Foreign companies will be able to invest in the Kaesong industrial park in North Korea from next month as the South Korean government tries to capitalise on emerging optimism about the nuclear crisis and promote greater co-operation with the North.
Six-party talks on the North’s nuclear programme are to resume today in Beijing. Meanwhile, the South’s unification ministry is preparing investment incentives to encourage foreign manufacturers in particular to open factories in the industrial park on the northern side of the demilitarised zone separating the two Koreas, and take advantage of cheap North Korean labour.
With the pilot stage of the project complete, the ministry will announce in April that it is sectioning off almost 10 hectares of land in the phase one development area specifically for foreign investors.
“We will set aside 30,000 pyong (9.9 hectares) for foreigners next month and we will allocate additional lots for other companies,” said Kim Yong-jin, a unification ministry official.
The Kaesong complex is operated by the South’s Hyundai Asan with the support of the unification ministry, and 22 South Korean companies employ 12,000 North Koreans in shoe, clothing and other light industrial factories.
However, details about investment procedures, the legal framework and investment guarantees for foreigners remain sketchy.
“Sole investment is allowed but it’s more favourable to invest through a joint venture with a South Korean company,” Ahn Tae-won of Hyundai Asan, told members of the European Union Chamber of Commerce in Korea during a visit to the zone last week.
Jean-Jacques Grauhar, secretary-general of the EUCCK, said that while European companies were becoming interested in the possibility of setting up operations in Kaesong, more certainty was needed.
“European companies making textiles and parts would need to bring in their equipment but they need a message from the US government that they will not face sanctions on their businesses in America if they do business here,” Mr Grauhar said.
Business would also need clarification on whether goods produced at Kaesong would be recognised as made in South, rather than North, Korea, he said.
The US is refusing to include Kaesong in the scope of the free trade talks with South Korea that are due to finish this month.