Business as usual despite missile crisis

PUBLISHED : Friday, 30 June, 2006, 12:00am
UPDATED : Friday, 30 June, 2006, 12:00am


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Joint venture plays down claims of exploitation as it woos investors

While the international community has been engaged in diplomatic manoeuvrings to prevent a possible missile launch by Pyongyang, the wheels of industry have continued turning at a controversial industrial complex in the reclusive country that has been accused of worker exploitation.

In vast, modern factories in Kaesong Industrial Park, just across from the demilitarised zone, more than 6,000 North Koreans produce everything from watches to dresses.

In operation for little more than 11/2 years, the Kaesong industrial complex is a unique venture created with a combination of South Korean capital and cheap North Korean labour.

At present, only a handful of South Korean companies are located in the area. But as part of a public relations drive to attract foreign investors, Seoul last week invited more than 100 foreign businesspeople and diplomats to tour the site. Seoul is hoping to lure investors with wages that compete with countries like China and Vietnam.

'Let's face it, one of the reasons why this all works is because of the low wages,' said John Boynton, of Doran Capital Partners, a property management company.

South Korean companies pay the North Korean government a minimum of US$57.50 a month for each employee. Seoul claims after deductions for social welfare fees, workers take home US$35, which is well above the average monthly wage for the rest of the North.

'It is all a function of relativity. If you pay a man US$2 when he would normally get US$1, is he being exploited? No, you have improved his quality of life,' said Franco Eleuteri, of engineering firm Aecom-McClier, which was involved in setting up the complex.

Kaesong is isolated from the rest of the country by guard posts and steel fencing, and visitors must cross the two border checkpoints to enter the complex.

The South Korean government believes projects like Kaesong encourage economic reform and openness in the North, perhaps even paving the way for eventual reunification. It is a view shared by some members of the foreign business community in Seoul.

'I think this is a single step, but if we don't take a step, we won't make any progress,' said Mr Boynton, an American.

Seoul takes pride in the working conditions of the park, where employees eat their meals at company canteens.

'We notice that after a time working in Kaesong, the North Korean employees start to look healthier. Sometimes we will distribute biscuits and sweets, but instead of eating them, they take them home to give to their families,' said a unification ministry official.

Nevertheless, Kaesong has drawn much flak recently from the US. Earlier this year, in speeches and newspaper articles, the US special envoy for human rights in North Korea, Jay Lefkowitz, criticised the lack of guaranteed labour rights at Kaesong.

'The world knows little about what actually goes on at Kaesong, and given North Korea's track record, there is ample cause for concern about worker exploitation,' he wrote.

His comments drew a stinging and unusually public rebuke from the South Korean government, which accused the envoy of bias and lacking understanding of the project. It recommended Mr Lefkowitz visit the area.

North Korea yesterday approved a visit by Mr Lefkowitz, likely to take place in a month.

Seoul has grand ambitions for Kaesong. Over the next six years it wants to increase the size of the park from the current, 3.10 sq km to 67.34 sq km, employing hundreds of thousands.