The Chosun Central News Agency (KCNA) reported on Monday that North Korea has designated Rason, the site of North Korea’s first, largely unsuccessful free economic zone, as a “special city” through a “political order” of the Presidium of the Supreme People's Assembly.

No other details on either the backdrop to the decision or what the designation means in practice were given. The report simply added, “The Cabinet and related apparatus need to make executive plans to carry out this order.”

Prior to the move, in the New Year’s Statement on January 1st, North Korea emphasized, “Let’s expand foreign markets and engage actively in foreign trade activities,” and “Let’s greatly advance the people’s lives.” Following this designation of Rason as a special city, follow-up measures related to the promotion of the free economic zone will be crucial.

In mid December, 2009, Kim Jong Il visited Rason to conduct an onsite inspection of the Rason Daeheung Trade Company. It was the first time in the 19 years since the city and its surrounds, then known as the Rajin-Sonbong Free Economic Trade Zone, were designated as such in December, 1991. During his inspection, Kim Jong Il is reportedly to have reiterated, “We have to constantly expand our foreign markets through intensive foreign trade.”

The “Rajin-Sonbong Free Economic Trade Zone” was designated by Administration Council Decision No. 74, but it failed to bring in much foreign investment. According to South Korean analysis, actual investment amounted to less than $150 million dollars. Among its facilities are a casino and hotel largely frequented by Chinese tourists.

From 1993 to 2004, Rason existed as a “directly-governed city,” outside the auspices of provincial control, but was put back under provincial control thereafter. The new designation, “special city,” is different.

In September, 2007, North Korea and China discussed a joint plan to develop Hunchun in China and Rason by modernizing roads between them and constructing a joint industrial complex, while the right to develop the No. 1 dock at Rajin port was given to a Chinese company, Chuangli Group, after the visit to Pyongyang of Chinese Premier Wen Jiabao in October last year.

Meanwhile, Russia, keen to secure usage of a port which doesn’t freeze in winter, holds the exclusive usage rights for the No. 3 dock at Rajin, and in 2008 began upgrading 54km of railway line between Khasan and Rajin at a cost of approximately $200 million. In theory, the time it takes to put South Korean goods into European shops could be greatly reduced by shipping them through the port.