Entrepreneurial Opportunities in Gaesung Industrial Park: An Inter-Korea Business Perspective

Abstract

IntroductionSouth Korea has taken remarkable steps to make the Industrial Park (GSIP) successful. GSIP of North Korea, which is 44 miles from the Seoul metro - politan area, stems from the loose co-operation of the two Koreas. The 1998 sunshine policy of South Korea's Kim Dae Jung has improved business relationships between the two countries even though political tensions still exist (Noland, 2000; Kennedy, 1993).Many South Korean business firms have the opportunity of taking the best advantage of their strengths (Hay, 200i; Oh & Hassig, 1999). These advantages are North Korea's high quality manpower and relatively low wages (Choe & Hu∂, 200i; Kim, 2002). Successful development of GSIP assumes that North Korea's economic recovery and South Korea's improved industrial productivity will continue. The two Koreas also hope that a strong business relationship between them will minimize political tensions (Park, 2000; Swomley, 2002).This study focuses on entrepreneurial opportunities in GSIP and provides management and policymakers with insights into how inter-Korean business ties may better develop. This review draws attention to potential planning policies in the inter-Korean market with an eye toward appropriate business partnerships, e[double dagger]cient allocations of resources, and adherence to the defined requirements of the Korean political situation.First, we review the business environment in the GSIP. Next, we present the inter-Korean business model as well as the economic e∂ects the GSIP has on South and North Korea. Finally, we discuss the inter-Korean business relationship and entrepreneurial opportunities.Business Background in the GSIPHistorically and geographically, is the most appropriate choice for an industrial park. Currently located in North Korea, had been recognized as a famous business city for over a thousand years. A Gaesung business executive carries the reputation for having active and productive entrepreneurship in Korea. After the Korean War, North Korea adopted the Soviet model for economic development and thus focused on fostering heavy industries such as chemical, iron, steel, and machinery. The North Korean economy scale and growth were far better than South Korea's between i960 and early i970. Current economic issues in North Korea resulted mainly from continuous natural disasters for more than a decade and from the failure of the Soviet economic model (Cha, 1999; Kim, 2003).The GSIP has several advantages, such as location, manpower, and attractive real estate, which would appeal to South Korean companies. Seoul's capacity to absorb the major economic and business activities of South Korea is full. Some cities in South Korea are being developed as a supplemental city or alternative city. However, these cities are also subject to many restrictions and have a limited capacity. The GSIP is not only one of best alternative places to absorb Seoul's business demand, it also could be a future investment entity supporting Seoul's role. Thus, the GSIP's location benefits the South Korean companies' investment interests.High quality manpower, low labor wages, attractive real estate, and tax benefits give the GSIP competitive advantages. Table i shows three major factors-wages, rent, and taxes-for business environments in industrial parks from South Korea (Ansan), North Korea (Gaesung), and China (Chingdao). The table indicates that wages at Ansan, near Seoul, are highest, that is to say, about 2i times as much as Gaesung's and about i5 times as much as Chingdao's. Rental fees for land in Ansan, $6,000 per one square meter, is about i20 times as much as Gaesung's and 40 times as much as Chingdao's. Lastly, the tax rate of Ansan is 27 percent, that is to say, about 2.5 times more than and Chingdao's. In addition, the GSIP provides a i00 percent tax exemption for the first five years and 50 percent exemption for next three years, whereas Chingdao has a i00 percent exemption for only the first two years. …