Can N.Korea Take Over the Kaesong Industrial Complex?

      April 29, 2013 13:48

      Can North Korea run the Kaesong Industrial Complex on its own now that South Korean firms have evacuated their staff from the inter-Korean industrial park? Experts believe it is nearly impossible because the impoverished country will not be able to overcome the power shortage.

      The electricity used in Kaesong Industrial Complex is completely supplied from South Korea. A substation in Munsan, Gyeonggi Province, sends electricity to the 100,000 kW Pyeonghwa substation in Kaesong built by South Korea, which then redistributes the power to the businesses.

      North Korea suffers chronic power shortages. According to the Bank of Korea, North Korea has a generation capacity of 6.97 million kW, and generates 23 billion kW/h -- just 9 and 5 percent of South Korea.

      The power supply is prioritized to the elite and munitions factories in Pyongyang. The Kaesong complex is not on priority list.

      Cho Bong-hyun of the IBK Economic Research Institute said, "It would cost North Korea hundreds of billions of won to build a separate power plant for the complex, and even if it tries to redirect power supply from stations nearby, it would still cost tens of billions because it will have to build power transmission facilities."

      The North would also need a new water supply and drainage system for the complex, which would cost several billions of won to build.

      It would have difficulties maintaining machinery. Cho said, "South Korean technicians have been in charge of maintaining and repairing high-tech machinery. North Korea simply lacks the ability to deal with that."

      Some suggest that Chinese companies could step in, but Prof. Yun Duk-min of the Korea National Diplomatic Academy said, "That would require transporting manufactured goods overland to China, and the logistics costs would just be too great. It's also very unlikely that China will risk diplomatic conflict with South Korea."

      Securing raw materials is equally problematic. They could be brought in from China, but securing materials of consistent quality could pose a headache.

      Last but not the least, even if the North does manage to operate the complex, it would have a hard time finding markets for the products.

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