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Data Questions: 

Where is this data from?

This data comes from annual statistics published in the South Korean Ministry of Unification White Paper. Additional statistics on activities at the Kaesong Industrial Complex are from the Kaesong Industrial District Management Committee (KIDMAC).

What is the Kaesong Industrial Complex?

The Kaesong Industrial Complex (KIC) is a large industrial park in North Korea located just north of the demilitarized zone. The KIC was an exercise in trust-building and economic integration between the two Koreas. The Hyundai Asan Company and the Korean Land Corporation (KOLAND) jointly collaborated with the DPRK to establish the KIC in 2000, a time in which South Korean President Kim Dae-jung pursued robust inter-Korean engagement under the “Sunshine Policy.” At the peak of its operation, over 120 South Korean companies operated in the KIC, and about 54,000 North Korean workers were employed there; total cross-border trade volume in 2015 reached about $2.7 billion. The South Korean government indefinitely suspended operations at the KIC in February 2016, amidst mounting inter-Korean tension and fears that North Korea was using funds from the project to finance its nuclear program.

Given its scale and unique nature, operation of the KIC required frequent cooperation and dialogue between South Korean officials and business owners and their North Korean counterparts. In addition to factories, the KIC contained infrastructure and amenities including a hospital, badminton courts, a daycare center, an apartment complex, a bank, and a firehouse. Facilities located south of the DMZ supplied water and electricity to the complex. The original plan for the KIC called for a three-stage growth strategy, with the objective that the complex would eventually employ 700,000 workers on a site encompassing 65 square kilometers. However, development of the KIC did not proceed beyond the first stage.

After the South Korean government imposed sanctions against the North in response to the sinking of the ROKS Cheonan in 2010, the KIC became the only channel for direct economic engagement between the two Koreas. However, prior to the indefinite suspension of operations at the KIC in 2016, there were several periods of heightened tension over the project, including numerous disputes over wage increases and a months-long shutdown in 2013.

What was produced at Kaesong?

Trade at KIC largely consisted of imports of raw materials and inputs from the South and exports of value-added goods produced at the zone. Major categories of goods produced at Kaesong included clothing and textiles, semi-conductors, and car parts. The reported trade flows for Kaesong also incorporate trade related to the construction of roads, updated communication systems, wastewater treatment plants, and related facilities in the zone.

When the KIC was operational, South Korea sought to convince its international trading partners that KIC-produced goods should be considered to have originated in the ROK, thus allowing these products to avoid international sanctions imposed against North Korea or other barriers to trade. Goods produced at the KIC were ultimately unable to gain entry to U.S. markets, although such products were sold in the EU, Australia, Russia, China, and Singapore.

Why did Kaesong close, and are there plans to re-open it?

The Park Geun-hye administration, in its sudden decision to shut down operations at Kaesong, argued that proceeds from the complex were being used to fund North Korea’s nuclear and ballistic missile programs. The roughly $100 million in annual wages paid by South Korean firms at the KIC were given directly to the DPRK government, with North Korean workers reportedly receiving little of their income directly. (Although the wages paid to the DPRK government were given in U.S. dollars, the North Korean workers at the complex received only rations and North Korean currency converted at a highly overvalued rate.) The KIC’s role as a de facto source of hard currency for the North Korean government was therefore one of the chief criticisms leveled against it.

Additionally, critics argued that the indirect payment of wages at the KIC violated international labor standards. Critics also noted that the positive social and economic externalities that the KIC was intended to generate in North Korea were limited in practice because North Korean employees were largely restricted from socializing with South Koreans at the complex, and because the closed nature of the KIC had limited impact on the North Korean economy as a whole. South Korea’s provision of subsidies for companies operating in the zone has also come under criticism. UN Security Council Resolutions adopted after Kaesong’s closure may preclude such subsidies from resuming in the future.

Supporters of the KIC have argued that North Korean workers were nonetheless better off than workers elsewhere in the country, as KIC employees worked in modern facilities, had access to food and medical care, and were able to receive bonus or in-kind payments from their South Korean employers. The KIC also provided ordinary North Koreans with clear evidence of South Korea’s prosperity, and became a prominent symbol of inter-Korean cooperation and the possibility of eventual peaceful reunification. South Korean President Moon Jae-in, elected in May 2017 in the wake of President Park Geun-hye’s impeachment, has indicated an interest in eventually re-opening the KIC, but has said that it must be done “at a later stage, when North Korea has made some progress on denuclearization.”