Two Koreas learn to work as one

Two Koreas Learn to Work as One
New Industrial Park Matches South's Capital and Know-How With North's Low-Cost Labor

By Anthony Faiola
Washington Post Foreign Service
Tuesday, February 28, 2006; Page A10

KAESONG, North Korea, Feb. 27 -- Inside a modern new industrial park two-thirds the size of Manhattan, hundreds of North Korean textile workers kept heads down and eyes focused Monday as South Korean managers patrolled the assembly lines.

But Kim Eue Hye, an effusive young woman wearing generous makeup, proudly looked up at a visitor to pronounce her verdict on an experiment that is bringing back together two societies separated for half a century.

"I have learned that it is possible to work with the South Koreans," said Kim, briefly putting down the blue pinstriped blouse she was finishing for dispatch to a department store in Seoul, the South's capital. "It has brought Korea closer to reunification. Together, nothing can stop us."

That, at least, is the official hope of the two Koreas, which view the vast Kaesong Industrial Complex just north of their shared border as the seeds of the peninsula's economic future: South Korean capital, technology and management matched with the North's low-cost labor.

Moving the project ahead has brought extreme challenges from the start. After the first busloads of North Korean workers arrived at the gates 16 months ago, weeks passed before people from the two societies could even understand each other's dialect, said Lim Dong Ryul, a section manager for Taesun Hata Corp., a cosmetics company that came north to set up in Kaesong last year.

He had to explain virtually every aspect of modern life to his fresh-faced communist charges -- down to how to use the factory's Western-style toilets.

Today, Taesun Hata is exporting compact casings for Clinique and eye shadow holders for Bobbi Brown from its multimillion-dollar plant, located just five miles north of the barbed wire and minefields of the world's most heavily fortified border."

By standing with the North Koreans side by side and not giving up, we were able to make things work," Lim said. "Just look at what we've built."

Southern companies making shoes, textiles, auto parts and kitchen implements employ more than 6,000 North Koreans here. The workers put in long hours at often grueling tasks, but life here nonetheless seems a cut above the poverty that is common in most of North Korea.

This year, officials in Seoul project that an additional 15,000 North Koreans will start work as more than 20 South Korean companies move in. By 2012, plans call for as many as 700,000 employees -- 4.5 percent of North Korea's entire workforce.

The 1950-53 Korean War left both North and South in ruins. They never signed a peace treaty. Now, with detente softening the tensions, the Kaesong industrial zone is the largest effort at economic cooperation to date.

It is also key to South Korea's strategy for lessening what is bound to be a massive economic jolt if it reunites with the North. With North Korea's per-capita income at roughly $1,800 a year, 10 times less than the South's, South Korea faces a far greater wealth imbalance than West Germany did when it took in the communist East. So Seoul is hanging much of its hopes on gradually bridging the gap by offering its neighbor something it needs more than anything else -- jobs.The idea is to "keep the North Koreans up there and avoid heavy migration south by bringing in stable investment," said Marcus Noland, a senior fellow at the Washington-based Institute for International Economics. "So they are turning to projects like Kaesong, which presumably will only be the first of a series of such economic enclaves" funded by South Korea.

Officials say Kaesong is also meant to keep on course a program of market-oriented restructuring that the North is undertaking in its domestic economy.

The industrial park remains a work in progress, with only a fraction of its real estate developed. Officials here say factors such as an unresolved dispute over North Korea's nuclear weapons program could derail large-scale expansion.

But on Monday, earthmovers stood at the ready in cleared patches of land between the 13 factories already operating. A South Korean telephone company has installed the first 300 of thousands of planned phone lines; a branch of a major South Korean bank is open for business, as is a Family Mart convenience store staffed by two North Korean women.

Thousands of workers live in on-site dorms, while others arrive by bus from the nearby city of Kaesong. South Koreans are not permitted beyond a bright green perimeter fence that is guarded by armed soldiers and separates the complex from a decaying North Korean village rife with communist slogans, including one telling all residents to "celebrate the greatness" of North Korea.

While conceding they are here to promote North-South ties, South Korean executives also say the project makes economic sense. The companies, which have received low-interest loans and security guarantees from the South Korean government, are paying most North Korean workers a fixed salary of $57.50 a month. That is about 20 times less than the pay of a South Korean worker of the same skill level, but it is a welcome sum in North Korea.

It is unclear how much of that money actually goes to the North Korean workers. The dollar-denominated checks issued by the South Korean companies are paid to a North Korean government agency. Na Un Suk, director general of North Korea's Central Special Economic Zone Control Agency, said the government makes deductions for room and board provided to the employees before paying them varying amounts in North Korean currency.

"But it is clear that our workers are not doing this to make money," Na said. "They are doing it because it is their duty for the greater good of the nation."

Although South Korean managers have some say in promoting workers, they have little role in choosing who arrives on their doorstep. Many employees are from Kaesong city -- the ancient capital of the Goryeo kingdom that first united much of the Korean Peninsula. But all are picked by officials from the North Korean government.

Because of the communist state's chronic shortages of electricity, the South Koreans have had to run power lines across the border to serve their factories. And some company representatives concede that the North Koreans are not always ideal business partners.