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North Korea's economic zone remains under construction

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Aug. 22, 2012, 1:42 p.m. | World — by Associated Press

In this Monday, Aug 20, 2012 photo, piers no. 1 and 2 of Rajin port are under construction in Rason, North Korea. The port of Rajin and the neighboring city of Sonbong together comprise the Rason special economic zone being developed with help from foreign investment, particularly from China. Rason was host this week to the zone's second international trade fair.
© AP

Associated Press

Associated Press

RASON, North Korea — More than a year after construction began, the road from China to North Korea's special economic zone in Rason is paved. Power substations are being built, railway lines are being linked to routes to Siberia, and piers at the harbor expanded. 

This week, an international trade fair staged at the exhibition hall in the zone in North Korea's far northeast offered foreign investors and visitors from China, Britain, Russia and elsewhere, as well as journalists from The Associated Press, a glimpse at the efforts to turn a long-neglected, remote region into a manufacturing, tourism and transportation hub.

A diorama of the future Rason International Commercial Trade Center displayed at the trade fair showed rows of modern buildings sparkling with lights and cars parked under street lamps along tree-lined streets — a look at what officials hope the zone will look like in years to come. But whether that vision comes to fruition will depend in large part on whether China comes through with the electricity, supplies and money needed to bring Rason into the 21st century.

Over the past two years, North Korea's leadership has made the bid to transform Rason into an international hub a priority, along with drawing much-needed foreign investment. Last week, Jang Song Thaek, a senior official and uncle of leader Kim Jong Un, led a visit to China to discuss joint cooperation on developing economic zones along the border in an indication that the project has the attention of top officials.

North Korea's economy has languished in sharp contrast to the booming market economies of its neighbors in Northeast Asia. Pyongyang has not publicly released detailed economic data for decades, but the CIA Factbook estimates its per capita GDP at $1,800. Outside the capital, Pyongyang, much of the country remains poor, with buildings and roads in dire need of repair, and the United Nations says two-thirds of North Koreans face some form of chronic food shortage.

In recent years, North Korea has turned increasingly to China to provide trade, investment and knowhow in exchange for access to its minerals and labor.

Government policy calls for strengthening economic cooperation with other countries while still maintaining North Korea's "juche" policy of self-reliance, Yun Yong Sok, vice department director of North Korea's Committee for Investment and Joint Venture, told the state-run Korean Central News Agency in March.

"Contracts on joint venture and joint collaboration have been on increase with the investment environment changing for the better," he told KCNA.

The government directive to seek foreign business partnerships is a shift in a policy away from the insularity of past decades.

Still, doing business in North Korea is a challenge. Most foreign visitors cannot travel freely in and out of the country, drive their own cars or communicate with their local counterparts by cellphone — basics for conducting business anywhere else in the world. Ensuring steady electricity, broadband Internet and access to international banking systems has also proven difficult.

The geographic potential of Rason, which encompasses the cities of Rajin and Sonbong, is clear. It sits in the far northeastern tip of North Korea, with Russia on one side and China on the other. Officials told AP the zone is called the "golden triangle" because it has three ports with waters that never freeze, even in winter, offering potential routes into all three countries.

It was earmarked in 1991 as a special economic zone, with officials seeing promise in building factories for manufacturing and expanding the Rajin port for shipping. However, little was done to develop Rason until North Korean authorities in recent years gave the area some autonomy from Pyongyang and amended or wrote new laws that make it easier for foreign businesses to set up shop, particularly regarding visas and entry.

It also signed a pact with China two years ago to jointly develop the zone.

But even longstanding ties with China haven't guaranteed smooth sailing. Earlier this month, a Chinese firm, the Xiyang Group, warned other companies against investing in North Korea, calling its four-year experience trying to tap into North Korea's mining industry "a nightmare."

Xiyang said it invested $37.1 million to set up a joint venture to build a mining facility, and sent 100 workers to North Korea last year. North Korean officials later demanded changes to the contract and when Xiyang refused, they cut off utilities to the plant and deported the workers, Xiyang said in a statement.

On the other hand, the Yatai Group, a Chinese conglomerate, announced last week that it signed a 50-year contract with Rason officials to build a sprawling complex around Unsang Harbor to produce cement and mortar.

The push to develop Rason moves forward, and an AP reporter found crews working this week on renovating rails to link Rajin and the Russian city of Khasan, which would provide a link to European markets, as well as tracks between Rajin and the Tumen River at the Chinese-North Korean border.

City officials say they are even working on sprucing up tourists sites.

Kim Yong Ho, the president of the Kumyong Co., which provides services to restaurants in Rason, said business in the area is booming and he has seen more customers, both North Korean and foreign. 

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