Kaesong, Kim Jong Il, and Killing the Goose

Update: South Korea may be reconsidering the expansion plans after all.The Kaesong Slave Labor Park may want to reconsider its expansion plans in light of the Daily NK’s new breakdown casting doubt on just how successful the existing venture really is. Of 23 businesses that were supposed to have started operations at Kaesong since 2005,

• 4 have abandoned their space reservations;
• 1 or 2 more are considering abandoning their reservations;
• 4 have placed their space reservations on hold;
• 6 or 7 are at some stage in the process of “preparing” to start operations; and
• 7 have actually started operations. [Daily NK]

Of the 6 or 7 that are still “preparing,” the Daily NK notes that under Kaesong’s rules, operations were supposed to start within 6 months of the signing of a contact. Yet after 18 months, an unknown number of those companies are in breach without either starting work or paying liquidated damages for breach.

To what do we owe this flat start, since the cost of labor is no doubt a relative bargain in constrast to the wages demanded by the feisty cadres of the Korean Confederation of Trade Unions down South? On closer examination, North Korean government’s regulations may well be disadvantage enough to outweigh the advantage of cheap labor. Several North Korean demands remain unresolved, including proposed charges for entry and exit permits and the issuance of passports to South Korean workers. Park rules surrounding the laborers’ working conditions also remain unresolved, no doubt because South Korea wants to be able to answer importers’ and others’ questions questions about international labor standards without making those rules a deal-breaker for Kim Jong Il.