kaesong industrial complex (kic)
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Kaesong Industrial Complex (KIC)
Contributor: Aziz Maamoody Yücel, David Moon, Un-Sun Yoon
FB 09 Faculty of Linguistics, Cultures, and Arts
Course: North and South Korean EconomyProfessor: Prof. Seiwan Kim
June 17, 2013
1. Introduction2. Founding3. Production4. Transport5. Administration6. KIC during the crisis7. Criticism8. Future Prospects
Structure
Introduction
• Establishment was decided in May 2003
• Construction started in June 2003
• Hyundai Asan prepared the “Master plan” concept
• Pilot phase: 2004 with 15 companies
• Park opened in Dec. 2004, but isn’t still finished yet: plans haven’t been completely fulfilled
Founding
Founding
• Establishment was decided in May 2003
• Construction started in June 2003
• Hyundai Asan prepared the “Master plan” concept
• Pilot phase: 2004 with 15 companies
• Park opened in Dec. 2014, but isn’t still finished yet: plans haven’t been completely fulfilled
Founding
Purposes:• Cooperation• Stability in the region• Further projects• Option for NK to reform
& liberalize its economy
• Business advantages
Founding: Reasons
Produced Goods and Profits
Export Destinations of KIC Products
SK small and medium sized companies:
• cheap and flexible Human Resources
• gov't backed political insurance• gov't support through providing
infrastructure• gov't support through providing
loans with below-market interest rates
Who really profits from the KIC?
KIC
South Korea
North Korea
Hyundai Asan
Improvements in:international competitive advantagepolitical leverage on NKpolitical and regional stability
influx of foreign currency (USD)fighting unemploymentpossibility to gain technological know-how
made a 50-year lease on the entire KIC Area all companies have to pay Hyundai Asan for use
Who really profits from the KIC?
rail:• KIC is served by Korean
State Railway Pyongbu Line from Panmun Stn.
• KORAIL has access via Gyeongui Line
• Agreement to re-establish freight services was made in 2007
• Closest SK Station is Dorasan Station which has also road access
Transport
Road:
• limited access available for workers from the South via South Korea National Route 1 to DMZ and then into Kaesong via Asian Highway 1
Transport
Air:
• closest NK airport is Sohung South Airport• however no South-bound flights• closest SK airports are
Gimpo Intl' Airport Incheon Intl' Airport
(both: road access to KIC)
Transport
Transport
Administrative Committee:
• has been established in October 2004 • is responsible for the administration of the
companies and production in KIC• has got also the function of the South
Korean consulate in KIC
Administration
• in 2007 the South Korean gov‘t gave financial support to the companies for electricity and other basic facilities in KIC
• in June 2007 a transmission tower has been built, which supplies 100.000KW per unit for free from SK
• in September 2007 and until April 2008 basic facilities like water supply and waste treatment has been provided
Electricity and other Basic Facilities
other Facilities:• there are various
stores for every demand
• SK-Won are not accepted: only US-Dollars
• only for SK worker
Electricity and other Basic Facilities
Sinking of the SK destroyer Cheonan in March 2010:
• since May 23 SK government stopped the aid, trade and bilateral cooperation, with the exception of KIC
• NK government closed the Administrative Committee
Shelling of Yeonpyeong-Island in Nov 23, 2010:
• entry into KIC has been stopped, only entry into SK was allowed
many companies in KIC lost sale contracts or had to take back the products
KIC during the crisis
April 3 entry into KIC has been stopped, only
entry into SK was allowedApril 8
the NK government withdraw the NK workers from KIC
April 25every SK workers came back to SK
May 4 the KIC has been officially closed
since June 8 the NK and SK government negotiate
about KIC
Crisis in 2013
• the average wage of a NK worker: $ 110-160 (1/5 of the SK minimum wage)
• the wages don’t go to the workers directly, the NK government receives the money
• after discounting of the social contribution cost and the exaggerated exchange rate of the US-Dollar,
there is not enough money left for the workers• besides the workers don’t get money,
instead they get a kind of coupon
Criticism
• We think: Park won’t be definitively closed KIC survived from a closure (New SK gov’t; NK nuclear test; Inter-Korean tensions 2010)
• Both countries are seeking profits & advantages NK needs the money SK has already invested enormously; insurance payments could accrue • SK has further plans (expand KIC, train
connection to China)
Future Prospects
Companies at the pilot phase
by Hyundai Asan
Internet sources:• http://www.businessinsider.com/what-isthe-
kaesong-industrial-complex-2013-4• http://online.wsj.com/article/
SB10001424127887323646604578399693853456424.html
Article:• ‘The Kaesong North-South Korean Industrial’ Complex by the Congressional Research Service
Where we got our sources..
Internet sources:• http://www.hdasan.com/english/kaesong/
intro_k01.jsp• http://www.spiegel.de/wirtschaft/soziales/
industriezone-kaesong-nordkorea-beendet-den-wandel-durch-handel-a-892342.html
• http://ko.wikipedia.org/wiki/개성공업지구Books:
A history of Korea: From Antiquity to the Present by Michael J. Seth
Where we got our sources..
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