Academic journal article Current Politics and Economics of Northern and Western Asia

The Kaesong North-South Korean Industrial Complex

Academic journal article Current Politics and Economics of Northern and Western Asia

The Kaesong North-South Korean Industrial Complex

Article excerpt


The Kaesong Industrial Complex (KIC) is an industrial park located in the Democratic People's Republic of Korea (DPRK or North Korea) just across the demilitarized zone from South Korea. As of the end of December 2010, approximately 120 medium-sized South Korean companies were using North Korean labor to manufacture products there, employing over 47,000 workers. (See Table 1.) Currently, the park has much of the infrastructure (e.g., South Korean-built water, sewage treatment, and electrical facilities) to enable the completion of the complex's first phase, an 800-acre site that would contain roughly 300 foreign manufacturers employing around 100,000 North Korean workers. If the master plan of Hyundai Asan, the co-developer of the project, is followed the KIC eventually will be over 6,000 acres (nearly half the size of Manhattan Island) and include high-technology zones, shopping districts, residential areas, and facilities for tourism and recreation. At present, over 100 companies that have signed lease agreements to open factories have not done so. The complex was planned, developed, and financed largely by South Korea, and it has become a symbol of engagement between the North and the South. In 2010, about $1.4 billion, or 76%, of the $1.9 billion in total trade between the two Koreas was attributable to the KIC.1

The purpose of this report is to provide an overview of the role, purposes, and results of the KIC and examine U.S. interests, policy issues, options, and legislation.

The KIC Survives Inter-Korean Tensions in 2010

Twice in 2010, the KIC 's future was thrown into doubt by a marked deterioration in inter-Korean relations. First, on March 26, 2010, a South Korean naval vessel, the Cheonan, sank in waters disputed by the two Koreas. Nearly 50 South Korean sailors died in the incident. A multinational investigation team led by South Korea determined that the ship was sunk by a North Korean submarine.2 South Korea, backed by the United States and Japan, has said it will take the case before the United Nations Security Council. On May 24, 2010, South Korean President Lee Myung-bak also announced that North Korean ships would no longer be permitted to pass through shipping lanes under South Korean control, and that North-South trade, visits, and exchanges generally would be suspended. Exceptions were made for humanitarian aid to infants and children, and for the KIC. Propaganda radio and loudspeaker broadcasts into North Korea would also be resumed.3 South Korean Minister of Unification Hyun In-taek announced that new investments in the complex would be stopped and that the number of South Korean personnel at the complex-which had often approached 1,000 people in mid-week-would be reduced by as much as 50%.4

North Korea's Committee for the Peaceful Reunification of the Fatherland, the government organ responsible for inter-Korean relations, responded by labeling the actions by the -puppet" South Korean government as -a declaration of war against us" and announcing that it would abrogate all North-South non-aggression agreements, terminate contact with Lee's government, and -completely halt" all North-South cooperation projects, among other steps.5 However, the Kaesong complex was not shut down, although North Korea threatened to take this step if South Korean loudspeaker broadcasts resumed. (It also threatened to shoot at the loudspeakers.) Instead, several South Korean government workers at the KIC were expelled. South Korea did not restart its broadcasts.

Second, on November 23, North Korean artillery units fired over 150 shells onto and around Yeonpyeong Island, across the North-South disputed western sea border. North Korea claimed that the South Korean military had fired first, during routine U.S.-ROK exercises in the area. According to one report, about half the North Korean shells hit the island. The barrage killed four South Koreans (two marines and two civilians), wounded dozens, and destroyed or damaged scores of homes and other buildings. …

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