The Kaesong Industrial Complex sits inside North Korea just north of the Demilitarized Zone separating the country from South Korea. Developed in 2002 as part of then-South Korean President Kim Dae Jung's Sunshine Policy of constructive engagement with North Korea, the Kaesong zone was intended to be a model of inter-Korean economic cooperation that could build toward social and political cooperation in the future. To make the zone functional, North Korea had to allow overland transport between South and North Korea, opening a gap through the Demilitarized Zone, a move that had psychological significance. While the zone only accounts for around $200 million of North Korea's annual $1.5 billion in exports, according to South Korean research and many have suggested that the South Korean businesses that participate usually do so for the economic incentives offered by South Korea, the zone is less about its economic activity than the political symbolism. Even during times of intense tension between the North and South, neither side has shut down operations at Kaesong. For Seoul, this remains a significant demonstration of a Korean effort to ultimately resolve the division of the Peninsula. For Pyongyang, it provides access to technology and manufacturing management, and is a training zone for labor and a source of cash for the regime. There are complications, however, as South Korea frequently disagrees with the United States on whether to consider, for trade purposes, goods sourced from Kaesong as being South Korean (and falling within the U.S.-Korea Free Trade Agreement) or as North Korean, and potentially being restricted by sanctions.
