June 1, 2006｜Korean Peninsula
3.The Rason Economic and Trade Zone
Today, in the DPRK, joint economic ventures and collaborative activities with people from various other countries, including Koreans based overseas and Chinese, are being actively undertaken. Amidst these, the development of the Rason Economic and Trade Zone is receiving a great deal of attention. Investment in this zone by a number of countries, including China, is increasing.
Due to its favorable geographical and climatic conditions and the existence of the vast markets of Far Eastern Russia and Northeastern China in its hinterland, hopes are high for the future of the DPRK’s Rajin-Sonbong area as an economic and trade zone with comprehensive functions, such as an entrepot for cargo transport, processing and manufacturing industry, tourism and financial services. It is also expected that it will play a major role in the long-term economic development of Northeast Asia.
Development has progressed over the dozen or so years since the designation of this area as an economic and trade zone was announced, and the conditions that will enable foreign investors to conduct activities smoothly are being put in place. Cargo transport to China and Russia is conducted by means of the northern region railway lines linked with China and Russia, via Namyang and Tumangang stations respectively. Recently, the issue of connecting railways between the DPRK and Russia was discussed and it was agreed that the railway between Khasan, Tumangang and Rajin would be modernized, as an initial measure. Moreover, the issue of the investment of Russian capital in the establishment of the Rason Economic and Trade Zone has been discussed.
The roads have also been upgraded and it is now possible to travel back and forth to China on a daily basis, via Hoeryong, Sambong, Namyang, Saeppyol County and Wonjong. Moreover, with regard to international communications, it is possible to contact any given country via the Pyongyang satellite communications station; microwave communications are used between Pyongyang, Rajin and Vladivostok, while fiber optic communications can be used between Rajin, Sonbong and Hunchun.
Hotels and tourist facilities have also been developed in the Rason zone, so it is convenient for travel. There are ten hotels and there is considerable passenger transport capacity. Based on the development of such infrastructure, investment in this zone has increased, totaling US$299 million by the end of 2003. 177 companies have been established, of which 116 are foreign-invested companies (15 collaborative companies, 45 joint ventures, 38 foreign companies and 17 offices and representative offices) and 61 are companies that have received domestic investment.
The main fields of investment are infrastructure and the service sector, focusing mainly on communications, hotels, transport, construction and tourism. Investment has been concentrated in the infrastructure sector because investment in infrastructure development was prioritized and strongly encouraged in the initial stages of the development of the zone. The biggest role in investment in the infrastructure sector has been played by Hong Kong’s Emperor Group (which invested US$59 million in a first-class hotel).
As investment increases and development progresses, the number of foreigners visiting the zone is also growing. More than 100,000 foreigners visited the zone in 2002 alone. Of course, there is the constraint that investment in the production and export processing fields is low. However, it is anticipated that, in the future, as the zone takes shape further, if the investment environment is improved, investment in these fields will also grow.
Until now, there have been many applications to invest in the Rason Economic and Trade Zone, but the tempo of its realization has been slow, due to various constraining factors. Foreign concerns about investment are related in no small measure to the stability of the situation.
The DPRK’s internal situation is highly stable and the country is well protected thanks to General Secretary Kim Jong-il’s military-first politics, so all the conditions are in place for its external stability as well. The opening of a representative office in Pyongyang for the first time by the ABB Group of Switzerland at the beginning of last year is believed to be due to a solid judgment about the stable political situation in the DPRK.
Today, the development of the Rason Economic and Trade Zone is actively being promoted, but in the future, it is anticipated that it will be further invigorated as a comprehensively developed international economic and trade zone, in response to future trends in the development of Northeast Asia and the global economy. Rather than stopping at developing this zone as an entrepot trade base that fulfils a key role in international cargo transport, the government of the DPRK is formulating a plan to make effective use of its industrial foundations and build an export processing based focused on light industry and processing industry based on technology exchange, as well as developing profitable tourism resources and constructing international tourist attractions and a financial center providing high-level services. Accordingly, it is steadily making preparations aimed at translating this plan into reality. If these goals are achieved, there is a good prospect that the Rason Economic and Trade Zone will, in the near future, become an economic complex offering trade, entrepot export, export processing, financial and tourism services.