Firms urged to innovate in China with DPRK labor

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Firms urged to innovate in China with DPRK labor

A Seoul economic institute has urged the administration to continue economic cooperation with the North by opening joint industrial areas and parks for small-scale Korean manufacturers in areas near China’s border with the North, such as Dandong.

The state-run Korea Development Institute on Sunday published a report written by two researchers at the Korea Small Business Institute (KSBI), which emphasized the need for trilateral economic cooperation among Seoul, Pyongyang and Beijing.

The business cooperation should be pushed in areas that do not conflict with the economic sanctions in place since 2010 after the sinking of the Cheonan warship, and seek indirect economic cooperation with the North through Chinese goods offices. That strategy would complement the Korea-China Free Trade Agreement when it goes into effect.

The cooperation should take the form of a basic industrial infrastructure that would help the North’s economy, while also benefiting companies in both China and South Korea, the report said.

To do so, the report said large cities like Dandong, across the border from North Korea’s Sinuiju, are suitable for an economic cooperation support center to assist manufacturing under consignment. That would give smaller Korean companies a role in product design, distribution and sales.

In border cities, Korean-Chinese and Chinese businesses already work with North Korean manufacturers by providing raw materials from China.

Such a manufacturing system would use the industrial infrastructure in North Korea, the report said, so it would spare South Korean businesses an initial investment in building production facilities.

“The economic cooperation support center may be a shop or business consultation area where buyers could sign deals and plan future business,” said Lee Jae-ho, a researcher at KSBI.

The KSBI report also suggested a new industrial complex, a “second Kaesong,” where North Korean labor could produce goods for South Korean manufacturers.

Smaller Korean manufacturers hope to open production lines in the Rajin-Sonbong Special Economic Zone in the North, but Lee said nearby Chinese cities like Hunchun could be an alternative choice because South-North Korean relations are still frozen, partly because of economic sanctions Seoul imposes on North Korea.

The Hunchun area has already been developed by the Chinese government to welcome Korean capital. Posco operates a distribution center there, perhaps giving smaller Korean companies an opening as well.

Lee emphasized that Korean small- and mid-sized manufacturers should work with Chinese partners in order to hire quality North Korean workers because the North doesn’t want its workers at South Korean plants.

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