THE KAESONG INDUSTRIAL COMPLEX AND ITS IMPLICATIONS FOR INTER-KOREAN RELATIONS

Abstract

This thesis focuses on the puzzling endurance of the Kaesong Industrial Complex (KIC), a joint endeavor between North and South Korea, and its implications for inter- Korean relations. The KIC is a special administrative industrial zone located in North Korea, just thirty miles northwest of Seoul across the Demilitarized Zone. As the first-ofits- kind large-scale inter-Korean economic cooperation project, the KIC houses 125 medium-sized South Korean companies employing roughly 52,000 North Korean laborers as of 2014. The goal of this thesis is two-fold: first, to analyze the improbable origins and initial success of the KIC between 2000 and 2007, and second, to explain the puzzling endurance of the KIC despite the increasingly hostile dynamic between the Koreas during the period from 2008 to 2014. This thesis shows that despite the changing geopolitical situation on the Korean peninsula, a new equilibrium arose, in which both Koreas were unwilling to permanently shut the door on the KIC. This thesis employs a “process-tracing” method to identify various actors and factors that affected the KIC. In addition to secondary literature written about the KIC, this study makes use of evidence from interviews with South Korean government officials, members of the KIC Corporation Association, as well as U.S. government and UN representatives. This thesis argues that the KIC was a product of the exceptional resolve of the two Koreas’ top leaderships to pursue peaceful co-existence on the Korean Peninsula. At the dawn of the 21st century, the KIC embodied a growing optimism for rapprochement between the rival states. However, this promise soon evaporated, as inter-Korean relations quickly deteriorated upon a drastic political shift in South Korea and an anxious leadership succession in North Korea. These escalating tensions, which brought the two Koreas nearly to the brink of war, led to the cancellation of all cooperative projects between them, with the sole exception of the KIC. The KIC endured because of the two Koreas’ different motivations, which reflected their remarkably different sociopolitical systems—one democratic and the other totalitarian. South Korea was bound by deeply entrenched legal mechanisms and the symbolic value of the KIC to the South Korean public as the last remaining “lifeline” linking the divided nation. Likewise, Kim Jong-un was bound to continue supporting the KIC, as it had become a symbol of his father’s legacy and personal resolve. As a result, the KIC became virtually indispensable and essentially took on a life of its own. This study concludes that as long as the North Korean nuclear issue remains unresolved, there will continue to be an inherent tension between security concerns and active engagement with North Korea. As shown through the case study of the KIC, South Korea will be unable to promote its long-standing wish of reconciliation with North Korea until its leaders renew their commitment to pursue a two-track approach, in which economic interchanges are delinked from political and security concerns.