South Korea will supply electricity, gas and communications networks to the North's projected Kaesong Industrial Complex, just north of the western edge of the buffer zone between the two Koreas, according Hyundai Asan, the North Korea dealing arm of the Hyundai Group in the final draft contract involving the project, submitted to Pyongyang in October last year.

An article of the draft stipulates: "The Republic (North Korea) shall protect the infrastructure facilities such as electric power, gas and communications the South will supply to the Kaesong region and guarantee the ownership of the suppliers."

Given that such a provision can hardly be suggested without the consent of the South Korean government, some speculate that Seoul has given Pyongyang, via Hyundai Asan, a prior promise of supplying the infrastructure facilities. The final draft contract, first submitted to Pyongyang in November 2000, is to constitute the backbone of the Kaesong Industrial Complex basic law the North is expected to announce early next month. "We understand that 80% of the basic law adopts the Hyundai-Asan draft," said a government official in Seoul.

According to the tentative draft, the government and Hyundai Asan have kept secret the fact that the Kaesong Industrial Park and the Mount Kumgang Special Tourism Region will be "free international economic zones," granting South Korean and foreign investors rights to use land and own buildings, with land ownership exercised by Pyongyang. Land may be used for up to 70 years, upon the expiration of which the use period may be extended upon mutual accord.

Unlike the Sinuiju Special Administrative Region that exercises legislative, judiciary and administrative rights, the projected Kaesong Industrial Complex and Mount Kumgang special tourism zone will exercise administrative rights only. The development and administration of the projected industrial estate and the tourist zone, according to the draft, are to be shared by three agencies: the Free International Economic Zone Central Committee, regional authorities and administration corporations. The central committee placed under the jurisdiction of the State Council will establish and execute policies for the regions; regional authorities take charge of administrative duties within relevant areas such as public safety, tax affairs, exit and entry; and administration corporations, to be manned by South Korean firms, acceptance and approval of investment applications and the issuance of land use and building licenses.

This means that North Korea takes charge of administration and South Korea the management of the industrial park. As is the case with the Suzhou special zone, managed by Singapore and China jointly, Pyongyang is learned to have decided to manage the Kaesong and Mount Kumgang in tandem with Seoul, said the official.

South Korean firms planning to operate in the Kaesong industrial park have demanded a guarantee that they will be given a free hand in managing local labor like employment, dismissal and bonus payment. The demand is accommodated in the draft, which also stipulates a direct payment of wages to employees. Financial instruments to be used in Kaesong and Kumgang are North Korean currency, South Korean currency, credit cards and American dollars. Tax rates will be 14% of settlement profit for ordinary investors, lowered to 10% for investments in the latest technologies encouraged by the North that develop science and technology.

South Koreans, overseas Korean residents and foreigners holding legitimate passports or certificates issued by the administration corporation will have free access to Kaesong.

(Lee Kyo-kwan, haedong@chosun.com )