It’s time for “Direct Analysis” where we take a look
at a hot topic in the news. The North Korean authorities have designated six
more economic development zones, bringing the total number up to nineteen. The
most important thing, however, is whether or not these zones are being managed
properly. Today we are going to talk about the management of such economic
development zones and existing special economic zones with reporter Kim Min
Soo.
-Kim Jong Un has designated a lot of economic
development zones since coming to power. What kinds of development zones are
there?
Kim Min Soo: Yes, well, Kim Jong Eun
established the Economic Development Zone Law in May of 2013, and designated 13
economic development zones and one special economic zone in November of that
same year. These zones were established in different regions of North Korea,
with specialties according to region. There are small and medium-scale
development zones that were established with $100 million USD worth of money
from both domestic and foreign investors as well as large-scale development
zones that were established with additional money from investors. These
development zones focus on agriculture, tourism, industry, and trade,
respectfully.
There are many development zones that depend on Chinese
investment. Progress in the Sinuiju Special Economic Zone, established in 2002,
had been halted, but there were reports last year that development has started
up again. Now North Korea has also announced the addition of six new economic
development zones, including a “cutting-edge development zone” in Pyongyang and
the Kangryong International Green Model Zone in South Hwanghae Province.
-Why is North Korea designating so many economic
development zones?
Kim Min Soo: The biggest reason seems to be
that they want foreign capital and investment due to the poor economy. They need money to continue to
rule and govern and Kim Jong Un needs to prove himself in the economic sector
in order to maintain dignity [and authority]. I think that’s why they’re
approaching this so aggressively. It’s hard to see this simply as a full-scale
effort for economic reform. It’s very possible that these areas will become
inaccessible to the North Korean people and that the goal is to simply procure
foreign capital for their own economic gains.
-North Korea has worked hard to attain foreign capital
after designating these economic development zones, right?
Kim Min Soo: Yes. They’ve invited and met
with foreign investors, they’ve ordered the financial workers in each province
or the managers of different businesses to look for investors, among other
efforts in the same vein. Last June, they combined the National Economic
Development Trade Committee and the Joint Investor Committee to create an
organization called “Foreign Economic Feasibility”. This organization hasn’t
really achieved anything.
The most well known effort was that of the
Hwanggeumpyeong Economic Development Zone three years ago. The Chinese Commerce
Minister Chen Deming attended the grand groundbreaking ceremony but there has
been no progress on the development zone since then. A journalist visited
Hwanggeumpyeong last May and reported finding just a few excavators and some
North Korean soldiers plowing a field.
-And existing development zones aren’t even
being managed properly, is that right?
Kim Min Soo: That’s right. The special zone
in Nasun was established over 20 years ago in 1991 and named a free economic
trading zone; It was intended as Northeast Asia’s international cargo delivery
and export processing zone, as well as a tourism and financial base. However, in twenty years it has only managed to attain
about a hundred medium and small Chinese enterprises and has raised no more
than $80 million USD in investments.
Recently, China and Russia, understanding
the need to be able to use Nasun Port’s dock, invested in fixing up the road
leading to Nasun Port and modifying the port itself. However, this is a far cry
from the original goal to make Nasun Northeast Asia’s international cargo
delivery zone.
-North Korea broke the contract and took
away Hyundai Asan’s business license for the Geumgang Mountain Special Tourism
Zone. Have there been any developments since then?
Kim Min Soo: No, there haven’t been. The
tourism business in the Mt. Geumgan area
came to a halt in July 2008 when a South Korean female tourist was shot and
killed. After that, North Korea confiscated the South’s property and used
cruise ships to promote and develop marine tourism for Chinese and foreign
tourists, but they haven’t really achieved anything from it.
Kim Jong Eun has designated the “Wonsan
Tourist Special Zone” in Gangwon
Province as a comprehensive vacation spot and there has been some progress
development there. He may have done this with the intention to also revitalize
Mt. Geumgang tourism, but it doesn’t
seem like the “Wonsan Tourist Special Zone” will easily achieve any kind of
results either.
-So it seems that the only zone that
actually achieved anything is the Kaesong Industrial Complex, which was done in
collaboration with the South Korean government and South Korean companies.
Kim Min Soo: Yes. Kim Jong Un may have
ordered the closure of the Kaesong Industrial Complex last year, but the Korean
government did not give up on this project, which it considers to be the symbol
of economic cooperation between the North and the South. The Kaesong Industrial
Complex started operations ten years ago in 2004. It has both continuously and
quantitatively grown since then. The annual output has grown 30 times in ten
years, accumulating a total output of 2.3 billion USD. The number of North
Korean laborers working in the complex has grown about nine times from about
6,000 to 52,000 people and the number of Korean businesses in the complex has
grown from 15 to 125.
The complex has potential to grow even more but the
problem remains that North Korea refuses to cooperate, thus only the very basic
level of business is conducted. If they had agreed to go along with the terms
of the original plan, the complex could have been operating at a higher level
by now.
-North Korea is making all these economic
development zones and even making new laws to go with them, so why do you think
they aren’t getting any investments?
Kim Min Soo: There are many reasons, but I
think the most important one is that the North Koreans can’t be trusted. In the
case of both the Kaesong Industrial Complex and Mt. Geumgang,, they broke
contracts with the South and even took away South Korean property. Last year,
the entire world watched as South Korean companies left the Kaesong Industrial
Complex. Who would want to invest in a place like that?
There are also many
cases of foreign companies signing contracts with North Korea and North failing
to honor those contracts or embezzling funds. The Chinese government even
distributes guides to Chinese companies, cautioning them about investing in
North Korea. North Korea can’t even earn the trust of South Korea or China, the
two countries most likely to invest, so how can they expect other foreign
countries to invest?
-I imagine the nuclear issue is probably a
huge sticking point for foreign investors as well.
Kim Min Soo: Yes. Do you think there would
be a lot of countries that would want to invest in a country that illegally
develops nuclear weapons and has sanctions imposed on it by the UN? These days,
companies are very concerned about their image. The UN has imposed sanctions on
North Korea and the international community is very critical of North Korea’s
violation of human rights, so companies avoid investing there. It’ll be
difficult for North Korea to lure in investors if it does not change its image,
no matter how many economic development zones it builds.
Yes, well, that’s all
the time we have for today. Thank you, Kim Min Soo, for sharing your words with
us.
