Made in North Korea - or is it?

In gleaming new factories amid hills stripped bare for fuel, six thousand North Korean workers toil for South Korean companies.

"Workers from North Korea and South Korea are committed to work hard under the slogan, 'One for all, all for one,' " says Moon Chang Seop, president of a company producing shoe parts for its parent company in South Korea. "We operate under a very unique system for North Korean workers. They get $57.50 a month regardless of position" - plus overtime pay. Mr. Moon admits that figure is "1/10th or 1/20th" of what South Koreans are paid.

However, South Korean managers say privately that North Koreans see only a tiny fraction of the amount stated in glossy handouts given to foreign visitors. Instead, the money goes to the North Korean agency that is responsible for hiring them.

The issue of how much the North Korean workers are paid is, as one manager puts it, "a delicate question" as South Korea negotiates with the United States for a free trade agreement.

Under the agreement, South Korea wants products made here in the Kaesong zone, just across the border from South Korea, to be classified as made in South Korea. The United States insists they're made in North Korea and beyond the scope of the agreement.

"The bottom line is goods made in Kaesong should be designated as South Korean-made," says Kim Song Keun, president of the Kaesong Industrial District Management Committee, made up of South and North Korean officials.

The Kaesong zone, still a small-scale project compared to South Korea's enormous industrial complexes, ranks high in the South's policy of reconciliation. If the grandiose publicity is any judge, both South and North Korean leaders see it as emerging as a regional hub by 2012. They envision hundreds of thousands of workers, most of them North Koreans, working in hundreds of companies - most of them South Korean.

"The reason the Kaesong industrial park is special is South Korean companies don't have to go to Southeast Asia any more," says Ha Jung Byun, senior manager with Hyundai Asan, the South Korean company developing the complex. A South Korean company, he explains, can hire North Korean workers for the same low wages it pays workers in Southeast Asian countries - and then will be able to price its products low enough to compete with those made in China.

North Korean strictures pervade the zone, as is clear in any attempt at questioning workers operating industrial sewing machines in the ShinWon textile factory, one of 15 enterprises now operating here. In response to queries about their wages, a young woman murmurs, "I cannot say anything," and another says only, "We get enough."

A bus tour inside the tall green wire fence that marks the zone's 8.6-kilometer-long boundary reveals the contrast between life inside and outside the zone.

Beyond the fence, the land stretches barren on every side except for clusters of white-walled homes. A few goats and chickens are seen around a handful of small apartment buildings, decaying and in need of repairs. North Korean workers, forbidden from any contact with South Koreans except when necessary on the job, enter and leave the zone through a single checkpoint manned by North Korean soldiers.

Inside the zone, managers from South Korea live in single-story temporary quarters that resemble military barracks. Typically, they go home twice a month.

"It's very difficult," says Kim Ki Hong, general manager of a branch of the only South Korean bank in the zone. "We cannot go outside," says Mr. Kim. "We are almost prisoners."