kaesong industrial complex (kic)
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FB 09 Faculty of Linguistics , Cultures, and Arts Course: North and South Korean Economy Professor: Prof. Seiwan Kim June 17, 2013. Kaesong Industrial Complex (KIC). Contributor : Aziz Maamoody Yücel, David Moon, Un -Sun Yoon. Structure. Introduction Founding Production - PowerPoint PPT PresentationTRANSCRIPT
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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
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1. Introduction2. Founding3. Production4. Transport5. Administration6. KIC during the crisis7. Criticism8. Future Prospects
Structure
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Introduction
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• 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
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Founding
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• 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
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Purposes:• Cooperation• Stability in the region• Further projects• Option for NK to reform
& liberalize its economy
• Business advantages
Founding: Reasons
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Produced Goods and Profits
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Export Destinations of KIC Products
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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?
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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?
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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
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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
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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
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Transport
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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
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• 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
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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
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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
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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
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• 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
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• 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
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Companies at the pilot phase
by Hyundai Asan
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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..
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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..