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Key Advantages of Kaesong Complex: Cheap Labor Costs, Low Rent

According to Yonhap News,

(SEOUL = Yonhap News) Cheap labor costs and low rent are some of the advantages associated with the inter-Korean business complex in Kaesong, a poll conducted on 215 foreign investment companies in South Korea and overseas firms showed Sunday.

The survey carried out by the state-run Korea Trade-Investment Promotion Agency (KOTRA) showed 33 percent of the respondents saying the competitive labor cost is the top attraction of the industrial park, located just north of the demilitarized zone that separates the two Koreas.

This was followed by 22 percent and 21 percent that cited competitive rent and tax benefits as the important benefits that can induce businesses to invest. A further 11 percent responded by saying its "strategic" location in the heart of Northeast Asia is Kaesong's main selling point.

By nationality, North American and European businesses maintained labor costs as being the most important incentive to invest, while Chinese and Japanese investors tended to view tax benefits and location as the main advantages enjoyed by the industrial complex that first started churning out products in late 2004.

Kaesong is viewed as the crowning achievement of the historic 2000 summit meeting between the leaders of the two Koreas and remains the only viable economic link between Seoul and Pyongyang.

KOTRA's latest poll also showed that if foreign companies opt to set up operations in Kaesong, 56 prefer a joint venture arrangement, with only 23 considering investing without a partner. Some 9 percent said they would consider stakes investment in a company that will allow an indirect presence in the factory park that is home to some 120 South Korean companies at present. No foreign company has built a plant in Kaesong so far.

On changes needed to turn Kaesong into a truly competitive industrial complex that can attract investments from all over the world, 74 percent stressed that the North Korean government must become more trustworthy, with 23 percent citing some sort of resolution to Pyongyang's nuclear ambitions.

Of companies checked, 13 percent said issues regarding country of origin and sales outlets are important factors, with 11 percent claiming more must be done to liberalize communication, transit and customs inspections to and from Kaesong to the outside world.

On what foreign companies want from Seoul to make investing in Kaesong more attractive, 48 percent said tax breaks would help, with 31 percent saying direct cash grants for investment would be a positive inducement.

A further 27 percent said assistance in securing land would be helpful, while others cited the need for detailed consulting services.

The findings revealed that 78 percent of those polled said they knew about Kaesong, up 12 percentage points from last October.

Of those surveyed 39 percent said they will take part in an investor relations (IR) meeting for the industrial park, with Chinese and Japanese businesses being very keen on the idea.

Close to 70 percent of Chinese and half of Japanese companies said they would participate in an IR event, which is far higher than 26 percent tallied for foreign firms that already have investments or joint ventures in South Korea, KOTRA said.

Copyrights Yonhap News. All Rights Reserved.

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Source: Yonhap News (Feb. 6, 2014)

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