Kaesong worse than we knew

A new report from South Korea’s Ministry of Commerce, Education and Industry documents what most people have suspected for some time. North Korea keeps most of the wages of the workers in the Kaesong Industrial Complex, giving the workers only about the equivalent of $10 out of the $57.50 monthly salary for each worker paid by the South Korean companies.

More than half the salaries paid to North Koreans working at the inter-Korean Kaesong Industrial Park go to the North Korean Workers’ Party, a document written by a team in charge of inter-Korean economic cooperation at the Ministry of Commerce, Industry and Energy shows. The team reported to the unification minister.

Grand National Party lawmaker Kim Gi-hyeon made the document public on Sunday. According to the memo, US$30 out of the monthly pay of $57.50 goes to the Workers’ Party. With $17.50 spent on insurance and other costs, North Korean workers at the complex are left with only $10 a month.

This shouldn’t be too much of a surprise since part of the deal with North Korea to open the Kaesong complex involved paying the “wages” not to the workers directly, but to the North Korean government, which is supposed to pay the workers in turn.

What is shocking is that the estimated $8-$10 the workers do get is double the average monthly salary of most North Koreans.

This story from the Hong Kong Standard paints a bleak picture of what life is like for Kaesong’s North Korean workers, who are considered to have plum working conditions relative to the rest of the country.

South Korean companies have asked repeatedly to pay the workers directly and to give bonuses for better work, but have been refused. Even New Year’s gifts such as extra food and warm clothing could be given only after elaborate negotiations to make sure everybody was getting the same.

South Koreans, many of whom live for weeks at a time in modular housing in the complex, have their own cafeteria and their own medical clinic, all off- limits to North Koreans. Last year, stories appeared in the South Korean media about a purported Romeo-and-Juliet romance between a North Korean woman and a South Korean man. But people at Kaesong said the story was apocryphal because the North Korean women are never alone.

And, in case there’s any doubt left about where that money goes, this report from the Peterson Institute for International Economics, documents in chilling detail how North Korea’s economy has evolved to depend almost exclusively on “informal markets” and “unconventional activities.”

The marketization of the North Korean economy over the past decade is best understood as a bottom-up process driven by the trauma of the famine. The government’s responses have been reactive and ambivalent. Illicit activities have long been part of the North Korean economy, but they appeared to intensify in the 1990s, as the North Korean economy went into decline and central government control began to fray.

As North Korea’s centralized system broke down and the state was no longer able to supply food, small social units of families; enterprises; and local, political, and military organs began to exhibit a variety of coping behaviors to obtain food. The authorities responded by tolerating the development (and/or expansion) of informal markets. The market became the primary institutional mechanism through which most North Korean families obtained food.

After defaulting on international creditors in the 1970s, North Korea was frozen out of international capital markets and came to rely increasingly on aid from fraternally allied socialist states, remittances from ethnic Koreans in Japan, and illicit activities such as drug trafficking and counterfeiting to generate foreign exchange. Aid declined from the mid-1980s on, as did remittances, which are likely to be well under $100 million today. As these sources of hard currency revenueswithered during the 1990s, North Korea’s dependence on a variety of illicit activities intensified.

[For example] North Korea’s diplomatic corps has long been under pressure to support the maintenance of foreign missions by earning foreign exchange. One of the simplest ways of doing so is to exploit diplomatic immunity, including most importantly the international conventions that protect the secrecy and integrity of the diplomatic pouch. During the 1970s, police in all four Scandinavian countries found that North Korean embassies were using their diplomatic tax exemption to purchase alcohol and
cigarettes in large quantities and then reselling them on the black market.

Read the rest of the report if you truly want to blow your mind.

(h/t: Marmot’s Hole)