ZCZC
BCN-10
NKOREA-SKOREA-ECONOMY
N. Korea made $120 mn a year from joint factory park: report
SEOUL, June 24, 2019 (BSS/AFP) – North Korea raked in more than $120
million a year from a symbolic cross-border industrial zone that Pyongyang
and Seoul are pushing to re-open as part of nuclear negotiations, a report
said Monday.
The Kaesong Industrial Complex — where around 55,000 North Korean workers
churned out products ranging from watches to clothes for some 125 South
Korean companies — was one of the most visible signs of reconciliation that
followed the first inter-Korean summit in 2000.
But it was shuttered by the South’s then-conservative government in 2016
in response to a nuclear test and missile launches by the North, saying
profits from Kaesong were funding Pyongyang’s provocations.
The South’s current President Moon Jae-in has dangled re-opening the
complex as an incentive for Pyongyang to engage in denuclearisation talks,
but doing so is complicated by the web of international sanctions imposed on
the North over its weapons programmes.
At their Pyongyang summit in September, Moon and North Korean leader Kim
Jong Un agreed to “normalise” operations at Kaesong when conditions were
“ripe”, but negotiations between Pyongyang and Washington are now deadlocked
and Northern media have pressed the South to implement joint economic
projects.
The International Crisis Group called on Monday for the complex to be
reopened with “a modest deal involving sanctions relief”.
Doing so would create “much needed momentum for stalled peace talks and
serve as a reminder to both North and South Korea of the benefits of building
a sustainable peace on the peninsula”, it added in a statement.
The factory zone gave the North foreign investment in its infrastructure,
employment for its people and “much-needed revenue in hard currency”, it said
in a report, while the South Korean businesses involved enjoyed cheap but
high-quality labour — wages in China were 2.9 times higher in 2014.
In 2015, the year before it closed, South Korean firms paid the North
around $123 million for their workers, ICG calculated.
The North taxed the sums at 30 percent and paid the workers 70 percent of
the remainder in essential foodstuffs and coupons for state-run shops, the
report said, citing the firms in Kaesong and the South’s unification
ministry.
The rest was paid “in local currency at an artificially low official
exchange rate”, it added.
Currently the North’s official exchange rate is around 80 times lower than
the market rate. If a similar ratio applied to the Kaesong workers, they will
have received in cash only around one quarter of one percent of the value
paid to the North for their services, AFP calculates.
Profits from Kaesong were equivalent to only about 10 percent of what the
North made from coal exports to China, ICG said, but “were nevertheless
important… to a regime that needed all the cash it could get”.
“In this sense, reopening Kaesong would unquestionably be a concession to
the North,” it added.
BSS/AFP/HR/1045