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February 10, 2016

South Korea to Shut Down Kaesong Industrial Complex 개성공업지구

A map showing the border between North and South Korea and the cities of Seoul and KaesongThe South Korean government today announced plans to close the Kaesong Industrial Complex. Kaesong, also Romanized as Gaesong, is a city on the southern border of North Korea. Sageuk fans may remember it as the Korean capital during the Koryeo (or Goryeo) dynasty from the 10th-14th centuries, immediately preceding the Joseon era.

These days, Kaesong is home to 124 South Korean factories staffed by North Korean workers. The rather bizarre arrangement just goes to show that mutual greed overrides political principles when ruling elites collide. South Korean factory owners pay the North Korean workers about $74 a month. Minimum wage for South Korean workers is $5 an hour.

Kaesong is pitched to South Koreans as a symbol of cooperation between the two Koreas, and all instances of cooperation are taken as possible groundwork for future reunification. Although President Park Gun Hye’s administration supports reunification, the percentage of South Koreans who see this as feasible or even desirable is declining. It has been over 60 years since the separation of the Koreas, and the last generation of South Koreans who remember one Korea is passing into history.

Unification monument at the DMZ - a split open sphere with people on both sides trying to push it together again

Reunification monument in the DMZ between North and South Korea


Their children are still supportive of reunification efforts. Their grandchildren, however, are not so sure. They view the cultural divergence between the Koreas as significant, feeling “closer” to Chinese than to North Koreans. The additional financial burden reunification would likely impose on an already stagnating economy is another consideration for a generation that spent its childhood studying 14 hours a day, in a fierce competition for scarce career opportunities.

South Koreans have seen too many false starts to place much faith in political initiatives towards reunification. There is a lingering humanitarian concern for their cousins in the North, however. Playing on this concern, the Kaesong Industrial Complex is justified by pro-business South Koreans as beneficial to northern workers, scandalously low wages notwithstanding. The South Korean government requires that wages be paid directly to them.

A hand holding a number of Korean won paper bills in various denominationsThis is a hollow gesture, though, as their own government requires them to turn over their wages for “distribution.” It’s widely understood that the internationally negotiable currency, which is otherwise non-existent in North Korea, winds up in government pockets. With prodding from allies in the wake of recent events, the South has acknowledged that annual Kaesong wages equivalent to $100 million U.S. undoubtedly contribute to North Korean nuclear development.

North Korea has been trying to develop nuclear capability for years, much to the distress of South Korea, Japan, and the U.S. Even the North’s sometime ally, China, isn’t thrilled about gaining a new nuclear neighbor on its doorstep. Despite neighborhood sentiment and international sanctions, North Korea recently conducted another nuclear test and launched a satellite. Neither of these efforts was very successful, but it’s not something anyone in the region wants to see more of.

Park Gun Hye’s conservative government is taking care of her political base, extending loans and providing other “financial aid” to business owners impacted by the Kaesong closure.

Despite the promises that they will be taken care of, the factory owners don’t want to give up their very sweet deal. They are protesting the Kaesong shutdown, and urging Park to reverse the decision, soon, if not immediately.

Korean presidents are limited to a single 5-year term. With two years remaining in the Park presidency, it will be interesting to see whether internal or external pressures ultimately prevail.

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