The Kaesong Industrial Park is, as it were, a capitalist foothold of the South Korean government in North Korea. And it is openly states that it is the North Korean equivalent of Shenzhen, the special investment zone that helped begin China’s free-market miracle nearly 20 years ago.
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 $20 billion worth of goods a year. That compares with an output of only $366 million in the first half of this year. 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.
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.
Whether this successful model will be extended will depend to a large extent to the relationships between North and South Korea. But it is a good start and has taken the Chinese zones, perhaps the greatest success story in Asia’s commercial history, as its model.