Kaesong Industrial Complex - US-Korea Institute at SAIS

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Kaesong Industrial Complex: Is it Changing the DPRK?Fellow at the Peterson Institute for International Economics, stated in his paper“North Korea and the South Korean Economy,” that “it is worth engaging withthe North and hoping that through a policy of engagement either Pyongyangwill evolve toward a less threatening regime, or engagement will undermine theideological basis of the Kim Jong-il regime and eventually cause its collapse.Either way the military threat to Seoul is eliminated.” The KIC is a strategic partof this larger plan to engage the DPRK.Economic development is necessary in order to achieve political stability.Although it is important not to exaggerate its effects, economic engagementprojects such as the KIC can have a long-term significant effect when it comesto political transformation. The true value of the KIC is in creating economicintegration that leads to increased human interactions, which may provide addedopportunities to change the DPRK. The more the DPRK economy is integratedwith the South through economic cooperation and the more North Koreanpeople are exposed to South Koreans, the more likely it is for the DPRK tocooperate rather than take military action. Interaction between the two Koreasin itself can be an important learning experience for the DPRK. The KIC canalso be a tool to enhance trust, revitalize the economy, reduce reunificationcosts, and create a buffer zone between the two Koreas such as hosting theSouth-North family reunions and inter-Korea talks. The KIC has grown toolarge for either Korea to abandon it; incentives outweigh political risks on manylevels. Further steps should be taken to continue to leverage incentives in orderto better engage with the DPRK. Thomas Byrne, Moody’s Investors Serviceanalyst, stated after touring the KIC, “[The] Kaesong Industrial Complex isthe optimistic future of South and North Korea.” For the two Koreas, the KICremains to be a land of much potential and opportunity.203
U.S.-Korea Institute at SAIS1740 Massachusetts Avenue N.W.Washington, DC 20036www.uskoreainstitute.org
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Kaesong Industrial Complex - US-Korea Institute at SAIS

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