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Abstract
This HBR Case Study includes both the case and the commentary. For teaching purposes, this reprint is also available in two other versions: case study-only and commentary-only. The CEO of a watchband manufacturer based in Seoul is considering opening a factory in the Kaesong Industrial Complex (KIC), a South Korean manufacturing zone in North Korea. Such an operation is appealing on several counts: The costs of labor are low, capital risk is also low because of South Korean government guarantees, and the KIC, as the largest area of economic cooperation between the two Koreas, could be a step toward a unified peninsula. But there are substantial risks as well, concerning South Korean employees' safety, the treatment of North Korean workers by their government, the human rights situation generally in the North, and the uncertainties of dealing with a volatile regime. Are the potential economic benefits worth the human risks? And should politics and national pride factor into the decision? Two commentaries accompany the case, one from Youssef Nasr, a former senior executive in the HSBC Group, and one from Ian Bremmer, the president of Eurasia Group.
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Abstract
This HBR Case Study includes both the case and the commentary. For teaching purposes, this reprint is also available in two other versions: case study-only and commentary-only. The CEO of a watchband manufacturer based in Seoul is considering opening a factory in the Kaesong Industrial Complex (KIC), a South Korean manufacturing zone in North Korea. Such an operation is appealing on several counts: The costs of labor are low, capital risk is also low because of South Korean government guarantees, and the KIC, as the largest area of economic cooperation between the two Koreas, could be a step toward a unified peninsula. But there are substantial risks as well, concerning South Korean employees' safety, the treatment of North Korean workers by their government, the human rights situation generally in the North, and the uncertainties of dealing with a volatile regime. Are the potential economic benefits worth the human risks? And should politics and national pride factor into the decision? Two commentaries accompany the case, one from Youssef Nasr, a former senior executive in the HSBC Group, and one from Ian Bremmer, the president of Eurasia Group.
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