Archive for the ‘Sea shipping’ Category

Fishing casualties in 2011

Tuesday, December 18th, 2012


Pictured Above: The Orang Odaejin Fisheries Office

According to the Daily NK:

Daily NK has learned that approximately 30 North Korean squid fishing vessels from ports in the provinces of North and South Hamkyung have been lost at sea this year alone, causing more than 120 casualties.

A source from North Hamkyung Province revealed the news to Daily NK on the 18th, explaining that the information came from the ‘2012 Missing Vessels Report,’ a booklet of statistical data compiled by the regional coast guard.

According to the source, the report noted, “Among all the vessels that have engaged in squid fishing this year, more than 30 smaller vessels have been lost, and 122 crew members have been killed or reported missing.”

It is mandatory for fishing vessels to register a crew list before leaving port each day for security reasons. Those vessels that leave port but do not return are classified as lost.

The sea near the Hamkyung port of Odaejin in Eorang County has traditionally been the most popular on the North Korean East Sea coast for squid fishing. However, Jang Keum Chun, who previously operated a shipping company in the Liaoning Province city of Dalian, has had a number of boats in the area since 2007.

This is because Jang is the son of Jang Wool Hwa, who sided with Kim Il Sung during the fight for liberation from Japanese rule. As such, he is said to have received direct permission from Kim Jong Il to begin fishing in the area.

The local fishermen who had been fishing for squid in the region for generations have been progressively forced further and further out by this (plus declining squid stocks throughout the East Sea region), which has put many in grave danger.

The source said, “North Korean fishing vessels only have about 6 to 8Hp, so are easily swayed by strong winds and waves.” When vessels run into trouble, there is little hope of rescue due to inadequate communications equipment and rescue vessels.

North Korea has reportedly been suffering 100 or more casualties in fishing accidents in the region for a number of years.

Read the full story here:
122 Casualties in Race for Squid
Daily NK
Choi Song Min


Rise in popularity of Rajin Port

Friday, November 30th, 2012

Institute for Far Eastern Studies (IFES)

North Korea has focused on developing Rajin Port, located in the North Hamgyong Province, with the aim of attracting foreign investments.

China and Russia have already secured usage rights to these ports and Mongolia has expressed itsinterest in this endeavor. This indicates a rising popularity and competition to use these ports.

Mongolian parliamentary speaker, Zandaakhuu Enkhbold,met with the DPRK’s Supreme People’s Assembly Chairman and Korean Workers’ Party Secretary Choe Tae Bok on October 19 on his four-day visit to Ulan Bator, the capitol of Mongolia. The officials from both countries agreed on the future possibilities of bilateral trade and cooperation in the fields of information technology and human exchanges. Mongolia is landlocked and expressed interests in cooperating for port leaseswhile Chairman Choe expressed enthusiasm in cooperation in harbor, coal, and mining industries.

The day after the two leaders met, Choson Sinbo, Pyongyang’s mouthpiece in Japan, directly reported on the results of the talk, exposing North Korea’s positive reaction to leasing ports to Mongolians. According to the newspaper, “Rajin Port is the most convenient sea route for Mongolia.”

Mongolia’s and North Korea’s bilateral cooperation on Rajin Port has been received positively as it fits the economic interests of these two countries. For Mongolia, they are interested in exporting coal and other underground resources overseas, as the country is rich in underground resources such as coal, copper, gold, and uranium. However, these resources arecostly to export since Mongolia has to rely on Chinese and Russian railway systems.

Once it is able to obtain lease rights to the Rajin Port, Mongolia should be able to significantly reduce itsshipping costs. Thus far, Mongolia has exported coal mainly to China, but may intend to diversify exports to other countries once it is able to use the port at Rajin.

Furthermore, once freight trains between Hassan in the Far East region of Russia and Rajin begin to operate, it will make it possible for Mongolia to transport coal directly to Rajin Port.

North Korea is most likely to lease Pier No. 2 and Sonbong Port to Mongolia, which are currently not being usedby China or Russia.

More importantly, North Korea is turning to South Korean participation in the development of future Rajin Port development. Choson Sinbo reportedin an article on October 21 (under the title, “Hwanggumpyong and Rason”)that “We (North Korea) sincerely want North and South to cooperate for mutual prosperity through communication and join forces to advance economic cooperation larger than neighboring countries.”

Once inter-Korean relations improve and South Korea joins China, Russia, and Mongolia in the development of Rajin Port, other economic cooperation between these five countries is likely.


DPRK ships missile parts to Syria

Wednesday, November 14th, 2012

According to the Korea Herald:

A shipment of graphite cylinders usable in a missile program and suspected to have come from North Korea was found in May aboard a Chinese ship en route to Syria in what appears to have been a violation of U.N. sanctions, diplomats said Tuesday.

South Korean officials seized the shipment of 445 graphite cylinders, which had been declared as lead piping, from a Chinese vessel called the Xin Yan Tai, U.N. Security Council diplomats told Reuters on condition of anonymity.

South Korean authorities stopped the ship at the South Korean port of Busan, the envoys said, adding that the cylinders were intended for a Syrian company called Electric Parts.

South Korean officials informed the Security Council’s North Korea sanctions committee about the seizure on Oct. 24, the envoys said, adding that China had offered to help investigate the circumstances surrounding the incident.

“It appears the cylinders were intended for Syria’s missile program,” a diplomat said.

“China assured us they will investigate what looks like a violation of U.N. sanctions.” Diplomats said the graphite cylinders appeared to be consistent with material usable in a ballistic missile program and that South Korea would investigate the case with China.

The shipment to Syria was arranged by a North Korean trading company, diplomats said. One diplomat said the Syrian company that was to have received the cylinders may be a subsidiary of the North Korean trading firm.

North Korea is barred from importing or exporting nuclear and missile technology under U.N. Security Council sanctions imposed on Pyongyang because of its nuclear tests in 2006 and 2009.

Read previous posts about the DPRK and Syria here.

Read the full story here:
Suspected N.K. missile parts seized en route to Syria
Korea Herald


Yanbian Haihua Group inks Chongjin port deal (and others)

Monday, September 17th, 2012

Pictured above (Google Earth): Chongjin’s two ports and shipyard

The PRC’s Global Times reports that in addition to use of the Rason Port, another Chinese SOE has taken out a lease/investment deal on the Chongjin Port. According to the article:

The official news website of the Yanbian Korean Autonomous Prefecture in Jilin Province reported on Thursday that the Yanbian Haihua Group inked a deal in Pyongyang on September 1 and established with its counterpart a $7.83 million joint venture company.

Under the deal, Haihua Group holds a 60.46 percent stake while the North Korean side owns the rest, to operate the Chongjin port’s No.3 and 4 wharves for 30 years.

The ports will be capable of processing 7 million tons of cargo a year and be put into use this year.

The prefecture’s public relations department and the Yanbian Haihua Group did not comment on the joint venture when contacted by the Global Times yesterday.

Although the Global Times reports a $7.83m price tag, the actual size of the deal appears much larger. According to the Donga Ilbo:

The North Korean regime has received 6.12 million euros ($7.82 million) of rental charges for the 3,180 square-meter (34,229 square-feet) piers and a 4,000 square-meter cargo yard from the Chinese company and paid the money to fund the newly-built joint venture, the newspaper said.

The Chinese company will invest a total of 13 billion won (USD $12m) on developing the port, such as building new equipment and facilities, which accounts for about 60 percent of the entire capital spent on the project.

According to the daily, they have already set up a series of detailed regulations on employment management, profit distribution and the formation of a new board with a goal to raise cargo traffic to one million tons by 2015.

The Yanbian group already spent 60 million yuan ($9.47 million) on manufacturing cranes and building necessary equipment, the newspaper said, and also completed work on stabilizing the 36,000-square meter grounds of the construction site.

They are scheduled to finish manufacturing cranes within the year to begin a full-fledged plan for domestic and international transportation through the port.

Yonhap and the Daily NK reported back in 2010 that this very same Chinese firm had leased the Chongjin Port for exports to South Korea and other parts of China:

The report, citing an anonymous government official from Tumen in China’s far northeast, across the Tumen River from Namyang in North Hamkyung Province, said that the usage rights have been sold to a “Chinese state company, Yanbian Haihua Import-Export Trade Company.”

He predicted, “Yanbian Haihua Import-Export Trade Company will start shipping between Chongjin port and Busan by container ship in September, and will start shipments to southern regions of China soon.”

The anonymous official also revealed that North Korea has agreed to allow the Chinese company to use the railroad between Tumen and Chongjin as part of the deal. The deal, the official said, will “facilitate trade from Tumen,” and added that the Chinese company which inked it is planning to use it to fulfill shipping contracts with three other Chinese companies.

The Chinese company is reportedly investing 10 million Yuan ($1.48 million approx.) in shipping cranes and other construction at Chongjin, and is having 150 freight cars produced to add to 50 already sent.

It would be interesting to know if the fiasco surrounding the Xiyang contract let to a renegotiation of terms of this deal in any way: Either by altering the ownership shares, time horizon, or if greater assurances against ex post expropriation were added. Since the contract is not ever likely to be made public, we may never know.

UPDATE 1 (2012-9-18): The Hankyoreh reports that quite a few ports on the DPRK’s eastern shore are being renovated by the Chinese. According to the article:

North Korea and China will develop 4 or 5 ports in the eastern coastal area of North Korea.
A source in Beijing said on Sept. 17 that it was confirmed through a Chinese government official that “4 to 5 ports in the eastern coastal area of North Korea in locations such as Seon-bong, Rajin, Cheong-jin, Gim-chaek, Dan-cheon, Heung-nam and Won-san are being jointly developed by North Korean and Chinese companies.” The source added that in addition to the two ports that are being developed in Rajin and Chongjin currently, businesses in the two countries are discussing specific conditions for development in the other areas. This is the first time that this information has been confirmed by a Chinese government official.

The Tanchon Port has been featured prominently in the DPRK media. Learn more about it here.


122 ROK ships affected by GPS jamming

Thursday, May 31st, 2012

UPDATE 4 (2012-5-31): Three arrested in South Korea over GPS jamming. According to the Choson Ilbo:

Spies in South Korea were involved in North Korea’s recent jamming of GPS signals, police said Wednesday. The Seoul Metropolitan Police Agency said it booked or arrested three men on espionage charges of collecting confidential military information to help the North.

They include a businessman identified only by his surname Lee who was formerly a prisoner of war from North Korea, a Korean-New Zealander identified as Kim, and another man who formerly worked for a defense contractor.

Export of electronic jamming devices to some countries including the North is banned.

Lee and Kim, who are engaged in trade activities in Nampo, North Korea and New Zealand, are suspected of attempting to hand over GPS jamming devices and radar systems to Pyongyang at the direction of a North Korean agent.

Police say they have footage of their meeting with the agent and a statement from Kim saying he received an order from the North.

Read previous posts on this topic below:



Petrov on the Chinese boat situation

Saturday, May 26th, 2012

UPDATE: The PRC’s China Daily has published a timeline and related information on the “Hikacked” fishing vessel.

ORIGINAL POST (2012-5-25): Leonid Petrov writes in the Asia Times:

China often describes its relations with North Korea, its closest regional ally, as intimate but not substantial. For more than half a century, Beijing’s attitude towards the Korean Peninsula has revolved around the avoidance of three scenarios: “No new war on the Korean Peninsula”; “No regime change in North Korea” and “No American troops on the Sino-Korean border”.

But can the developments of recent weeks shake this strategic alliance tested by time, wars and revolutions?

Read the remainder of the article below…


China does [not?] commit to new infrastructure investment in Rason

Wednesday, February 15th, 2012

UPDATE 2 (2012-4-12): North Korea and China attracting investors for Rajin Port development (IFES):

China is currently actively recruiting investors to build additional wharfs in Rajin Port.

China’s Dandong City Industrial and Information Association (丹东市信息协会) announced that it is seeking investments for the construction of tanker wharf under 10,000 ton and affiliated facilities. This organization has received 45 year usage rights from the Rason City People’s Committee and stated that it needed 330 million CNY (52 million USD) to cover the construction cost. According to the association, the investment is attractive because of its geographic location, reduced transit time and costs, and tax-free benefits, for which a special permit was obtained from the North Korean authorities granting trade goods coming from Jilin Province at the Hunchun Port to be allowed entry tax-free. In addition, cargo will be permitted to be sent from Rajin Port to other ports in China.

Meanwhile, North Korea is also planning to build a new port in the Rajin-Sonbong area with a state-of-the-art container distribution capacity. According to the “Rajin New Port Development Plan,” Rajin port development will undergo major transformation as an international hub port, similar to Busan Harbor, unlike the previous small-scale renovations of Piers 1, 2, and 3. This new port is expected to be built across from the current Rajin Port.

Rajin Port development was initially considered as a remodeling project to update the existing wharfs. In 2003, China began to implement construction of Piers 1, 2, and 3. However, the piers began to deteriorate and for the lack of railway and road infrastructure in the area, it delayed the transportation and distribution and could not perform its full function. As a solution, in 2008, North Korea transferred the usage right of Pier 1 to China and Pier 3 to Russia. At that time, Pier 1 was developed to primarily transport chemical fertilizers but it was recently updated as a transportation dock for coal. Russia, in addition to the port, also carried out a modernization project of the Rajin-Hassan railway system to improve the transport of containers.

The new port development plan as suggested by North Korea indicates Jian Group of China as the responsible party for developing the new port into a container port. However, considering that North Korea’s industry does not call for container ports, it is more likely that North Korea is expanding the port to make it a hub port to ship cargo to China, Russia, and Europe. Considering Rajin Port’s geographical advantage, it is likely that North Korea is striving to make it into an international hub port that connects the Pacific with Northeast Asia.

China’s recent advertisement of investment is also considered to be linked with the new port development in Rajin Port.

UPDATE 1 (2012-3-1): Accoridng to Stratfor, the Chinese have denied they plan to make this investment.

The Chinese Foreign Ministry denied allegations made in a Feb. 16 South Korean media report regarding its agreement with North Korea to jointly develop the Rajin-Sonbong Special Economic Zone (SEZ), a port area in northeast North Korea commonly referred to as the Rason Special Economic Zone.

According to the Yonhap news agency, Beijing agreed in late 2011 to invest about 19 billion yuan ($3 billion) into Rason, for which it would receive the lease of three piers for 50 years. Under the agreement, Beijing would also build an airfield, a thermal power plant and a 55-kilometer (34-mile) railway track connecting Rason to Tumen, China. The Chinese Foreign Ministry claimed that the specific details of the report are untrue and that China and North Korea had agreed only in principle to develop the zone.

China has long exerted its economic influence in North Korea and has an interest in the strategically important Rason Special Economic Zone. Chinese involvement in Rason dates back to the 1990s, though Beijing increased its involvement considerably in 2005 when it secured the rights to one of the port’s piers. Beijing has been particularly involved over the past few years. While the details of the deal remain unknown, it is clear that Beijing has arranged to help Pyongyang develop Rason, possibly by connecting the remote port to northwest China. Such a development would revitalize the zone — to the benefit of both countries.

ORIGINAL POST (2012-2-15): China has committed to infrastructure projects in Rason. According to Yonhap:

China has secured the rights to build three new piers in a special economic zone in North Korea’s northeast and use them for 50 years, sources said Wednesday.

China will also build an airfield and a thermal power plant in the special economic zone known as Rason, as well as a 55-kilometer railway track between China’s northeastern city of Tumen and Rason.

North Korea and China reached an agreement late last year to build infrastructure in Rason with Chinese investment of about US$3 billion, according to the sources in Seoul and Beijing.

The Daily NK offers some more data:

China has agreed to dig out dock 4 at Rasun to make it possible for 70,000 ton vessels to dock and to construct a runway long enough to accommodate passenger and cargo aircraft within the SEZ; the railroad is due to be complete by 2020, while the development of dock 5 and 6 will follow that of dock 4, Yonhap sources claim.

This agreement was reportedly signed quietly by North Korea’s Joint Ventures Committee and the Chinese government shortly before Kim Jong Il’s death.

The North Koreans have sought the construction of an airport and expansion of the port  for some time.

KITC published the image above in 1995 (Source here).  If you look carefully on the right side of the picture you will see the site of a proposed airport.

Above is a more recent map of Rason published by the DPRK. In the middle of the above map you can see a small airplane which represents the desired location of a future airfield. It is in the same location as shown on the KITC map.

Here is the approximate location on Google Earth (42.397884°, 130.592084°):

If you look at the left side of the KITC photo you can also see that there are many piers, however today there are only three.  I suspect that the new piers will be constructed south of the current piers and will look something like this:

The railway and power plant projects are intereting as well.  There is already a thermal power plant in Sonbong, so I expect that the Chinese are simply renovating it so that it generates more power or is simply more reliable (Google Earth:  42.327275°, 130.382585°):

At a presentation at the Korea Economic Institute in Washington, DC, Andray Abrahamian reported that increased electricity supplies for the Rason Zone could come from China.

As for the Tumen (China) – Rason railway line…this already exists as well.  The DPRK’s Hambuk Line (함북선) runs from Chongjin to Namyang (border with Tumen) to Rason:

The Tumen to Rason leg of this railway line, however, is approximately 156km (according to Google Earth) and likely runs pretty slowly.  The proposed new Chinese-built Tumen-Rason line is intended to be just 1/3 the distance!

Additional Information:

1. The Russians built a railway line from their border to the Rajin Port. Learn more here.

2. The Chinese and Russians have already rented two of Rajin’s three ports.

Read the full stories here:
China secures right to use 3 piers to be built on N. Korean port for 50 years

China Reportedly Grabs 3 Docks and More
Daily NK


Daewoo Shipbuilding [not] to invest in DPRK SEZ

Friday, February 10th, 2012

Pictured Above (Google Earth): The Hwanggumphyong and Wiwha Island SEZ on the Yalu/Amnok River which separates the DPRK and PRC.

On Friday, the Donga Ilbo reported that Daewoo Shipbuilding was going to invest in the DPRK’s Hwanggumphyong SEZ (see the original post below).  Today the report appears to be incorrect. According to the Wall Street Journal:

Daewoo Shipbuilding & Marine Engineering Co. on Monday shot down news reports that it had agreed to build a shipyard in North Korea.

“We don’t have any plans to do that,” a spokesman said.

According to some South Korean news accounts over the weekend, the company, which is the world’s second-largest builder of ships and whose controlling stake is owned by the South Korean government, had agreed to help a Chinese company develop an island off North Korea’s northwest coast, near the Chinese city of Dandong.

The DSME spokesman said the company held discussions with the Chinese company but isn’t close to an agreement.

The news accounts said DSME would build a shipyard that would be devoted to repair work. One report said the idea would be presented to DSME’s directors and announced in April.

The company spokesman said it’s unclear how the accounts originated.

See the original report bleow:



Nampho port frozen (again)

Friday, February 10th, 2012

In February 2011 I posted reports that the DPRK’s west coast was experiencing record-low temperatures and the ports were frozen. Unfortunately for the North Korean people, history is repeating itself.


Pictured above (Yonhap): two satellite images of the DPRK’s west coast

According to the Donga Ilbo:

North Korea`s fisheries and shipping industries, two key earners of foreign currency for Pyongyang, have effectively been shackled due to a prolonged cold wave that has frozen waters in the Yellow Sea.
With the temperature reaching minus 10 degrees Celsius for more than a month, more than 40 kilometers of sea water in the Yellow Sea off the North`s coast have been frozen. This is the first time in decades that about 200 kilometers of the North`s coastline from the mouth of the Yalu River to the North`s Hwanghae provinces have been frozen.

Experts say the frozen water will not only affect the North’s fisheries and shipping industries, both of which are major earners of U.S. dollars, but also the Stalinist country`s economy and newly launched Kim Jong Un administration.

Massive ice blocks cover 200 kilometers of N. Korean coastline

In Seoul, the Korea Center for Atmospheric Environment Research and the Korea Meteorological Administration said Thursday that based on analysis of satellite images, massive ice 40 kilometers wide was detected in North Korean coastlines spanning 40 kilometers from the mouth of the Yalu River to coastal waters off Pyongyang.

According to the analysis, Korea Bay located in between the North’s Cholsan and Changyon peninsulas has remained frozen since Jan. 10 due to the cold wave. Coastal waters of Unryul County in South Hwanghae Province, the Chongchon River flowing into Korea Bay, and the port of Nampo at the mouth of the Daedong River running through Pyongyang are also covered with ice.

Chung Yong-seung, director of the environmental think tank, said, “In the past, waters off the North Korean coast used to be frozen. But the formation of such large-scale ice is unprecedented.”

Experts blame arctic ice moving south due to global warming for the ice formation.

North Korea has been hit by a severe cold snap this winter. According to the South Korean weather agency, the North’s average temperature last month was minus 8.4 degrees, 0.7 degrees lower than in an average year.

The Chosun Shinbo, the official newspaper of the pro-Pyongyang Federation of Korean Residents in Japan, recently said, “Temperatures in Pyongyang remained below zero from Dec. 23 last year through Jan. 31, the most extreme cold since 1945,” adding, “North Koreans can even walk on the Daedong River.”

Temperatures in the North fell further this month to minus 11.1 degrees on average, down 4.6 degrees from an average year.

Big burden on N. Korean gov

The ice formation in North Korean waters is pressuring the Kim Jong Un administration economically, experts said. The combined share of fisheries and agriculture in the North`s GDP is 20.8 percent, eight times higher than for South Korea (2.6 percent). Fisheries also play a key role in sustaining the North`s economy with catch volume reaching 630,000 tons a year.

Pyongyang`s dollar earnings have also been hit hard due to the frozen sea that has prevented fishing boats from leaving ports. Goh Yoo-hwan, head of the (South)Korean Association of North Korean Studies, said, “The North should export primary products such as fisheries goods, but no fishing operations due to the frozen water will take a huge toll on the North`s dollar earrings.”

Waters near China’s Liaodong Bay and Russia’s Vladivostok have also been frozen, causing the North’s maritime transportation to go awry. Due to soured inter-Korean relations, the North`s trade with the South and Japan has declined and raised the Stalinist country’s dependence on China to 56.9 percent.

Kim Yong-hyeong, a professor of North Korean studies at Dongguk University in Seoul, said, “If the ice formation in waters wreaks havoc on the North’s maritime transportation, this will destabilize the North Korean economy.”

The problem is that ice at sea is growing thicker. The National Meteorological Satellite Center in Seoul said the boundaries between ice blocks and waters in the North’s section of the Yellow Sea were vague last month, but grew clear this month with ice getting thicker.

Director Chung of the environmental think tank said, “Given North Korea’s weather conditions, the ice in the sea will grow thicker through early next month,” adding, “North Korean society will be hit hard if its fisheries and shipping industries are grounded for more than two months.”

And just how productive is the DPRK’s fishing sector?  According to Yonhap:

Chung Yong-seung, head of the research institute, said it is rare for the port to freeze two winters in a row, a development he said could have a negative impact on the North’s fishing industry.

North Korea’s catch reached 663,000 metric tons in 2009, the latest year for which statistics are available, according to the South Korean government data.

Read the full reports here:
N. Korea’s largest port frozen for 2 straight winters

Extended cold wave freezes key NK sectors of fisheries, shipping
Donga Ilbo


Rason update

Thursday, December 22nd, 2011

Andray Abrahamin and John Kim worte a comprehensive summary of the current state of Rason. The article appears in The Diplomat:

In 1991, the North Korean government dubbed Rajin-Sonbong (Rason) a free trade zone to attract foreign capital. However, less than a decade later, the zone lost its free trade status. According to local businessmen, the party secretary of Rason, a relative of the late Kim Jong-il himself, was charged with corruption and eventually executed, a harbinger for the long period of isolation ahead. Since the end of 2009, signs of renewed commitment to Rason have sprouted. While it may be too early to say whether the region will succeed in drawing investment and reform, our recent trips to Rason lead us to believe that developments on the ground may eventually warrant a shift in foreign policy by governments around the globe.

China has long eyed Rason as a potential import/export center for the landlocked provinces of Jilin and Heilongjiang. However, from Rason’s inception, the Middle Kingdom held little influence or interest in the region’s success. In 2002, North Korea establishedanother special economic zone in Shinuiju and instated businessman Yang Bin, then China’s second richest man, as the SEZ’s Chief Executive. The Chinese authorities promptly placed Yang Bin under house arrest. Perhaps as a lesson learned from this episode, the North Koreans have made the Chinese government a major stakeholder in Rason’s development.

The Chinese have moved 80,000 metric tons of coal this year through a pier they leased at the Rajin port.They are also reportedly sending regular delegations of senior officials, including the Chairman of the China Development Bank, and they have invested $30 million to repave the road from the border town of Wonjong to the Rajin Port. This road was 60 percent paved during a visit in October, and recent reports from businessmen inside the region confirm that the road is now 95 percent paved, allowing for large trucks to pass through. The Chinese have also constructed a new road on their side of the border, part of the support this area has received after the Chinese central government designated it “The Changjitu Development Region” in November of 2009.Officials from the North explained that the Chinese will have a say in everything from zoning of real estate to port customs and investment policies.

Though Russia’s involvement doesn’t run as deep, it also maintains a keen interest in Rason’s ice-free port and has pledged an investment of $200 million to refurbish a railway from the border town of Khasan and to upgrade pier three at the Rajin port, which it has leased for 49 years. Rason’s third port at Oongsang was once a major exporter of lumber from the Soviet Union, and though Oongsang looks far from reviving the Soviet involvement of its heyday, Russia clearly has an interest in Rason’s success as well.

In addition to neighboring countries’ newfound interest in the zone’s success, the North Korean leadership has also shown a renewed desire in luring investment into the region. In December 2009, Kim Jong-il made a visit to the area, sent his former trade minister to run the region as party secretary, and reinstated Rason’s status as a special city, wresting it out of provincial control. Any potential investor who visits the SEZ would experience the thirst of the local government to develop the region, as reflected by the words of an official with the Rason Economic Cooperation Bureau, Rhee Sung Hye: “The future of my career depends on how much investment I can bring.”

At the national level there are also signs that the regime is increasing its focus on economic development as a source of legitimacy. In 2009, the Joint Venture Investment Commission was formed as a one stop shop for foreign investors, while the Taepung Group and State Development Bank were created to attract foreign investment. In the first half of 2011, Kim Jong-il made more appearances related to the economy and less related to defense than in prior years, and a focus on improving lives through focus on light industry and agriculture was emphasized in joint editorials that signaled policy direction at the beginning of 2010 and 2011.

The alignment of simultaneous commitment from North Korea, China, and Russia sets the scene for a North Korean special economic zone with higher chances of success than perhaps ever before. However, interest and desire may not necessarily translate into results without knowledge of markets and how to create a stable investment environment. After a recent tour of his 200MW fuel oil powered generation facility, the President of Songbong Power, Rhee Kang Chul, expressed that the reason for his plant’s inactivity and the subsequent blackouts in the region was the rise in feedstock costs. When asked about mechanisms for electricity pricing, Rhee responded that the government had set power prices at 6.5 euro cents/kwh, but he couldn’t provide further details on how the number was arrived at and when it might change again. Though Rhee was clearly an expert on the technical aspects of power generation, he hadn’t had the chance to consider that potential investors, after getting comfortable with country risk, would have little clarity on the revenue side of their equation. When this was expressed to the Vice Mayor of Rason, he replied, “We can change the price of electricity here. Rason is not under the same restrictions as the rest of the country.”

North Korea could theoretically piggyback off the market knowledge that their Chinese partners have gained over the last 30 years, but Rason’s neighbors are only likely to share when it suits their interests. In the case of Sonbong Power, Kang told us that every Chinese official who has visited stated that the most effective solution would be to pipe in power from the Chinese grid. “We plan to have a power line installed from the border by the end of 2013.” As power is as strategic asset like food or water, dependence on Chinese power clearly leaves the North Koreans in a vulnerable position.

China is clearly North Korea’s closest ally, but their relationship has a thorny history and Pyongyang is acutely aware of its reliance on big brother Beijing. With China’s rise, many other countries in the region are increasingly dependent on trade but increasingly cautious of dependence, welcoming a stronger presence from the United States, which is in the midst of a strategic pivot towards Asia.

In December 2009, the Asia Society and the Institute on Global Conflict and Cooperation published a report arguing that economic engagement of Pyongyang by the United States would result in creation of vested interests in continued reform, a changed perception of self-interest and a less confrontational foreign policy from North Korea. Against the backdrop of a more uncertain domestic environment after the death of Kim Jong-il, and the shifting dynamics in Asia generally, a North Korea that trades more and engages with the outside world may necessitate a change in foreign policy of governments around the world, most specifically the United States, South Korea, and Japan.

The Rajin-Sonbong SEZ has a checkered past and it would be naïve to say that North Korea is embarking on late 1970’s style Chinese economic reforms. However, we believe that the unprecedented alignment of interests in the region make it a likely starting point for any lasting directional change, which is why the world should watch Rason.

Read the full story here:
Why World Should Watch Rason
The Diplomat
John Kim & Andray Abrahamian