Koreans left the Kaesong Industrial Region, which thus was completely shut down.
On 4 July, both countries agreed in principle that the Kaesong Industrial Park should be reopened, as tensions between the two began to cool. Six rounds of talks were held without reaching a concrete agreement, with South Korea's insistence on a provision to prevent North Korea from closing the complex again in the future. During the first week of August, North Korea reiterated that reopening the complex was in both nations' interest. On 13 August South Korea said it would start distributing insurance payments to businesses in the complex, but also said it was open to ''new'' wording on the issue of joint control of Kaesŏng. The move, seen as precursor to formally closing the region, sparked a seventh round of talks which South Korea label as "final". An official agreement to reopen the complex was reached and signed on 15 August. The agreement included provisions designed to ensure against a similar shutdown in the future. A joint committee was formed to determine if compensation will be provided for economic losses caused by the shutdown.
On 13 September, before the reopening of Kaesŏng Industrial region, the two governments held a subcommittee meeting to iron out additional issues regarding entrance, legal stay, communication, customs and passing. This also discussed the resumption of tourism in the Mount Kumgang Tourist Region.
On 16 September, Kaesŏng was reopened after five months. All of the 123 companies operating in Kaesŏng experienced losses equaling a combined £575 million ($944 million).
2016 closure
On 10 February 2016, in response to a rocket launch by the DPRK, South Korea announced that it would, for the first time, halt operations in the region, describing the launch as a disguised ballistic missile test. Seoul said all operations at the complex would halt, to stop the North using its investment "to fund its nuclear and missile development". The next day, the North announced it was expelling all South Korean workers and said it would freeze all South Korean assets and equipment at the jointly run factory park. All 280 South Korean workers present at Kaesŏng left hours after the announcement by the North.
On Thursday, 11 February, a few minutes before midnight, the South announced it had shut off the supply of electricity and water into Kaesong that supplied the factory zone.
In South Korean domestic politics, there were two opposing viewpoints toward the 2016 closure – while the Saenuri Party
The Liberty Korea Party () was a conservative political party in South Korea that was described variously as right-wing, right-wing populist, or far-right. Until February 2017, it was known as the Saenuri Party (), and before that as the Han ...
argued for the closure, stating that it was one and the only means to end North Korea's provocation, two other parties, The Minjoo Party and the People's Party, objecting to Saenuri, asserted that more communication is needed and that the closure would only escalate tensions in the Korean peninsula. The Saenuri Party, the ruling party at the time, said during the announcement of Kaesŏng Industrial Region's closure, "North Korea conducted the 4th nuclear test and rocket launch regardless of persistent warnings from the South Korean government and the international society. Communication and persuasion, or the 'carrots,' do not work anymore. We need more powerful sanctions on North Korea." Some people agree with the Saenuri Party, arguing that South Korea should have a more threatening and uncompromising attitudes toward North Korea so that it cannot conduct such tests again. On the other hand, The Minjoo Party and People's Party, which were the opposition parties, counter-argued that North Korea has never stopped its provocation even during its Arduous March, or the North Korean famine, emphasizing that a simple closure would never bar North Korea from testing nuclear weapons and launching missiles. They also say that the Kaesŏng Industrial Region was the last hope for peaceful resolution to everlasting tensions between the South and the North, but now that it is closed, South Korean citizens' fear over national defense will intensify.
In December 2017, an expert panel investigating the decision to close the park found that there was no evidence that North Korea had diverted wages to fund its nuclear program. The head of the panel Kim Jong-soo said, "The presidential office inserted the wage-diversion argument as major grounds, yet without concrete information, sufficient evidence and consultations with related agencies, mainly citing defector testimonies that lack objectivity and credibility. This impairs the decision's legitimacy and could constrain our ground over a future restart of the complex, while hampering the companies' rights to protect their assets due to the hasty pullout process."
A group of businesses who suffered losses of 250 billion won ($200 million) due to the closure demanded an apology and said, "Now that the wage-diversion claim has proved groundless, the government must apologize for abusing state power to suspend the complex and make utmost efforts to reopen it."
2018 opening of Inter Korean Liaison Office
On 14 September 2018, the Inter-Korean Liaison Office
The Inter-Korean Liaison Office () was a joint liaison office of North Korea and South Korea located in North Korea's Kaesong Industrial Region.
In the absence of formal diplomatic relations, the building functioned as a ''de facto'' embassy a ...
located in the region officially opened. The office's purpose was to further communication between the two Koreas.
On 16 June 2020, North Korea destroyed the building via explosion, amidst heightened tensions between the countries.
North Korea blew up the Inter-Korean Liaison Office in June 2020 in response to South Korea not banning or punishing defectors from sending leaflets and flash drives into North Korea. The South Korean government did not take strict measures against North Korea even though North Korea intentionally bombed the Inter-Korean Liaison Office, a building created to keep peaceful communication between the two countries. On the contrary, in December 2020, South Korea's National Assembly passed a law that penalizes South Korean citizens who send anti-North Korean material across the border.
Restoration of water supply
On 10 October 2018, South Korea resumed supplying water to the region. On 11 October 2018, the local water treatment plant had been restored.
Transport
There are two modes of travel to Kaesŏng, road and rail.
Rail
Kaesŏng Industrial Region is served by Korean State Railway
The Korean State Railway (), commonly called the State Rail () is the operating arm of the Ministry of Railways of North Korea and has its headquarters at P'yŏngyang. The current Minister of Railways is Chang Jun Song.
History
1945–195 ...
from Panmun Station through the Pyongbu Line
The P'yŏngbu Line is an electrified standard-gauge trunk line of the Korean State Railway running from P'yŏngyang to Kaesŏng in North Korea and further south across the DMZ to Seoul in South Korea; the name comes from the two (theoretical) te ...
. There is rail access to South Korea (operated by Korail
The Korea Railroad Corporation (Korean: 한국철도공사, Hanja: ), branded as KORAIL (코레일, officially changed to in November 2019), is the national railway operator in South Korea. Currently, KORAIL is a public corporation, managed ...
) via the Gyeongui Line but it is not known what restrictions apply. An agreement to re-establish rail freight services was made in November 2007.
The closest station in South Korea is Dorasan Station
Dorasan station is a railway station situated on the Gyeongui Line, which used to connect North Korea and South Korea and has since been restored. Dorasan station is located approximately 650 meters (710 yards) from the southern boundary of the Ko ...
, from which road access can be taken.
Road
Limited road access is available for workers from South Korea via South Korea National Route 1
National Route 1() is a national highway in South Korea. It connects Mokpo, South Jeolla Province with the city of Paju in Gyeonggi-do. Before the division of the Korean peninsula, the highway ran until Sinuiju, North P'yongan Province, in presen ...
to the DMZ and then into Kaesŏng via Asian Highway 1 in the North. The route between the two highways is a paved road and part of the AH1
Asian Highway 1 (AH1) is the longest route of the Asian Highway Network, running from Tokyo, Japan via Korea, China, Southeast Asia, Bangladesh, India, Pakistan, Afghanistan and Iran to the border between Turkey and Bulgaria west of Istanbul wh ...
network. There are no connecting roads ''en route'' and a turnaround is available only in the South before entering the North. Access to the road is closed if there are restrictions from checkpoints upon entering the DMZ.
Air
There is no option of air travel available from Kaesŏng to the South. Sohung South Airport
Sohung South Airport(서흥비행장) is an airport in Hwanghae-bukto, North Korea
North Korea, officially the Democratic People's Republic of Korea (DPRK), is a country in East Asia. It constitutes the northern half of the Korea, Korean ...
is the closest airport to Kaesŏng in the North, but it serves no South Korea-bound flights.
The closest airports in the South are Gimpo International Airport
Gimpo International Airport (), commonly known as Gimpo Airport , formerly rendered in English as Kimpo International Airport, is located in the far western end of Seoul, some west of the Central District of Seoul. Gimpo was the main interna ...
and Incheon International Airport
Incheon International Airport (IIA; ) (sometimes referred to as Seoul–Incheon International Airport) is the largest airport in South Korea. It is the primary airport serving the Seoul Capital Area and one of the largest and busiest airports ...
, from which road access can be taken to the industrial region.
See also
* Rason Special Economic Zone
* Mount Kumgang Tourist Region
References
External links
Official website: Kaesong(Gaeseong) Industrial District Management Committee (KIDMAC) of South Korea
Official website: Hyundai Asan, the South Korean firm responsible for creating the Zone
Work to Start on Kaesong Industrial Park
People's Daily
The ''People's Daily'' () is the official newspaper of the Central Committee of the Chinese Communist Party (CCP). The newspaper provides direct information on the policies and viewpoints of the CCP. In addition to its main Chinese-language ...
, 4 November 2002
South Korea Begins Supplying Electricity to N.K. Industrial Park
Yonhap News
Yonhap News Agency is a major South Korean news agency. It is based in Seoul, South Korea. Yonhap provides news articles, pictures and other information to newspapers, TV networks and other media in South Korea.
History
Yonhap (, , translit. ' ...
, 17 March 2005
Despite U.S. Attempts, N. Korea Anything but Isolated
Washington Post
''The Washington Post'' (also known as the ''Post'' and, informally, ''WaPo'') is an American daily newspaper published in Washington, D.C. It is the most widely circulated newspaper within the Washington metropolitan area and has a large nati ...
, 12 May 2005
North-South Korea Trade Increased to Record $1.1 Bln in 2005
Bloomberg, 23 January 2006
A One-Hour Commute to Another World
Los Angeles Times, 28 February 2006
Asia Times Online, 6 April 2006
"Companies in Kaesung Delegate Management over to North Korea"
Daily NK, 17 May 2007
The Kaesong North-South Korean Industrial Complex
Mark E. Manyin and Dick K. Nanto, Congressional Research Service, 18 April 2011.
{{coord, 37, 56, N, 126, 38, E, display=title
Economy of North Korea
Directly Governed Cities and Special Administrative Regions of North Korea
Kaesong
Economy of South Korea
North Korea–South Korea relations
2002 establishments in North Korea