DPRK announces Sinuiju SAR

According to the New York Times (2002-9-25):

In the most significant reversal of economic policy since North Korea was founded, that Communist nation has announced the establishment of an autonomous capitalist investment zone near its border with China.

According to the official Korean Central News Agency, North Korea has adopted legislation mandating the creation of an “international financial, trade, commercial, industrial” zone to be built in the northwestern city of Sinuiju, operating free of central government interference for a period of 50 years.

According to news reports from both North and South Korea, the new zone will seek private capital from China, Japan and South Korea, as well as the West, and will operate its own legal and economic system, and even issue its own passports. Foreigners will reportedly be able to enter without visas, although the government will build walls around the city to control access by North Koreans.

In perhaps the biggest surprise of all, the special economic zone will be run by a Chinese agricultural and manufacturing magnate, Yang Bin, a frequent visitor to North Korea aboard his private jet, and a confidant of the North Korean leader, Kim Jong Il. According to Forbes magazine, Mr. Yang, 39, is China’s second richest man.

A native of Nanjing who has taken Dutch citizenship, Mr. Yang is chairman of Euro-Asia Agriculture Holdings, a grower of orchids and vegetables that was one of China’s most popular stocks with investors until media reports earlier this year raised questions about Mr. Yang’s finances and the firm’s transparency. According to Forbes magazine, his personal fortune is about $900 million.

Mr. Yang has said he will hire Westerners to run the special zone’s legal system along European lines.

“This is an attempt to build Hong Kong north, and it is an extraordinary leap” for North Korea, said Marcus Noland, an expert on the North Korean economy at the Institute for International Economics, in Washington.

Mr. Noland said North Korea had tried to build special economic zones in the past, notably a decade ago in the northeast region of Rajin-Sonbong, but had largely failed because of poor planning and a lack of commitment, perhaps reflecting ambivalence toward a capitalist model so fundamentally at odds with the self-sufficiency and sacrifice preached by North Korea’s Stalinist founder, Kim Il Sung.

The current plans involving a site close to the border with China and right on the rail line to Beijing are, by contrast, ambitious. “The degree of autonomy described in the press reports is greater than the independence granted by the Chinese to their new economic zones in the late 1970’s and early 1980’s,” Mr. Noland said. He called the new venture “an enormous gamble” for Kim Jong Il, who succeeded Kim Il Sung, his father, eight years ago.

North Korea has also toyed recently with building a special economic zone jointly with South Korea, at Kaesong, and granted the Hyundai conglomerate permission to operate there. Hyundai broke up before setting up in the zone, however, and North Korea dragged its feet over opening up rail links there, ostensibly because it got cold feet over allowing South Korea to play such a large direct role in its economy.

Last week, however, the rail link was reconnected for the first time since the end of the Korean War.

The 132-square mile Sinuiju zone lies across the Yalu River from the Chinese city Dandong in a relatively conservative region where the Communist party still holds strong sway, and ethnic Koreans are numerous.

A recent American traveler to the region called Sinuiju “one of the most barren places in Korea.” In bustling Dandong, by contrast, he said, “the railroad station is piled high with fruits, and people are running around with cellphones.”

Nicholas Eberstadt, a Korea expert at the American Enterprise Institute, said: “China’s opening to the outside world was effectuated by a lot of foreign entrepreneurs, members of the diaspora, from Hong Kong and Taiwan. The question has always been where does North Korea get its entrepreneurial talent?

“The obvious answer might seem to be South Korea, but that represents a terrible ideological peril, Mr. Eberstadt said.”They seem to have chosen China.”

Mr. Yang said on Monday that North Korea would build 100,000 greenhouses to grow vegetables for export, with his company handling the sales, the South China Morning Post reported. Although he said work would begin quickly, Mr. Yang did not offer a timetable. The Hong Kong newspaper said the new zone would have no import or export tariffs, and a fixed income tax of 14 percent.

Two months ago, the North Korean government announced a radical overhaul of the exchange rate, wage and price systems. With food production flagging, and industries operating at 10 percent of capacity, according to one diplomat, the government eliminated its food ration system, raised food prices and told factories to make a profit.

“Until recently, you could not even use the word reform, and now not only is it widely accepted, it is always used with a positive connotation,” said a senior United Nations official in Pyongyang, the capital.

Regional political analysts cite a number of factors in the shift. President Bush’s description of North Korea as part of an “axis of evil” may have created a sense of urgency about overcoming isolation, as has China’s irritation over an increasing flow of North Koreans across their mutual border.

South Korea holds crucial presidential elections in December, and North Korea is eager to see a government that favors friendly engagement, rather than isolation.

Until recently, North Korea had treated the doctrine of self-reliance as untouchable, even if dependence on China for food aid and subsidized trade had always made this a partial lie.

“There were a lot of people here in 1995, when the food crisis really began, who said we would rather die than have your food,” an international relief official said in a recent interview in Pyongyang.

After a famine that human rights groups estimate has cost more than two million lives, Kim Jong Il appears to be eager to attract capitalist funds and create a mixed-market communist system like the ones in China and Vietnam.

Last week, Mr. Kim took the surprising step of acknowledging and apologizing for the kidnapping of Japanese in the 1960’s and 1970’s, setting the stage for normalization of relations with wealthy Japan, which in turn apologized for its colonial rule of Korea and is now expected to give $10 billion in aid.

Read the full story here:
North Korea to Let Capitalism Loose in Investment Zone
New York Times
Howard W. French


Comments are closed.