Rason news from Germany

A (much appreciated) reader in Germany sent me an interesting article from the German publication Nachrichten fuer Aussenhandel (News for Foreign Trade), which is a government-sposored daily paper promoting foreign trade. 

The full article is available in German below, but in summary, the Vice Major of Rason, Mr. Chae Song Hak has started an initiative to promote the Rason free trade zone. The zone can be reached visa free and investors can obtain all required permits locally within the zone—without having to involve the central Government in Pyongyang.  Rason also, independently sets duty rates and local prices (I suppose for labour as well as for utility- and other local services) as well as applicable exchange rates within the zone.

If there are any German readers who care to provide a bit more informaiton about this article, I would appreciate it. 

Click image below for full story (in German and in JPG format):



3 Responses to “Rason news from Germany”

  1. Gabriel says:

    I did a quick translation:

    Priorities include the development of tourism, refining trade (Veredelungshandel?) and general trade through the port. Another advantage of Rason is the absence of the usual visa-requirements for North Korea.
    The free trade zone’s most important asset is its port in Rajin which was built in the 1930s. Rason’s potential mainly lies its function as a trade junction.According to Kim Chun Il, Director External Affairs at the Rajin port, the port has adepth of 9.5 meters and can be used by ships with a maximum freight weight of 30,000 tons. Currently, there are 3 piers but there are plans for an extension to 12 piers. For the enlargment to be worthwhile, freight volume has to rise first. Last year the freight handling was only 200,000 t, much below the max capacity of 3 mio t.
    Rason includes two other ports. The one in Sonbong is an oil port and was used to supply a petrochemical factory until the 1980s. In recent times, oil shipment from the USA arrived here. The small port at Unsgsang can be used for wood shipments among other things.
    It has to be seen, whether Rason can attract foreign Investors. In addition to the political risks there is also the problem of a lack of infrastructure. Powercuts and interruption of water supply happen daily. The railway lines need to be modernized and lack a steady supply of power. Most of the roads aren’t paved. There are a few bicycles but only very few cars, busses or trucks in the free trade zone. The bridge over the Tumen river to China was restored and reopened in June but remains only double-tracked.
    One of the functioning foreign businesses is East-North Telecommunication Company which is 50% owned by Loxley from Thailand. The company operates Rason’s cellphone network which is planned to be available in 2010. There’s also a Chinese-financed cigarette factory which mainly produces for the export market.Outside of the business realm there is the Rason International Catholic Hospital which was initiated by the Benedictine order. The Hanns-Seidel foundation is planning to set up small-scale agricultural aid projects.
    According to the Office for Economy, foreign investors can obtain email access but no Internet access. the corporate tax rate is 14%, while in certain so called priority sectors a reduced rate of 10% is applied. According to deputy mayor Chae, those sectors include the export industry as well as investions related to technological development.
    Rason’s Office for Economic Cooperation is seeking foreign investors for a range of infrastructure projects including the expansion of the 50 km road to the bridge at the Chinese border, the modernization of the 159 km railway track from Rajin to Namyang at the border to the Chinese city Tumen, a fourth pier at the port of Rajin as well as water supply and sewage disposal in Rajin. There’s also an interest in building a wind power station, an oil refinement factory and the modernization of a thermal power station in Sonbong. As these projects alone will not suffice to attract business-oriented foreign investors, the office for economic cooperation tries to connect them with fishing rights or access to natural resources such as iron ore, magnesium or aluminium in other parts of the country.
    But even such business deals still bear high risks for investors. Partner companies could be on UN-sanction lists.
    Projects in tourism as well as in processing of seafood, agricultural products (main agricultural products include corn, rice and beans), fruits and food seem a bit more realistic. Rason features several clean beaches and some hotels, however the lack of a steady supply of power and water remains a fundamental problem.

  2. KM says:

    I did a rough translation of the German article:

    Pyeongyang to extend liberties of the Rason Free Trade Zone

    (Companies to be able to get permits locally /visa-free entry)

    North Korea wants to revive the Rason Free Trade Zone, located next to the borders with China and Russia. Early this year the status of Rason has been elevated and more competencies have been granted. Before that some installations have been rented out to Russia and China. Mongolia has also shown interest in the area. While a bridge to China is being renovated, the agreed repair of the train link to Russia is stagnating. Besides political issues the lack of infrastructure remains a main concern.

    Already in 1991 North Korea established the Rason Free Trade Zone at the border with Russia and China, the amount of investment so far, however, has been small. Nowadays, almost 20 years later, the North Korean regime is again placing its focus on the area. Earlier this year Rason was declared a “special city”. This strengthens the city’s autonomy and there is hope that it will increase foreign investments.
    Chae Song Hak, the vice-mayor of Rason, emphasizes that investors can now obtain the necessary permits directly from the local administration. Before that step larger companies had to apply for permits with the central government. Rason now has the authorization to specify tariffs, prices and even the exchange rate to be used in the free trade area.

    Rajin can support vessels of up to 30.000 tons of freight
    Especially tourism, processing trade and trade shall be increased utilizing the harbor. An advantage is the visa-free entry, it is not necessary to apply for a visa 4 weeks in advance as it is the case with the rest of North Korea. The harbor in Rajin, which was constructed during the Japanese colonial period in the 1930s, is a major asset for Rajin, which could serve as a transportation hub. According to Kim Chun Il, the director for external affairs at the Rajin harbor, the depth of the harbor is 9,5m and can be used by ships with a freight capacity of up to 30.000 tons. Currently there are three piers, plans for an expansion of up to 12 piers have already been made. For such an investment to be profitable, the freight volume has to be increased. Last year the amount of cargo handles was 200.000 tons, well short of the maximum capacity of about 3 million tons. There are also two other ports in Rason, Sonbong harbor is used for oil transport and until the 1980s has been used to supply a petrochemical plant. More recently the harbor has been used to receive oil shipments sent by the US. The small harbor at Ungsang can be used for the transportation of timber. It is not clear whether Rason will be able to attract many foreign investors. Besides the political risks the infrastructure is a major problem. Interruptions of power and water supplies happen almost daily, the railway lines lack reliable supply of electricity and need to be modernized. Roads are usually unpaved, only some streets in the city center are in a better shape. People within the free trade zone usually walk, we could see only a limited number of bikes and even less cars, buses and trucks. The bridge over the Tumen river, linking the area with China, has been reopened following a renovation in June but is limited to two lanes. One of the operating businesses with foreign investments is the East-North Telecommunications Company with a 50% investment from Thailand (Loxley). The company operates the mobile phone network that should be operational sometime in 2010. Another company backed by Chinese investors is producing cigarettes mainly for the export. Outside of the commercial undertakings the Rason International Catholic Hospital, an initiative backed by the Order of Saint Benedict, has come into existence. The German Hans-Seidel-Foundation is planning a number of small agricultural aid projects in Rason.
    According to the business office foreign companies can use e-mail, but cannot receive access to the internet. The corporate tax is set at 14%, a reduced rate of 10% is applied to “priority sectors” (so far no definition has been made public). According to vice-mayor Chae export industries and investments that contribute to technological development will fall into this category.

    Looking for investors for road and railway construction
    Right now the business office is looking for investments for a number of infrastructure projects including a 50km long piece of road up to the border bridge with China, the modernization of the 159km long railway line linking Rajin and Namyang (located on the Chinese border), a fourth pier at Rajin harbor and water and sewage systems in Rajin. They are further interested in constructing wind turbines, a petrochemical plant and the modernization of the Songbong thermal power plant. All of those are investments, that are hard to sell to commercial investors. For this reason the office is considering linking these investments with fishery licenses or the right to mine natural resources like iron ore, magnesium or aluminum in other parts of the country. But also this kind of business deals can be quite risky. North Korean companies could be targets of UN sanctions, contact persons change and investments could be lost. The case of Gaeseong, where North Korea suddenly wanted South Korea to pay more for rent and wages, shows clearly that contracts are no protection for additional North Korean demands at a later point. projects related to tourism as well as those involving fishery and agriculture (corn, rice and beans or fruits) seem to be more realistic. Rason has a number of clean sand beaches and hotels. Also here, the not very reliable supply with electricity and water can pose additional problems.

  3. Joe Ching says:

    does this still apply today, 5/20/2015? thank you.
    “”” the Vice Major of Rason, Mr. Chae Song Hak has started an initiative to promote the Rason free trade zone. The zone can be reached visa free and investors can obtain all required permits locally within the zone—without having to involve the central Government in Pyongyang. “””