The first european company in Kaesong

According to « Yonhaps News Agency »,

Groz-Beckert, based in Germany, is set to become the first foreign firm to join the inter-Korean industrial complex in Kaesong since 2008.

Earlier, South Korea approved a plan by the company supplying industrial needles to set up an office in the Kaesong zone, just north of the inter-Korean border.

It came as the South’s Park Geun-hye administration is actively seeking foreign investment in the complex, the fate of which is often uncertain amid tumultuous relations between Seoul and Pyongyang.

The Park government believes foreign investors would discourage Pyongyang from using the joint venture as a political pawn.

« With Groz-Beckert setting up a sales office rather than a production facility, the level of risk seems minimal, » Troy Stangarone, senior director for congressional affairs and trade at the Korea Economic Institute of America, said in a report.

Especially, its role as a first mover into Kaesong among foreign entities is important, he pointed out.

« Because of the political and economic risks of investing in Kaesong, foreign firms have been reluctant to take the plunge, » Stangarone added. « However, if Groz-Beckert’s investment is successful, while operations at the complex continue to normalize and progress on issues related to transportation and access to the Internet and cell phones continues, it could help to encourage additional foreign firms to consider moving forward on investments in Kaesong. »

The Kaesong facilities opened in the early 2000s as a key symbol of inter-Korean reconciliation at that time.

Pyongyang shut it down in April last year by withdrawing its workers as military tensions soared on the peninsula.

The complex re-opened five months later and currently more than 50,000 North Koreans (and therefore they feed 250 000 North Koreans – about 1% of the North Korean population) work at about 120 South Korean light industrial firms there.

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Nicolas Levi

Analyst on North Korean issues

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