Economic cooperation with North Korea requires a fundamental overhaul that accounts for the country’s economic underdevelopment and isolation, according to a new analysis. Experts argue that a bipartisan, stable approach that does not shift with each administration is essential. The assessment comes after decades of inter-Korean economic cooperation failed to overcome long-standing structural barriers.
A report published on Thursday by the Korea Development Institute (KDI) titled “Evaluation of Inter-Korean Economic Cooperation by Previous Governments and Future Directions” reveals that the Kaesong Industrial Complex, once touted as a flagship cooperation project, had minimal impact on South Korea’s economic growth.
KDI visiting researcher Cho Dong Ho, the report’s author, criticized past efforts as merely inflating appearances through government funding and administrative support, without addressing North Korea’s internal conditions. He asserts that unless these structural limitations are resolved, no administration can achieve meaningful economic cooperation.
The Kaesong Industrial Complex, once hailed as a symbol of cooperation, fell short in both symbolism and tangible results. The South Korean government’s heavy-handed involvement – from infrastructure and utilities to wage negotiations and entry procedures – essentially turned it into a de facto government project.
This approach led to an influx of low-value-added manufacturers seeking quick returns. Without any significant changes in North Korea’s internal policies or systems, the complex remained a basic production outpost, contributing little to South Korea’s economy and failing to catalyze reforms or openness in North Korea.
Cho argues that the Kaesong Industrial Complex resembled a glorified assembly line rather than a true model of industrial cooperation leveraging both Koreas’ strengths. He laments the lack of policy innovation, which resulted in cooperation efforts that failed to impress the international community.
Adding to these challenges, shifting North Korea policies under successive South Korean administrations have undermined the stability needed for sustainable economic cooperation.
Cho explained that each administration adopted its own approach, with some advancing projects despite unfavorable business conditions and others abruptly halting cooperation regardless of corporate interests. He said this unpredictability makes long-term planning and stable economic engagement impossible for companies.
He stresses that without bipartisan consistency in policy implementation, inter-Korean economic cooperation will remain at the mercy of political cycles.
Looking ahead, Cho outlines three key focus areas for future inter-Korean economic cooperation: fostering change in North Korea’s internal conditions, developing projects based on forward-looking strategies, and implementing a principle-based approach to execution.
Regarding internal changes in North Korea, Cho emphasizes that without such shifts, the impact of economic cooperation will remain limited. He warns that unless North Korea adjusts its systems, cooperation efforts will struggle to move beyond superficial gestures propped up by South Korean government funding.
Cho called for a paradigm shift in future economic cooperation, urging a focus on long-term strategic planning rather than quick wins. He suggests exploring industries that could create new value and comparative advantages through inter-Korean collaboration.
Reflecting on past efforts, Cho criticized attempts to bypass sanctions through barter or loan arrangements, arguing that such approaches are unsustainable and risk undermining international trust. If the goal of inter-Korean economic cooperation is to encourage systemic change in North Korea, he recommended strengthening transparency and adhering to clear principles.
