THE Kaesong Industrial Park is worlds away from the North Korean city on whose outskirts it sits. While the South Korean-run park has modern factories and motorists in SUVs, the city of Kaesong is straight out of the Cold War. Long stretches of grey apartment blocks loom above empty boulevards, and loud red signs proclaim the victory of the workers' party.
Fences and vigilant soldiers separate the park from the rest of North Korea. That has not prevented South Koreans from dreaming of the industrial park as a capitalist foothold that some day might undermine this Stalinist state, making it the North Ko
rean equivalent of Shenzhen, the special investment zone that helped begin China's free-market miracle nearly 20 years ago.
Despite its prison-like feel, Kaesong Industrial Park is booming. The park's operator, South Korean developer Hyundai Asan, hopes to expand it into a mini-city in the next 12 years, with high-rise flats and hotels, a lake and three golf courses.
By that time, the company hopes there will be about 2,000 factories employing 350,000 North Koreans and producing $20bn (£11bn) worth of goods a year. That compares with an output of only $366m in the first half of this year, according to South Korea's unification ministry. In the six months to June, the flow of goods in and out of the industrial park accounted for 42% of the $881m in trade between the two Koreas, the ministry said.
The US eased sanctions against North Korea earlier this summer, after the country destroyed the cooling tower at nuclear facilities in Yongbyon, but import restrictions remain, making the Kaesong park less appealing to large South Korean and foreign companies. Indeed, South Korea's own conservative president, Lee Myung-bak, initially suggested he would not honour his predecessor's agreements to expand economic cooperation.
Despite all that, 72 smaller South Korean companies have built factories here, looking to tap the North's supply of low-cost, Korean-speaking labour. So far, only one foreign company has come.
This piecemeal brand of change is seen in the experience of SJ Tech, a South Korean maker of car and cellphone parts, which built a $4m factory here four years ago. The company's first North Korean employees had never even seen a keyboard, much less a computer, said SJ Tech president Yoo Chang-geun. Yoo jokingly calls his factory "North Korea's first business school". But now, SJ Tech's 430 North Korean employees can run the factory without South Korean supervisors. They have even cut their hair to look more South Korean. "The North Koreans are like sponges," Yoo said.
This is exactly the sort of result the South Korean government is hoping for. Even Lee, elected in December, has lately indicated he will back economic cooperation. Supporters of engagement in Seoul say their long-term aim is to prepare the North for unification with the wealthier South. For the North, the economic links mean hard currency for a moribund economy that cannot feed its 23 million people.
The North earns cash by selling 50-year leases on the land in the Kaesong park. Hyundai Asan also pays the North up to $100 a tourist on two tours that it operates, one to Kaesong and the other to scenic Mount Kumgang.
Critics in South Korea and the US say money from these projects, in the final analysis, bankrolls the lavish lifestyle of North Korea's leader, Kim Jung-Il, or worse, his nuclear ambitions.
Yet even a few once stolid critics now support engagement. "When you are feeding a rat with poison, but you coat it with sugar, you are not really feeding the rat," said Andrei Lankov, a professor of North Korean history at Kookmin University in Seoul. "When North and South Koreans can interact on a daily basis, it is a chance for the North Koreans to see that their own propaganda doesn't make sense."
The full article contains 664 words and appears in Scotland On Sunday newspaper.
