Chinese and Russian investors in Rason Special Economic Zone of North Hamgyong Province are reportedly withdrawing from North Korea. The root cause of the phenomenon is said to be the North Korean government’s inconsistent policies.
Rason, regarded as a symbol of North Korea’s reform and openness, has been actively seeking foreign investment, although sources in the region say it now feels like a “ghost town,” and has lost signs of its previous vitality. Foreign investors have stopped visiting the city, and existing foreign-owned companies are said to be withdrawing in quick succession.
“The Chinese companies in Rason all want to withdraw, citing unacceptable government practices. Some Russian companies have withdrawn from the city in the middle of construction, realizing that they can’t expect to profit from investing in the city,” a source in North Hamgyong Province told Daily NK.
“The Chinese investors used to mobilize their own vehicles to carry goods to the city, but now these practices are disappearing. Rason has for some time been regarded as a risky investment by foreign investors.”
According to a separate source in North Hamgyong Province, the city of Rason has lost its credibility with foreign investors due to repetitive swindling by North Korean businesses and institutions. North Korean entities are known to insist that conditions that were previously not mentioned in contracts have not been met, or provide various excuses for not remitting money that has been earned.
“Some foreign companies have left the city quickly, without even attempting to take their investment profits with them, believing that it’s a waste of time. They must have concluded that they should leave before losing even more,” he said.
“Some private Chinese investors have yet to receive any of their profits because they believed that their North Korean counterparts would abide by their promises to remit the money. Despite this, some small and medium-sized businesses and private investors appear unwilling to leave the city.”
The North Korean government has recently issued a new demand to foreign companies and private investors in Rason City. In recent days, the Ministry of State Security [MSS] has reportedly requested that Chinese companies and investors provide fuel for vehicles, as the price of gasoline in the city has skyrocketed.
According to data compiled by Daily NK’s sources, the price of gasoline in the city was 6 RMB per liter until only a few weeks ago, but remains under 10 RMB. Vehicles have not been visible in the city for some time, as most of the residents cannot afford to fuel their cars.
“As the prices are not showing any signs of decline, the MSS has been directly asking foreign investors in the city to provide fuel for their vehicles. The foreign investors have no choice but to obey, as it is essential for them to maintain good relations with the North Korean government,” an additional source in Rason explained.
“Foreign investors are tired of North Korea’s ridiculous demands and are saying that they will never invest in North Korea again. Even the local residents are saying that the city is being abandoned.”
Daily NK recently reported that Mangyongbong, the freight and passenger ship between Rason and Vladivostok, has started operations but does not seem to be popular among foreign tourists.
