CEO Interview

"No other industrial complex is as superior as Gaeseong Industrial Complex in terms of labor cost and production quality."

In Gaeseong lndustrial Complex, 124 companies and 52,000 workers work are working now. Of them, Combase is the only toy manufacturing company, bulit on lot of 1,050 Pyung (3,471 m2), with 325 North Korean workers and 4 South Korean resident workers. It takes only about an hour from Seoul to the complex, Without tariff, we are manufacturing toys Made-In-Korea toys with more than 60% of domestic raw and supplementary materials.

Chin has been dominant in world toy supply but its strength is getting weak and has to move its base of production somewhere else. Here. CEO Park Nam Seo is very surethat the location will be in Gaeseong lndustrial Complex. Korean race is second to none in dexterity and furthermore we are competitive even against China in plastic resin, which is one of raw materials for plastic toy, and the cost of electricity, In addition, we are more advantageous in labor cost and quality than other competitors.

So far, we met and talked with Park Nam Seo, CEO of combase Co., Ltd, who is hale and hearty, about the current status of Combase's factory in Gaeseong lndustrial Com-plex and future strategic points of toy production.

Q. Hello, first of all, welcome to our association! Would you tell us about your company Combase?

Hi! Combase has manufactured toner cartridges in Shiwha lndustrial Complex and exported them to japan, Australia and Europe. In the meantime, we newly established a factory in Gaeseong lndustrial Complex in an attempt to have competitive price against China in 2008, Our products have also been selected as superior products by KOTRA (KORTA Global Brand Gold), the Small and Medium Business Administration (Inno Biz) and Public Procurement Service.

However, we faced difficult period too.In2010,Cheonan Warship s Affair and Yeonpyeong lsland Attack broke out and as a result, we lost important ties-up in foreign trade. Since then, we have mainly focused on the manufacturing of plastic toy for domestic purpose.

Currently we undertake toll processing of Young Toys'Ttobot.

Picture of Young Toys' Tobot.

Q. Now your company bases production facility in Gaeseong lndustrial Complex.How come you chose to base your company there?

I was planning to shift the base of business to Vietnam in concert with buyers in Europe as we were losing price(especially, labor cost) competitiveness to China. In the meantime, I happened to see the recruitment advertisement posted by Gaeseong lndustrial Complex and decided to apply for it.

Though small, I wanted to do business contributing to peaceful unification of two Koreas and I was certain that doing so would make the rest of my life more meaningful.

Q. How is your production facility in the complex big?
Have you had some difficulty due to cultural gap, especially when you got in there first?
How do you communicate with the resident work the resident workers in Gaeseong lndustrial Complex?

At present, 325 North Korean workers and 4 South Korean resident workers are working in the product factory. 3-store building on lot of 1050Pyung. The factory is run by North Korean representative(who has a title of head of work) of the workers, not by South Korean resident workers. So it is kind of indirect management. The head of work had authority over human resources and managed production. Therefore, it was pretty inconvenient at first. Furthermore, wage was same, regardless of the date an employee was hired for both men and women. There was no incentive system then. So I was worried about poor productivity.

In 2008 when we started first production, I told them I would give handsome incentive, the North Korean workers said,
"No, we North Koreans work hard without such. Incentive system is nothing but a tool to exploit the people."
But now, they even urge us to bring more works to do. Their way of thinking has changed a lot. Whenever I visit the factory, they greet me saying,
"Boss, did you bring a lot of works to us?"
It seems that they see me as order sheet of Ttobot.

Good things there are managers and workers communicate in the same language. And North Korean workers are very proud of themselves, so the products they make are greater than by anyforeign works. AS a result, productivity increases very considerably..

Q. What is the current status of Gaeseong Industrial Complex?

In total, 124 companies and 52,000 workers are currently working in Gaeseong Industrial Complex.

Especially, the companies that came to the model complex in 2004 have successfully secured superior workforce and it is much stabilized now. While businesses related to textile and sewing are so busy with schedule that they have to do night shifts, it seems that some of electronic part assembling companies haven't recovered yet. Since last September when machine started running again in the complex, buyers has had stronger trust and credibility to the complex then before it closed. As a result, the land price and charge of toll processing increased a lot from this spring. As the existing companies demand more labor force, the complex suffers lack of workers, about 16,000, which is one big problem.

Q. Low wage but excellent labor is often on the tongues of men as well as a role of bumper between two Koreas.
Can you tell us other merit of Gaeseong Industrial Complex?

I have some to tell you more. First, we can save logistic cost and import tariff, It takes only hour between Seoul and Gaeseong Industrial Complex and there is no need to pay tariff on import or export.

Second, if we use domestic raw or supplementary materials more than 60% for finished goods, they are regarded as ones made in Korea. Currently, all of the companies in the complex use 100% of domestic (South Korean)raw materials for production. Therefore, there is no critical error. When we have an inferior product, we can return it right away and demand it to be corrected.

Therefore, we don't have to worry about malicious stock like production in China. Besides, we can realize zero-stock sales for sellers in South Korea. It is because we can deliver products just 3 days or a week after order at the same price as Chinese goods. Therefore, Korean Buyers can do Just-In-Time business without stocking goods. For seasonable or fad goods like garment or toys, it takes 5 or 6 month prior order before importing them from China. Therefore, there always remain high risk of malicious inventory, which causes a serious financial burden on importers and domestic sellers. However, if you have do business in Gaeseong Industrial Complex. you have no such problem.

Above all, Gaeseong Industrial Complex is the most peaceful place with fresh air, the place is the best option for a day rest.

Q. On the contray, what kinds of problems do you think that Gaeseong Industrial Complex has or what should be improved?

There are emotional unrest felt among foreign buyers worrying about the political conflict between South and North Korea and lack of labor force. Of 3 difficulties (Communication, Passage and Clearance), passage and dearance seem to be improving but internet can'tbe accessed and we can't use mobile phone. It causes much inconvenience.

Q. Do you have a special reason why you've decided to engage in toy business? And what toys have you manufactured so far?

I was sorry to see domestic toy importers of Chinese products suffering from inferior goods and malicious long-lasting stocks. As Chinese toy industry is losing its competitiveness after long dominance in toy supply to the world, I am pretty sure that it will move its production base to Gaeseong Industrial Complex, North Korea.

Korean race is second to none in dexterity and furthermore we are competitive even against China in plastic resin, which is one of raw materials for plastic toy, and the cost of electricity, In addition, we are more advantageous in labor cost and quality than other competitors. Also, domestic buyers can free themselves from the worries of malicious stocks and inferior goods because they can order goods after receiving orders from customers.

We are manufacturing plastic transforming robot toys "Tobot" for Korean market and toys for girls. In addition, we are also partly engaged in the production of plastic household goods.

Q. Could you tell us about the blueprint for future of Combase?

We are the only company that has a toy assembly process line induding injection, spray(coating), assembling and packing. In addition. we plan to add a molding facility to the assembly line and be able to deliver customized quality products to customer's specification and design. when provided, anywhere and anytime you want. We will secure a molding facility as soon as possible and recruit workforce and train them. Combase expects to make it self a strong manufacturer of global competitiveness in toy industry through partnership with domestic small or medium companies with strength in design and marketing.

What would you like to say for our Toy Magazine readers?

I hope that children have pride in Korean products while growing with toys that South and North Korea make together. Prosperity of Gaeseong Industrial Complex is also the short cut to our unification.