Ten years on, Kaesong Industrial Zone's legacy unclear

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Ten years on, Kaesong Industrial Zone's legacy unclear

Published: 19 Feb. 2026, 00:03

Audio report: written by reporters, read by AI

John Everad

The author is the former British Ambassador to North Korea.

This month, on the 10th anniversary of the suspension of the Kaesong Industrial Zone (KIZ) by the Park Geun-hye administration, the Ministry of Unification issued a statement lamenting its closure, describing it as a test bed for Korean reunification. Ten years on, the KIZ still provokes heated arguments. Was it a successful example of inter-Korean cooperation that could have been expanded, and its closure therefore a tragic mistake? Or was it just a means for the Democratic People's Republic of Korea (DPRK) to squeeze yet more money from the Republic of Korea (ROK)?

North Korean leader Kim Jong-un, center right, is seen holding hands with daughter Kim Ju-ae, center, during a completion ceremony for houses in Hwasong district in Pyongyang on Feb. 16, in this screengrab from the state-run Korean Central Television. [YONHAP]

In many ways, the KIZ was a taste of the South for North Koreans. The many factories that I visited throughout North Korea were often dingy and dark, but by contrast, the factories in the KIZ were bright and airy. Workers in most North Korean factories toiled either in silence or to thumping patriotic songs, but in the KIZ the workers were allowed to choose what music to work to (which tended to be gentle North Korean folk songs). Best of all, ROK managers in the KIZ ensured that the canteens provided good, wholesome Korean food, so that workers enjoyed a nourishing lunch. Conditions were much better than in a North Korean factory and must have made a considerable impression on the workers in the KIZ.

But how much of this was known outside the KIZ's work force? DPRK officials who administered the KIZ told me that every evening, workers simply went back to their apartments and their families in Kaesong. Even if the North Korean authorities had wanted to isolate them to prevent them from sharing their experiences, Kaesong simply did not have the buildings available to provide these workers with segregated accommodation. The officials added that people in Kaesong knew how good work was in the KIZ, as word had spread. If a vacancy arose in the KIZ, administrators were besieged by requests to work there.

Moreover, that information spread far beyond Kaesong. Once after I returned to Pyongyang, a friend who had been never been to the KIZ was still able to give me an accurate description of conditions in factories there — including some of the canteen meals available. This was not the first time I was impressed by the accuracy of the North Korean person-to-person network, where information was passed widely but carefully among trusted friends and extended families.

North Korean workers at the Kaesong Industrial Complex (KIZ), an inter-Korean industrial park where North Korean laborers were employed at South Korean-run factories prior to its suspension. [JOHN EVERAD]

Was the KIZ a possible model for reunification? In the KIZ, managers from the South directed workers from the North, something the DPRK would never have accepted as a model for wider reunification. But the KIZ did at least demonstrate that Koreans from the North and South could work together. ROK managers in the KIZ told me their interactions with DPRK workers there were friendly and professional.

However, the KIZ also showed the limitations of this kind of industrial cooperation. It was planned that eventually 300,000 North Koreans would work there, but for much of the KIZ’s life there was only about one-tenth of this number, and never more than one-fifth, as it proved difficult to persuade companies from the South to move in. This suggests that if the model had been replicated, they would have struggled to attract the necessary investment. Also, Kim Jong-il did indeed attempt to replicate the KIZ experiment in industrial zones elsewhere — but these were aimed at attracting companies from safe, totalitarian China rather than from the dangerous, democratic ROK. The South may have seen the KIZ as a step toward reunification while the DPRK may have seen a model for stimulating its economy.

Did the DPRK use the KIZ to generate foreign currency? It was surprisingly hard to establish how much of their pay KIZ workers were allowed to keep. One source told me that the roughly $80 a month that the workers received was all converted into DPRK won at a predatory official exchange. So even though KIZ workers were well paid by DPRK standards, the state through the banking system may have taken over 99 percent of the value of the wage. At that point nearly 40,000 North Koreans worked in the KIZ, which would have meant that the DPRK state was receiving over $3 million a month from the arrangement. However, another source told me that only about 20 percent of the workers’ pay was converted in this way, with the rest given to them in special won that they were able to spend at a special shop in the KIZ. So the DPRK state was certainly benefiting financially from the KIZ, although it was unclear by how much exactly.

A hazy view of North Korea is seen from Odusan Observatory in Paju, Gyeonggi, on Feb. 10, marking 10 years since the suspension of operations at the Kaesong Industrial Complex. [NEWS1/YONHAP]

Would the ROK wish to reopen the KIZ? It is most unlikely that the DPRK would agree to anything of the sort unless it stood to receive significant financial benefits from any arrangement. The original KIZ was opened in 2004 when the DPRK was economically desperate and, by today’s standards, unimaginably open. That time is long gone, and even the North Korea of 2019 —- when Kim Jong-un suggested reopening the KIZ —- has now vanished. The DPRK of 2026 is much more closed, much less tolerant and possesses much better techniques for the surveillance of its citizens. It is unlikely that the relatively free flow of information about life in factories in the old KIZ would be repeated. It is also uncertain if the DPRK would even allow ROK managers to run their factories unimpeded today. Moreover, the advance of robotics has reduced the allure of cheap labor, one of the key inducements for South Korean companies to move to the KIZ. Many of the jobs in the old KIZ are now carried out not by people but by robots. So both the political and commercial attraction of a reestablished KIZ might be much less than they once were.

Whether the original KIZ was a success or not boils down to whether the political benefits were worth allowing the DPRK regime to make so much money from it. Many progressives believe in progress toward reunification at any cost, but many conservatives disagree.

It is impossible to say today whether or not reopening the KIZ would be a good plan. At present, reopening the KIZ, like so many other aspects of possible inter-Korean cooperation, for now can be only a distant dream.