Eyes are on Singapore as President Trump and North Korean leader Kim Jong-un prepare to hold a historic meeting on June 12. It’s anticipated that discussions between the two leaders will touch on nuclear disarmament and peace on the Korean Peninsula. Trump wants the “complete, verifiable, irreversible dismantlement” of North Korea’s nuclear weapons but the way forward may be economically charged. It could be wishful thinking but many are hoping for real, lasting change…
A visit to North Korea’s Special Economic Zone
If money could talk, the coins and currencies in North Korea’s Special Economic Zones would testify to the potential for change in the world’s most reclusive nation.
Last year, I visited the northernmost province of the Democratic People’s Republic of Korea (DPRK), where I was exposed to commune farms and hillside livelihoods close to the border of China. People warned it would be like stepping into a time machine. And in some ways, it was like I had stepped out of the busyness of the metropolis world I knew, into rural 1960s Korea.
On the last day, we crossed into Rajin Sombong (Rason), a Special Economic Zone in the DPRK and the change was immediately visible.
Dirt roads gave way to stretches of concrete paths and locals wore fancier coats than their comrades in other parts of the country. Its roadside buildings were taller and wider, and wait, did I just see a taxi?
Competing taxi companies are big business in Rason, which also explains the few petrol stations we saw across the Special Economic Zone. We weaved past factories, not empty after the United Nations economic sanctions, and noticed the Emperor Casino, valued at $64 million, catering to affluent Chinese tourists.
The difference in living standards between Rason and its neighbouring provinces was profound but it sparked a degree of hope and curiosity during my visit. Foreign investment may just be the vehicle for change in a country ravaged by the worst drought in 16 years, and burdened by a struggling population.
“Welcome to this special economic zone, It’s a lot more free-er here” said our tour guide.
What’s so ‘special’ about Special Economic Zones?
A Special Economic Zone (SEZ) has ‘special’ rules, concessions and benefits for trade. Foreign-owned companies can set up shop in these zones, along with any production facilities that can help it attract the foreign investment it needs.
DPRK’s leader Kim Jong-un began experimenting with a dozen SEZs in 2013 to foster economic development. The area of Rason, short for Rajin-Sonbong, was the first type of Special Economic Zone to be set up in 1991.
The Special Economic Zone is similar to China back in the 1980s when Deng Xiaoping began experimenting with foreign investment before opening the country up to the world. Unlike its Chinese brethren, SEZs in North Korea has largely been a means of containing foreign investment from the rest of the country.
Associate Professor in International Relations and Comparative Politics, Justin Hastings says SEZs benefit locals by enabling a means of income, taking home what’s left after the government’s cut of the pie.
“Locals can see how enterprises work and have the chance to interact with non-North Koreans. Although the government tries to minimise that as much as possible, a couple of locals are benefiting and you can argue that it’s better than nothing,” he said.
“We tend to think of North Korea as isolated, but the country can be fairly encouraging of foreign business because they want your money and investment. Informally, North Koreans want to develop – they want to learn how to play the market and build companies that will function. Foreign investment is a learning process to do that,” said Prof. Hastings.
According to Prof. Hastings, the best case scenario from SEZs is to see the spread of foreign investment across the country, in hopes it will lead to internal development.
Despite his hopes that foreign investment will help the local population, Prof. Hastings says realistically, foreign investment alone is unlikely to cause a major sea change.
As Kim Jong-un continues to pivot and prioritise economic development, tomorrow’s meeting with President Trump will either propel North Korea’s economic development or add to the existing pressure from UN sanctions. One can only hope.