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30 Kaesong firms now operate outside Korea

July 26,2018
About 30 South Korean companies that had operations in the now suspended inter-Korean industrial complex have shifted production overseas in search of cheap labor since its shutdown two years ago, a trade body said Wednesday.

South Korea pulled the plug on the Kaesong Industrial Complex in the North Korean border town of the same name in February 2016 to punish the North for its fourth nuclear test and long-range rocket launch.

Before the suspension, 123 South Korean businesses, mostly labor-intensive small and medium-sized enterprises, operated in the factory park, which opened in 2004 and was hailed as a key symbol of economic cooperation between the rival Koreas as it combined South Korean capital and technology with cheap labor from North Korea.

According to an association of South Korean firms with operations in Kaesong, the companies have redomiciled in Vietnam and other foreign countries due to increased labor costs after their withdrawal from the inter-Korean industrial park.

One of those firms is Young Inner Foam, an underwear maker that is building its second factory near Vietnam’s Ho Chi Minh City, which is slated for completion in May next year.

Three months after pulling out of the Kaesong complex, the company, which operated a small production facility in South Korea, set up its first plant in Ho Chi Minh because of high labor costs here.

“We need a place where we can employ workers freely because our business is a labor-intensive one,” said company CEO Lee Jong-duk.

“The per-capita labor cost will amount to $270 per month in Vietnam next year, but the comparable figure for South Korea comes to $1,600 in light of next year’s minimum wage.”

South Korea hiked the minimum wage by 16.4 percent to 7,530 won ($6.68) per hour on Jan. 1 this year, the biggest hike in nearly two decades. Next year’s minimum wage has been set at 8,350 won, up 10.9 percent from this year.

DMF, a manufacturer of jeans and other garments, is in a similar situation. The company established a factory in Hanoi, which can employee about 350 workers, after its pullout from Kaesong.

“It is difficult to run a manufacturing company in South Korea due to a shortage of workers and high labor costs,” DMF President Choi Dong-jin said.

“We are waiting for the resumption of the Kaesong park.”

DMF built a factory in Kaesong at a cost of 11 billion won, which started operations in February 2009 and had a workforce of about 700 before the factory park’s suspension.

South Korean companies, which had operations in the joint industrial complex, claimed the recent hike in the country’s minimum wage has made it more difficult to turn a profit, calling for big businesses to pay more properly for their supplies.


Yonhap