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North Korea: Witness to Transformation

Kaesong Blues II: Sexy Cookie in North Korea

by | May 2nd, 2013 | 07:00 am

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By now, the satellite pictures of North Korea at night have become a virtual cliche; nonetheless, they are always worth a second look and we append a new one including Japan and more of China that we had not seen.

However, we found the attached photo from Mark Manyin at the Congressional Research Service to have a similar quality of showing a deep disconnect. On a visit to the KIC in 2009, Manyin’s North Korean minders took him to two plants: a factory making wires for refrigerators and other kitchen appliances and the stereotypical textile factory. By chance, hot pink “Sexy Cookie” lingerie was on the line that day. We are not going to deconstruct; there are a million stories here, from the reliance on young female workers in developing country apparel plants more generally, to the exploitative wages paid at Kaesong to the difficult ironies of laboring to produce lingerie which cannot be purchased at home for fellow Koreans that are routinely denounced as traitors and running dogs.

The most unfortunate story, however, is that the 53,000 plus workers in the KIC were better off with it than without it and the future of this one small sliver of the engagement era is now the object of a game of chicken. North Korea chose to use it as a bargaining chip, pulling all workers out of the zone on April 9. The Park government–to our surprise–called their bluff after the North rejected an offer to negotiate and pulled most of the remaining 175 managers out last Friday; as this went to press, a rump group of seven was trying to work out details of final payment before turning out the lights. Literally; Kaesong relies on power from the South.

The question now is which side can hold out longest; the negotiations are far from over, of course. North Korea’s opportunity costs are lost foreign exchange. South Korea’s are foregone revenue for a vocal lot of vulnerable small- and medium-sized enterprises. The shutdown will trigger a South Korean insurance scheme that has a reasonable war chest; the Inter-Korean Cooperation Fund was barely drawn during the LMB years. But it is difficult to make  all of these companies whole. We predict something will break at some point and the effort will resume. But that was a reasonable bet with respect to Kumgang as well; our posts on that sad saga can be found here. This is North Korea, remember.