Re-Opening the Kaesong Industrial Zone Would Give North Korea Something for Nothing

Robert E. Kelly

Economics, Asia

Seoul should think twice before it proceeds.

A few years ago, the South Korean government, under conservative President Park Geun-Hye, closed down an inter-Korean export processing zone. Near Kaesong, North Korea, an earlier South Korean government had opened this zone in hopes of encouraging small-scale capitalism in North Korea.

The Kaesong Industrial Zone (KIZ) was meant to be a small bastion of legitimate, white-market behavior in North Korea. It would act as a symbol and example of cooperation and what North Korea could be. North Koreans working in and near it would see modern production and management techniques. These might inspire them to start their own small businesses, while the North Korean government might similarly be taught a bit more about modern capitalism, and so become more tolerant of it.

North Korean workers interacting with regular, blue-collar South Korean employees and managers would be similarly enlightened. The Northern workforce would see that South Koreans were simply regular people who knew far more about modern production and economics than the North Korean government would ever admit.

It was a noble experiment. No one really knew what would happen if South Korean institutions—even just mid-size companies making basic textiles—operated at scale in North Korea. Given the extreme nature of North Korean totalitarianism, there was some genuine, not unfounded, hope that the KIZ would be something revolutionary. North Korea is so secluded and isolated that Kaesong might come to be the small breach in the wall which catalyzed change in the North.