Mick Hartley

The recent South Korean decision to close down the Kaesong Industrial Zone will have hit the 50,000 or so North Korean workers hard:

Aside from Pyongyang, workers at the complex, and by extension their relatives, enjoyed the country’s highest standard of living. A steady paycheck, running water, and working electricity provided favorable conditions for workers while enabling the local economy to prosper and savings rates to grow. 

“Because many of the Kaesong Industrial Complex (KIC) workers do not have much market and trading experience outside of the simple labor they have been trained to do, many of the families will have a hard time adapting to economic conditions outside the KIC,” she explained. 

“Cadres associated with the KIC are worried that an extended suspension of operations will cause confusion in the markets and even lead to an ideological backlash. If the market chaos continues, we might expect to see someone blamed as a scapegoat.” 

When asked about the residents’ reactions to this news, the source indicated that most people, especially the donju (literally masters of money, or new moneyed class), think that the KIC was shut down in order to block financial flows to the Kim Jong Un regime. 

“People are saying things like, ‘Whether the market lives or dies, the Marshal (Kim Jong Un) is perfectly willing to take the food out of his people’s hands in order to invest in nuclear development.’ There is no way of telling what form this anger might assume," she said.

The workers' wages were not paid to them direct, though. Payment went to the government, who then passed on whatever they saw fit to the workforce. That seems to have been only about 20%. The rest was creamed off by Kim Jong-un:

Amid reignited concerns on the appropriation of dollars paid to North Korea as wages for its workers at the inter-Korean Kaesong Industrial Complex [KIC], prompted by the zone’s closure last week, Daily NK has learned that the North Korean authorities have been skimming off 80% of the original sum before paying its workforce. 

“Upon receiving funds from the South, the Central Special Development Guidance Bureau would hand it over, untouched, to ‘above’ [the state],” a source from Pyongyang close to this matter told Daily NK on Monday. “Workers at the complex would receive their wages in North Korean money issued from the Central Bank.”…

According to Daily NK’s sources, up until the recent shuttering, North Korean KIC workers were receiving a monthly base wage of 200,000 KPW, with what the source described as a “bonus” 50,000 KPW. Paydays were also accompanied by strict orders warning the workers not to disclose any details about the payment system to anyone, including their own family members. 

When we consider that in Pyongyang 1 USD currently trades for 8,200 KPW, the injustice becomes even clearer. By this market exchange measure, the 250,000 KPW eventually trickling down to the workers has been slashed to a mere 30 USD, or roughly 20% of the 150 USD they should be taking home. Tragically, this is still a considerable sum in a country where salaries paid to state-enterprise workers translate to less than 1 USD per month. 

And what of all the money siphoned off by the state? “It funnels directly into Kim Jong Un’s so-called ‘revolutionary funds,’ which doubtless include the money spent on developing nuclear arms and missiles to bolster the might of the leadership,” the source reported. “The dollars earned from arms trade, mineral sales like iron ore,drug trade, and diplomat-smugglers are [for this same purpose] and not for use by individuals.” 

This has been an open secret for years, though it's interesting to have some figures – however rough – to substantiate the extent of the exploitation, and the way the money's been siphoned off by Kim Jong-un for his own purposes. It's why the South Koreans have, finally, and not before time, decided to pull the plug. But yes, it's idle to pretend otherwise: the 50,000 or so who've lost their jobs, together with their families, will suffer.