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Foreign diplomats based in Seoul visited Kaesong Industrial Complex on June 12 under the guidance of Ban Ki-moon, second from right, minister of foreign affairs and trade. (Seoul/Yonhap)
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Investment interest sparked by profit and expansion
Amid rising international tension surrounding North Korea’s preparations for an alleged missile test fire, a group of 200 foreign business officials participated in a workshop held June 22 at the joint North-South Kaesong (Gaesong) Industrial Complex in North Korea. Several South Korean small- and mid-sized companies based there are seeing profit, sparking interest in potential investors. A few of the Kaesong-based firms are expanding production on a large scale. According to Kaesong Industrial District Management Committee officials and companies which moved into the industrial park, five firms out of 13 in a particular area of Kaesong--apparel firm Shinwon, watch producer Romanson, shoemaker Samduk Tongsang, Daewha Fuel Pump, and semiconductor parts manufacturer SJ Tech--have performed quite well so far, and have expanded or plan to expand production facilities. A survey found that four or five companies which moved into Kaesong complex at an earlier stage surpassed the break-even point during the first half of this year, and most companies are expected to make operating profits next year. It means that the Kaesong’s model of advocating ’high-skilled and low-cost’ labor has worked thus far. Some observers expect that the Kaesong complex will offer an alternative to smaller South Korean companies which were being forced out of the nation by competition from cheaper Chinese products.Shinwon Ebenezer is undergoing a large-scale expansion of its production facilities after reporting a surplus for the first time after operating a factory in Kaesong since February last year. Shinwon plans to construct a new factory by early July and to increase production lines from five to 15. "Shinwon has made a monthly operating profit of about 30 million won since March. said Yun Yeong-mu, an official of Shinwon. "As it has already secured profitability, it is going to see a real turning point in July." Daewha Fuel Pump will build another factory this summer and shoemaker Samduk also plans to expand its production facilities. SJ Tech, a heavy equipment parts maker, is operating some of its production facilities around the clock due to a labor shortage. SJ Tech recently expanded its factory lot and has a plan to further enlarge its production facilities. Yu Chang-geun, representative of SJ Tech, said, "Since we have employed engineers from prestigious [North Korean] colleges like Kim Chaek University of Technology, the level of human resources in Kaesong reaches nearly 80-90 percent of what can be achieved in the South." Taesung Co., a manufacturer of cosmetics containers, is working some of its production lines 24 hours a day, as well. Romanson is also going to expand its factory. CEO of Romanson Kim Ki-Moon said, "Pace of production in Kaesong and the quality of goods manufactured here are satisfactory. As there are not many textile companies exporting products to America, it is really important for the goods produced here to be accepted as ’made in Korea’ in the Korea-U.S. free trade agreement negotiations.’ Park Geun-gyu, 60, vice chair of the Korea Federation of Small and Medium Businesses, said, "Many of the companies that moved to China and Southeast Asian countries seeking low-cost labor are returning because it is difficult to improve on the quality of production here." With companies’ success in Kaesong, he said, the complex "is giving hope to smaller enterprises." The Kaesong Industrial District Management Committee predicts the number of North Korean workers in Kaesong will increase to about 10,000 from the current 7,000.
