SPACE Magazine
SPACE Magazine
An Economic-Evaluative Meaning of the Korean DMZ

An Economic-Evaluative Meaning of the Korean DMZ
Park Won Kyu (professor, Kyung Hee University),
Kim Chaehan (professor, Hallym University)
Is it possible to put a price on the De-Militarized Zone? In our last edition of the DMZ Series, SPACE observes the economic value of the DMZ. Park Won Kyu, who has asserted the need to establish an economic cooperation system between the two Koreas through vitalizing the exclusive industrial zone, and Kim Chaehan, who has asserted the interrectionship of political and economic aspect, together, explore the potential economic value of the DMZ, and suggest ways for its appropriation. editorial team
©Cuehyon Clara Kim
right / Fig. 2 Israeli settlements with roof painted red in order to avoid air attack from Israeli army
left / Fig. 1 An observation point on Mt. Bental near by the DMZ along the Israel-Syria border
Countless publications have tackled the issue of peaceful use of the Korean Demilitarized Zone. Their argument is simple. Large-scale development, followed by the uprooting of plants and trees is to be banned while peaceable utilization of the land and preservation of its ecology is to be encouraged, represented by the fields of agriculture, tourism and logistics.
Realizing the economic value of the Korean DMZ is an unknown path. As a buffer zone during armistice, the DMZ has witnessed a three year Korean War, and a multitude of skirmishes during the six decades of ceasefire. The majority of cases overseas, in which economic benefits have been reaped through cross border cooperation, are usually nowhere as unstable as the military borders of the Korean DMZ, leaving the Korean DMZ without a model to benchmark. Hence, this article will investigate how we may go about fulfilling the potential brand value of the Korean DMZ. Accompanied with some cases of the Israeli borders, the article will discuss the economic implications of industries such as agriculture, tourism, and logistics, in utilizing the Korean DMZ.
Composition of the Korean DMZ Values  
How much would one assess the Korean DMZ in terms of money? In general, the use value of a good is estimated by its market price. On the other hand, its non-use value, which can neither be traded nor observed in markets, is estimated with a contingent valuation method (CVM) which questions people on their willingness to pay (WTP) under a hypothetical condition. The aggregate preservation value of the Korean DMZ from the WTP laid between USD 264 and USD 602 million.▼1
The use value of the Korean DMZ is definitely greater than its non-use value. The concept of brand value may make an estimate of the DMZ economic value more relevant. The brand value of the Korean DMZ has been estimated at about 67 trillion KRW, varying between every view of value. First, war-deterrence-minded people, on average, estimate the brand value of the DMZ as 49.2% of Seoul. Second, those who regard ecology as the most important value estimate the DMZ’s brand value as 79.6% of Seoul’s brand value. Lastly, Korean people, who put the most important value on exchange or reunification estimate the DMZ’s brand value as 80.3% of Seoul. The exchange or reunification view seems to put far greater value on the DMZ than the war deterrence or peace view.
Peaceful uses of the DMZ can be understood according to the following three concepts: confidence, ecology and paths. The concept of confidence is related to sidestepping war or making peace. The Korean Armistice Agreement defines that neither side shall execute any hostile act within, from, or against the DMZ established with withdrawing 2km from the Military Demarcation Line. These Confidence Building Measures may contribute to peace.
The concept of ecology is related to preserving ecological environments. According to the Korean Armistice Agreement, the member of persons, military or civilian, from each side who are permitted to enter the DMZ for the conduct of civil administration and relief shall be as determined by the respective commanders, but in no case shall the total number authorized by either side exceed 1,000 persons at any one time. While the Korean DMZ has been a barrier to exchange and discourse between North and South, it has kept civilians out of their natural ecology areas. Therefore the DMZ experienced so little human activity that it can be preserved in its pristine state. Many environmental activists are afraid that the DMZ ecosystem will be destroyed by the frequent exchanges that may result from inter-Korean reconciliation or even reunification. This excludes the development, which disregards its environment aspects, from peaceful using plans of the Korean DMZ.
Lastly, the concept of the DMZ as a path is related to exchange or reunification. The Korean Armistice Agreement says that no person, military or civilian, shall be permitted to cross the Military Demarcation Line unless specifically authorized to do so by the Military Armistice Commission. However, the agreement adds that convenience of movement shall be permitted through the territory under the military control of either side over any route necessary to move between points within the DMZ where such points are not connected by roads lying completely within the DMZ. A border may be either a line or an area. A line may be an impassable wall or a protector distinguishing between in and out while an area may be a passable route or window mixing in and out.▼2 A border may yield mutual interests if it works as a path for human and ecological interchange, not for exclusive ownership.
The ecological and war-deterrent value of the Korean DMZ cannot be replaced by any other value. Only the economic values of the DMZ, which are compatible with these values, can be accepted. The literature concerning functionalism or integration theory has long argued that non-military exchange promotes politico-military cooperation. However, there are few cases of politico-military reconciliation initiated by ecological cooperation. Rather, detente or reconciliation has made ecological cooperation easier to achieve. For example, the German Green Belt (Grünes Band Deutschland in German) was initiated on the inner German border after, not before, its political reunification. We cannot say that the ecological value of the DMZ increases its peaceful and economic values, but that peace and prosperity tend to go together while there are some ways to create economic value without worsening its ecological value.
©Cuehyon Clara Kim
Fig. 3 The Western Wall and Dome of the Rock located in Jerusalem
The Peaceful Uses of Israeli Borders▼3
As Israel has unstable borders with Egypt, Jordan, Syria and Palestine, there have been several DMZs around Israel. Even after Israel announced an open-ended cease-fire with Hamas and Islamic Jihad in August 2014, the Israeli government has insisted that the Gaza strip must become a DMZ. The Israeli DMZs are the severest cases in frequencies and casualties of battles since their establishment while the Korean DMZ is the most serious case in terms of casualties of war and longevity of DMZ. Thus, the Israeli cases with Syria, Jordan and Palestine may suggest some implications for the Korean DMZ.
First, let’s observe the Golan Heights. In 1974 the United Nations Security Council established a DMZ in a portion of the Golan Heights of Syria, which was occupied by Israel. At the same day Israeli and Syrian forces on the Golan Heights signed the Agreement of Disengagement to end the Yom Kippur War. The official title of the DMZ is the United Nations Disengagement Observers Force Zone. With no agreements on who has jurisdiction over the DMZ of the Golan Heights and its adjacent areas, disputes have persisted. In the DMZ areas, farming and irrigation by one party evicted farmers of the other party and brought about armed clashes. The productivity of agriculture and tourism on the DMZ between Israel and Syria has not been evaluated highly enough.
The West Bank is more complicated than the Golan Heights. More than 80% of its population are Palestinian Arabs while the others are Jewish Israelis. Israel has 16 industrial parks in Israeli settlements of the West Bank with about 1,000 plants and 21,000 workers, about two-thirds of which are Palestinian.▼4 For instance, Mishor Adumin is an industrial park near Jerusalem in the West Bank. Its factories and supermarkets employ many Palestinians who do not support the Palestinian Authority’s decision to boycott the products of Israeli settlements. The Palestine Authority began the boycotting in 2009 and stopped it later.
In contrast to Israeli settlements in the West Bank, there are some industrial zones promoted by the Palestine Authority in cooperation with Israel. Since the Palestinian Authority was created in the early 1990s, the following industrial zones are established in the occupied Palestinian territories of the West Bank: the Tarqoumiyya industrial estate near Hebron with support from the World Bank and Turkey, the al-Jalama industrial area near Jenin with support from Germany and Turkey, an agro-industrial park near Jericho with support from Japan, and some industrial parks in Bethlehem with support from France and Germany. The longest-operation Israeli Industrial border zone is the Erez industrial park located in Gaza, not in the West Bank. However, the Erez industrial park, which once employed about 20,000 Palestinians, has not been operational any longer since the Israeli government withdrew Israeli firms for security reasons in 2004.
This pursuit of reconciliation through economic cooperation is called an ‘economic peace’ model of development. The Palestine Authority announced that the industrial parks would create 20,000 direct and at least 10,000 indirect jobs for Palestinians in the West Bank and help boost the struggling Palestinian economy.▼5 Tourism in Bethlehem, Jenin and Jericho increased to more than double its rate after their industrial parks were established.
Some critics, however, argue that the zones give Israeli companies a legal way by which to penetrate the Palestinian economy, and that the zones reinforce and legitimize the occupation by making the Palestinians even more subservient to Israel given that the Palestine Authority has to rely on the occupiers’ good will for access, movement and transfer of tax revenues.▼6
Economy is not the main factor in Israeli border disputes. Such economic activities as agriculture, tourism and industrial parks may intensify or ease the conflicts to a limited degree only. Economic activities without any political consensus tend to provide more fodder for another use of military force while economic exchanges as a means to political conciliation may appease conflicts.
Image courtesy of KIDMAC
Fig. 4 A view of Gaeseong Industrial Complex in North Korea
DMZ Agriculture

Agriculture is maintained as an industries that does not damage the natural environment. As observed in Israeli cases, however, large-scale farming in the Korean DMZ may bring North Korea’s opposition which does not contribute to peace A joint farming zone of north Cheolwon was proposed where the South would provide seeds and farming machinery while the North would overlook the cultivation process. It was not accepted by the North. The current agricultural use in the DMZ includes small-scale farming by some North Korean soldiers as well as residents of North’s Kijeong-dong Village and South’s Daeseong-dong Village inside the Joint Security Area. As these areas are excessively regulated by their respective governments, their productivity and efficiency are evaluated to be low.
The term behind the DMZ, however, functions as a brand in such agricultures as rice, bean, ginseng, tomato, honey and water. Of course, these products are not made inside the DMZ. The brand of theDMZ may be used by any area adjacent to the DMZ. Under the current system of regulation, simply using the DMZ as a brand seems to increase the economic value of agricultural products.

DMZ Tourism

Most North Korean tour packages include visiting the north side of the Joint Security Area. Similarly, the DMZ areas are one of the most interesting sites that tourists wish to visit in South Korea. The current tour packages including the term ‘DMZ’ are usually to visit the Joint Security Area, the southern boundary of the DMZ with watching its inside, or the Civilian Control Zones only. Tourists are not allowed to visit most parts of the Korean DMZ. Of course, neither Mount Geumgang Tourist Region nor Gaeseong City Tourist Region belongs to the DMZ.
DMZ Ecotourism has been advocated as compatible with both ecological and economic values. Bird watching seems to be the only ecotourism programme among the current DMZ tour packages. Real ecological experiences are conducted in the DMZ’s adjacent areas, not inside the DMZ, with small exploration groups led by some non-profit organizations, not by commercial travel agencies. Any heightened economic value is not produced by current DMZ ecotourism.
An empirical analysis of the Israeli-Palestinian case shows that the pacifying effect of tourism on conflict has been overestimated.▼7 Mount Geumgang Tourism was initiated just after the Kim Young Sam government was replaced by the Kim Dae Jung government friendly to North Korea. Little evidence backs the notion that tourism can manage or resolve inter-Korean conflicts. Periods with tourism between North and South Koreas cannot be said to have been more peaceful than any other periods without inter-Korean tourism. It is said that inter-Korean relations just before the initiation of Mount Geumgang Tourism were far better than those just before the accident of a tourist killed in Mount Geumgang. If tourism can really be held accountable for pacifying effects, Mount Geumgang tourism would not have been suspended. Thus, the pacifying effect of tourism should not be greatly expected.
In case the DMZ tourism has only a limited effect on peace, then the DMZ tourism can be justified with its economic motivation. Current DMZ tourism including Mount Geumgang Tourism, however, is operated with governmental subsidies, not with their own profits. Many peace parks around borders over the world have muddled through getting financial support for their upkeep and management, since they do not make appropriate profits. The DMZ has the same problem.

DMZ Industrial Complex

If agriculture and tourism both has scarce meaningful pacifying and economic effects, the industrial complex is the only left to review. The total volume produced in the Gaeseong Industrial Complex (GIC) for a decade since 2005 falls below 2.5 billion US dollars. (Table 2) The pure-economic value of the production volume in the GIC cannot be said to be great.
As of August 2014, the number of North Korean workers in the GIC exceeds 50,000, while the number of South Korean workers is less than 1,000. As the GIC takes the mode of combining North’s labor (including land) and South’s capital, it falls short of extensive and symmetric exchange between North and South.
For a decade since 2005, the numbers of visitors and vehicles to the GIC are about 1 million and 0.6 million, respectively. More than 75,000 vehicles visited the GIC even in 2013 when operations at the GIC were strained. As the GIC related exchanges form a majority of total exchanges between North and South,
the industrial complex on a small space plays a major role as a path between the two Koreas.
Strong opposition can be found towards large-scale construction projects on the Korean DMZ. Any construction on the DMZ cannot be conducted without the only justifiable and worthy cause of reunification. Therefore, the path must be allowed to function, while being compatible with confidence and with the environment, to pursue economic values. As a transaction cost is incurred by making an economic exchange,▼8 the economic value of mutual interaction itself is created when a path opens.
This may be called a transaction benefit. The DMZ can be a connecting route of rail, road, water, cables, pipelines or electricity. If the DMZ functions as an important path, not as a barrier, between the North and South, and between Korea and the world, it may yield great economic values. It is time to note the huge economic potential of the Korean DMZ as a path.

Park Won Kyu got his MBA and Ph.D. in economics from Cornell University.
Kim Chaehan [corresponding author] has a Ph.D. in political science from University of Rochester. His research was supported by Hallym University Research Fund [HRF-201407-003].
tag.  korean DMZ , Park Won Kyu , Kim Chaehan , An Economic-Evaluative of DMZ
no.565 (2014.December) 
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