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Ⅰ. Problems
外交安保硏究院
Main Issues of the Gaesong Industrial
Complex Project and Possible Solutions
Jun Bong‒geun
Professor
Considering the benefits resulting from increased
inter-Korean exchange and cooperation and reduction in
military tension as well as the positive impact of the reform
and opening of North Korea, the Participatory Government of
South Korea has designated the Gaesong Industrial Complex
Project as its singular core project toward North Korea and is
providing intensive budgetary/administrative support for its
success. The first development phase of the project is now
complete with 818 acres of land having been developed.
Once the factories begin operations at the end of 2007, the
number of companies is expected to increase from the current
15 to 300, the number of North Korean workers from the
current level of 7,000 to 70,000 and annual sales from the $15
million (as of 2005) to $ 2 billion.
However, the project must still overcome a number of
internal economic/technical/budgetary hurdles in order to proceed successfully
and on schedule. Additionally, there are external political and diplomatic
obstacles to overcome.
Both high hopes and apprehension hover over the project as it awaits
expansion in the latter half of 2006, prompting the need to re-examine its current
business status and significance and review the various measures needed to ensure
its success. This paper will address and seek to resolve the four main issues
amongst the many political/diplomatic challenges facing the project: U.S.
cooperation, problems of transportation-telecommunications-customs, export
control and the issue of products’ country of origin.
Ⅳ. Considerations
The Gaesong Industrial Complex Brings Peace
The idea that the Gaesong Industrial Complex brings peace can be used to
rebut the notion that only democracy brings peace which is the basis for U.S.
criticism of the Gaesong Industrial Complex. Those criticizing the project assert
that Pyongyang’s anti-human rights, anti-democratic regime will only channel the
revenues from the Gaesong Industrial Complex toward strengthening North
Korea’s nuclear capability and its social control, not for the welfare of its people.
Furthermore, it is argued that democratization and human rights improvements
must precede everything else in North Korea.
The notion of peace and the Gaesong Industrial Complex is aligned with the
“Supply-chain” peace theory proposed by New York Times columnist Thomas L.
Friedman, renowned author of, “The World Is Flat” and “The Lexus and the Olive
Tree.” According to Friedman, if mutual economic inter-dependence strengthens
into a relationship where economic production elements are interwined, both sides
will avoid war for fear of the economic damage that a conflict would bring,
knowing that both sides cannot afford the losses that would occur.
Internationalizing the Gaesong Industrial Complex
If the Gaesong project continues to progress as a purely bilateral North-South
Korean project, North Korea has the potential to cite the complex’s
exceptionalism and uniqueness to forcefully demand concessions from the South.
Internationalizing the Gaesong complex with international customs and standards
in place will eliminate North Korea’s claims for special treatment and enable the
complex to develop into an international special economic zone which complies
12 Policy Brief 2006-5, July 2006
with international standards. In addition, the influx of international capital into the
complex will grant vested rights to the countries responsible for such investments
to help promote peace on the Korean peninsula and improved inter-Korean
relations. To this end, a strategy is needed to accelerate the entry of western
companies into the complex.
In particular, whereas the United States approaches North Korea strictly
within the framework defined by its military security and nuclear nonproliferation
policies, South Korea’s approach is focused on economic exchange
and cooperation. Thus, there is potential for conflict between the two differing
approaches. Therefore, in order to raise the U.S. government’s economic interest
in North Korea, the South Korean government should seriously consider
facilitating U.S. businesses in making inroads into North Korea.
Internationalization of the Gaesong industrial complex will also enhance
transparency, creating an environment favorable for resolving export control
problems and reducing criticism of cash transfers and human rights problems.
Changes in North Korea and Resolving its Nuclear Problem
The Gaesong Industrial Complex is a project aimed at inducing changes in
North Korea while at the same time the project’s success requires changes in
North Korea as a premise. Ultimately, the success of the Gaesong Industrial
Complex will depend on North Korea’s reform and opening, in particular the
resolution of the nuclear issue.
Although the second and third development phase of the Gaesong Industrial
Complex project expects to focus on adding high-tech industries such as
electronics and IT, it seems very difficult, under the current U.S. economic
sanctions and export control system, to branch off outside the labor intensive light
Main Issues of the Gaesong Industrial Complex Project and Possible Solutions 13
industries that manufacture products such as bags, shoes, etc.
If the six-party talks yield progress in resolving the North Korean nuclear
problem, it will be necessary to closely study the Cooperative Threat Reduction
program and the G-8 Global Partnership program for preventing WMD
proliferation. Building an International Science and Technology Center for reeducating
North Korean nuclear scientists and engineers within the Gaesong
Industrial Complex in order to enable them to operate civilian facilities may also
be considered.
Expansion and Development of the Gaesong Industrial Complex Model
The first inter-Korean economic cooperation model in the 1990s was a laboradded
processing industry, which then evolved into the KEDO Light Water
Reactor (LWR) project and Mt. Geumgang Tourist Project and has now expanded
into the Gaesong Industrial Complex. This progress should continue on beyond
the Gaesong Industrial Complex and serve as a foundation for developing a new
economic cooperation model for further expansion into North Korea. Although
the KEDO LWR project may not be appropriately categorized as an inter-Korean
economic cooperation project in the strict sense, it set the precedent of having
South Korean engineers working together with North Korean workers in North
Korean territory. The various legal arrangements such as privileges, customs and
immigrations agreements become the prototype of the inter-Korean economic
cooperation projects. Considering that the changes experienced by North Korea
and the development of economic cooperation methods happened in less than a
mere decade, it is necessary to prepare for the possibility of upgrading economic
cooperation methods further.
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