To answer your last question – I doubt it.

As far as I am aware, the vast majority of the companies which operate within the complex are South Korean firms, and whilst consumers in western countries would not be particularly thrilled to hear about some of their spent cash ending up in the hands of the North Korean government, issues associated with the Kaesong Industrial Park in particular do not seem to generate a great deal of media attention outside of South Korea.

Accordingly, I would think that any form of public outcry which would be likely to influence corporate behavior within the park in any meaningful way would have to originate from within South Korea.

And I don’t think that is likely to happen. Given language barriers as well as a considerable degree of reluctance on the part of South Korean people to engage in open discussion on controversial matters, accurately gauging public opinion within South Korea with regard to matters such as these can be extremely difficult, even for someone like me who is living in the country. That said, I have not sensed any apparent form of backlash against firms which operate in the region.

Moreover, my feeling is that many South Koreans probably view the complex in a positive light as one of the few remaining signs of co-operation between them and the North. Under this view, I would think that any form of public outcry against companies operating within the park would be highly unlikely, regardless of whether or not they cede to the demands of the North on the matter of pay.

Secondly, with regard to your comment about companies leaving as a result of these demands, from what I understand, you would certainly have a point. According to my understanding, if the particular wage increase in question is indeed granted, then that would mean that labor costs per head within the complex would become more expensive than those in neighboring China, making a somewhat considerable case for South Korean companies who operate within the complex to give the serious consideration to the prospect of re-location.

That said, my understanding is that the firms which operate there have invested a very large amount of funds to set up their operations within the complex. Re-location, for these firms, would mean walking away from huge capital investments.

Thirdly, I agree with your comment about going into North Korea in the first place. Whilst I understand a desire on the part of South Korean management to invest within the complex, the fact remains that North Korea remains a country which is unfriendly to business and companies would be better off investing shareholder funds elsewhere.

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Companies will seldom make “ethical decisions” unless there is some sort of public outcry. Will there be a public outcry over this?

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Broadly, I would be inclined to agree with you there.

Governments, I believe, should set a minimum wage according to whatever wage level is appropriate to ensure that every full time worker earns a sufficient amount of income so as to reasonably provide for the bear essentials of life (i.e. food, clothing, shelter etc) to his or her family.

Beyond that, however, I would agree with the notion that wage levels should be set according to free market principles.

Unfortunately, as you say, North Korea is not a free market economy and so things do not always work like that.

Mikael

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I was staggered as well, but that’s what our guide told us, and given the reputation of the North Korean government with respect to treatment of their citizens, I would certainly believe that the information would indeed be correct.

That 93% tax rate is also on top of rent charges which South Korean companies pay to the North as well.

I am also staggered that international human rights and labor rights groups have not opposed arrangements with more gusto. I know there has been a degree of concern raised with respect to conditions at the complex, but I am surprised that opposition to current arrangements has not been more forceful.

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If I were a CEO, there would be no way known I would have my company go near North Korea with a ten foot pole.

In business, you should not risk shareholder funds investing in countries which where governments are hostile to businesses unless absolutely necessary, especially in South Korea’s case, where low labor cost and (relative to North Korea) more business friendly China is so close.

Karen,

The current situation is unjust as you say, and from what I hear, arrangements at the Kaesong Industrial Complex have certainly been the subject of a considerable volume of rumbling from international labor rights groups over recent years.

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