Koreas Quietly Launch Ambitious Industrial Park

SEOUL -- The largest South Korean investment across the demilitarized zone in North Korea, a $5-billion industrial park that is intended to become a city unto itself, was launched Monday with a groundbreaking ceremony that contrasted with the nuclear crisis hanging over the peninsula.

The industrial park near Kaesong, which lies just across the DMZ, is the most ambitious of half a dozen economic projects underway in North Korea. The idea is to join South Korean capital and technology with cheap North Korean labor. Plans call for 22,000 people to be employed there in four years, and many more to be given jobs in subsequent years.

The South Korean government bused more than 120 dignitaries across the DMZ for the ceremony, while the North Koreans brought about 200. Although the project is open to foreign firms, few foreigners were invited. Festivities were deliberately kept low key in order not to offend the United States, which has been urging its allies to isolate North Korea economically until it renounces its nuclear ambitions.

“It’s almost surreal,” said Joel S. Wit, a North Korea specialist with the Washington-based Center for Strategic and International Studies who was visiting Seoul. “You have North Korea moving ahead with its nuclear program and South Korea is pursuing reconciliation as if nothing was wrong. There is a real disconnect.”

The timing was particularly awkward because the chairman and president of Hyundai Asan, the company developing the industrial park with the government-owned Korea Land Corp., were indicted last week for allegedly helping to pass funds to North Korea in exchange for the 2000 summit between then-South Korean President Kim Dae Jung and the North’s Kim Jong Il. Both company officials needed special permission to leave South Korea to attend the ceremony.

“It was not good timing to have a ceremony,” Shim Jae Won, the Hyundai official in charge of the Kaesong project, acknowledged in an interview. “But we are worried about the situation inside North Korea, and we felt we needed the opportunity to get things moving forward.”

Hyundai envisions the project eventually developing along the lines of Shenzhen, the special economic zone that China created just across the border from Hong Kong in 1980.

Looking forward to a future when it is easier to cross the DMZ, the company hopes that Kaesong, which is only 42 miles from Seoul, could become a bedroom community easing the overcrowding around the South Korean capital.

“Our goal is to eventually build a whole new city,” Shim said.

The site, about seven miles outside Kaesong, today holds only rice paddies and corn fields. Hyundai said that about 900 South Korean firms, most of them in textiles, leather or light manufacturing, have applied to build factories there.

The company is also hoping this summer to start bringing tourists to Kaesong, an ancient dynastic capital.

North Koreans who attended the festivities also expressed great enthusiasm for the development, according to a pool report from the ceremony.

“This project reflects the whole nation’s wish for reunification,” Ri Jong Hyok, a top official who serves as vice chairman of North Korea’s Asia-Pacific Peace Committee, was quoted as saying.

Some South Koreans say the North has suddenly become far more cooperative about moving forward with long-stalled reconciliation projects.

“They understand that without us, they would be completely isolated,” said a South Korean government official who spoke on condition of anonymity. He said that South Korea intends to move ahead on several projects despite U.S. misgivings.

“It appears that the United States is not fully sympathetic, but we have to convince them,” the official said. “If we stop these projects altogether, there will be no leverage left against North Korea, and that could drive them to the wall to chose an extreme course.”

Just two weeks ago, North and South Korea held another ceremony at the DMZ to commemorate the joining of their railroads. Hyundai is putting the finishing touches on a $45-million sports arena in Pyongyang, the North’s capital. The arena is scheduled to open later this year. The eighth round of reunions of family members separated since the 1950-1953 Korean War is now taking place, and more are planned for September.

Infrastructure work near Kaesong is to begin in September, while construction of buildings is to start next year.

There remain several big obstacles to the project, the most immediate being how to get electricity across the DMZ. South Korea wants to run an electric cable from the south, while the North Koreans are clamoring for a power plant that would help them with their chronic energy shortages, according to business sources.

A power plant would be diplomatically impossible in the current climate.

Washington is now pressing South Korea and Japan to cancel a project to build light-water reactors in North Korea because of the North’s pursuit of nuclear weapons.