Rare Inside Look Into North Korea: Controlled Capitalism

GAESONG, North Korea, Feb. 28, 2006 — -- Na Un-Suk, director general of the Central Special Economic Zone Control Agency, walks a thin line as the top North Korean official in charge of a new, spiraling joint industrial complex between the two Koreas.

On the surface, the Gaesong Industrial Complex Project, initiated by the leaders of the two Koreas, is a perfect match for a way to use South Korea's capital investment and North Korea's cheap labor. But underneath the economic reasons lie different agendas.

South Korea hopes to "open up" the hermit kingdom as the poor nation gets a taste of capitalism. On the other hand, Na needs to keep his 6,047 North Koreans working for South Korean companies from becoming "contaminated" with the evils of capitalism.

"Our workers here are not motivated by material satisfaction. We are motivated by the fact that this is a national business project. We are one nation, and this is an important part of our unification process," said Na, walking up the assembly lines. Hundreds of North Korean women in uniforms sporting badges of Kim Il-Sung, North Korea's founder, diligently sorted cosmetic cases for U.S. companies like Clinique and Bobbie Brown.

The Gaesong Industrial Complex, just five miles north of the heavily armed border that separates the two Koreas, is one of the key fruits of a rising detente mood on the Korean peninsula. The communist North and capitalist South are still technically at war since their division after the Korean War, which ended in 1953. But since a historic summit in 2000 between Kim Jong-Il and then-South Korean President Kim Dae-jung, tensions have eased dramatically with increased social, cultural and economic exchanges.

Three years after the summit, Hyundai Asan Corp., one of the top South Korean conglomerates, led the construction of the Gaesong complex, which is expected to be a complete city with industrial, commercial and residential areas about two-thirds the size of Manhattan. The complex is expected to be finished by 2012, creating 2,000 enterprises and 700,000 jobs for North Koreans. A wage of $57.50 a month, one of the lowest in Asia, has inspired many companies' interest, but political tensions with the United States, South Korea's most important ally, have slowed the pace of leasing.