Chairman confident of economic benefits from having production lines in N.K.’s Gaeseong Industrial Complex
Shinwon Group, a leading fashion retailer, was one of the first South Korean companies to enter the inter-Korean industrial complex in Gaeseong, the North Korean border town, in 2004.
Despite the political tension between the two Koreas, Shinwon chairman Park Sung-chul still has no doubts about the decision he made eight years ago.
“North Koreans are skilled workers as they are willing to work on a job for many years. Their hand skills are exceptional, even compared to South Koreans,” Park, dressed in a navy North Korea-made suit, told The Korea Herald.
“We have no problem in communicating with them. It’s also duty free within the industrial park. For exporting companies, entry into the Gaeseong Industrial Complex is the right choice.”
Park, a former textile journalist at a local business daily, founded a textile factory in 1973 and started exporting sweaters to 160 countries around the world.
In 1986, the company recorded $100 million in exports, becoming the first fashion retailer to receive a Gold Tower, the nation’s highest honor across industries.
After witnessing fashion trends abroad, he launched Bestibelli and SI, the companies longest-running local fashion brands, in 1990 when the Korean economy was booming.
However, Shinwon, which had continued to grow into one of the nation’s top 30 conglomerates, was hit hard by the 1997-1998 financial crisis and put under a workout program.
“We were the first to undergo a workout program at the time but also left from it earlier than other companies. We sold everything except the fashion businesses not to borrow more money,” Park said.
During the years when the number of employees was reduced from 2,500 to 700, the chairman also suffered from health problems and underwent surgery five times.
“People are not always healthy. We sometimes get sick and recover from it. It’s the same with business. I promised people that I would call them back. Now we have 2,300 employees,” said the 72-year-old entrepreneur.
Business operation in North Korea is also an area that Park has devoted much time to over the last 17 years. He believes that workers in the North are essential for the South, the world’s seventh-largest exporter, to achieve $2 trillion in export volume.
Shinwon currently operates 18 production lines on a 33,000-square-meter site, hiring 1,400 North Korean workers along with 15 employees from the South. They produce 5,000 items of clothing daily and 100,000 per month.
According to Park, North Korean workers learn skills faster than those in Indonesia or China, while their salary is 20 to 50 percent lower even though 24 percent of them are college graduates.
Unlike China, which imposes 13 percent tariffs and loses five to six days for logistics, the tax-free Gaeseong industrial park is just a two-hour drive away.
“The relationship between the two Koreas seems to have hit the bottom. In the coming months, I think, the operation of the Gaeseong complex will be normalized,” Park said.
“If there’s any progress between the North and the U.S., it’s also possible for the North to benefit directly from South Korea’s free trade agreement with the U.S.”
The products, despite their “Made in Korea” tag, can only be traded in the South Korean market.
During its early days in the North, Shinwon had to experience hostility and doubt like other South Korean businesses there. Especially, the group’s Christian corporate culture sometimes provoked the authorities in both countries.
“They cast suspicious eyes over the intention of our entry. Due to our religious color, we were once called the ‘worst company.’ There was also an accident where a fire burned down the factory building,” he said.
“I had no ambitious goal like unification and missionary work. We just continued treating them sincerely, greeting every worker warmly and sharing snacks with them.”
Shinwon was also the first company to offer workers Choco-Pies, the South Korean chocolate-coated biscuit and marshmallow snack. Due to their soaring popularity in the North, there were rumors that they were traded on the black market at high prices.
After years of effort, the company is now considered one of the most favored workplaces within the industrial complex, with most of the workers keeping their positions over the past eight years.
“We have been separated over the past six decades. Politics alone cannot solve the huge difference. Gaeseong is a workplace where people from the two Koreas share cultures and feelings,” Park said.
Shinwon is preparing for another big leap this year to nurture a global luxury brand.
VanHart Homme is a high-end men’s wear brand that integrates the company’s know-how accumulated over the past 40 years, including the experience of importing Italian luxury hand-made suit brand Brioni since 2001.
“A Brioni suit is priced at around 20 million won. At first we couldn’t find any difference from our suit products. After taking apart its suits, our designers found that the full canvassed technique was the secret,” Park said.
Using those techniques, the luxury line of VanHart suits will be introduced from the Spring season in collaboration with Italian celebrity designer Al Bazar Lino.
Shinwon also plans to step up efforts for business expansion in the soaring Chinese market. The company’s Sieg Fahrenheit has already become the best-selling men’s brand at Hangzhou Department Store, the largest department store in China, with 1 trillion won in annual sales.
Within three years, the company hopes to record more than 500 billion won in sales in China.
“We have very positive expectations about the Chinese market where the Korean Wave has just started in the fashion industry,” Park said.
Park is leading a group of 100 companies established by the Ministry of Knowledge Economy in February with the aim of creating Korea-made global brand names across industries.
“Even though Korea has talented designers and skilled craftsmen, local fashion companies are more dependent on imported brands, rather than launching a home-grown name,” he said.
“In order to become a global fashion leader, we need to develop our own luxury brand with value.”
By Lee Ji-yoon