Labor Shortage: Kaesong Industrial Complex Suffering from Insufficient Workers with North Korean Manpower Moving to China | BusinessKorea

Thursday, September 29, 2016

Model Industrial Complex factories in Kaesong (Gaesong) Industrial Area. (photo courtesy of Mimura/Wikimedia Commons)
Model Industrial Complex factories in Kaesong (Gaesong) Industrial Area. (photo courtesy of Mimura/Wikimedia Commons)
25 August 2014 - 5:48pm

A year has passed since Kaesong Industrial Complex restarted. Although the Complex escaped from the worst crisis of the cutoff of economic cooperation between South Korea and North Korea, news from the Complex is still all bad.

The facilities are deteriorating, and investment is not easy due to the icy cold political relationship between North and South Korea. Probably due to the psychological shock from the suspension of services, there is very little interest. Even with the increased wage level, labor is insufficient, as Chinese companies are increasingly hiring North Koreans. The operating ratio of factories is also getting lower due to the economic recession. The fact that internationalization of the complex began thanks to foreign companies moving in is the only positive signal.

Jung Gi-sup, president of the Association of Companies in Kaesong Industrial Complex, said, “There was a hope when the Complex restarted last year. However, due to the domestic economic recession, companies in the Complex are suffering more and more. Since the wage level grew over 15 percent this year, labor costs at Kaesong Industrial Complex is not cheap compared to Southeast Asia, even Vietnam.”

It will have been a year this coming September since Kaesong Industrial Complex restarted. Even though there have been many changes, companies in the Complex all agree that the business environments in the Complex are not as good as before.

There are many problems to solve. The most serious one is the labor shortage. Sixteen thousand additional employees are needed in Kaesong Industrial Complex, but this is not easy to secure. North Korea is taking the initiative in labor supply, and Chinese companies are worsening the situation. The Chinese government agreed with North Korea to build a high-speed railroad connecting Dandong, Sinuiju, and Sariwon. Chinese capital is being invested in Najin Sonbong in the Tumen River area, Sinuiju at Amnok river, and Kaesong. However, South Korea has stopped North Korean businesses started in 2000 since 2008, when the shooting incident happened at Mountain Geumgang. Kaesong Industrial Complex, which has been barely surviving, is also in trouble due to the 5.14 Action and differences in stances of the government of South Korea and North Korea.

President Jung said, “Many Chinese companies are considering investing in North Korea. Since they are demanding labor from North Korea, there could be an additional raise in swages. Companies in Kaesong Industrial Complex are worried even more because of this.”

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