North Korea is moving fast to expand foreign trade and attract foreign investment in a bid to escape economic difficulties. The nation revised a law governing its Rason economic and trade zone in January this year to increase the inflow of foreign investment. Under the revised law, a supervisory organ in Rason will assume the comprehensive role of the central government. The law also encourages investment in high technology and infrastructure construction. For companies investing in these areas, corporate income tax will be cut from 14 percent to 10 percent. But what grabs our attention the most is a new article that has been added to the law. The article stipulates that ethnic Koreans living outside North Korea can engage in economic and trade activities in Rason, indicating that the North has virtually decided to allow South Korean companies to invest in the special zone. Let’s listen to Cho Bong-hyun from the Economic Research Institute of the Industrial Bank of Korea.

Two North Korean border towns of Rajin and Sonbong merged to form Rason, which was designated as a free economic and trade zone in December 1991. Located on the nation’s northernmost coast, Rason borders both China and Russia. North Korea had an ambitious goal of developing the area into a logistics hub of Northeast Asia and a strategic base for exports, processing trade, tourism and finance. But the project eventually ended in failure. Lately, North Korea has turned to the Rason project again, amid the severe economic difficulty. Notably, the revised law makes it possible for South Korean companies to do business in the special zone. When the law on Rason was first enacted, it included an article allowing South Koreans to enter the area. But the article was removed in 1999. For the first time in eleven years, North Korea has reopened Rason to South Korean businesses.

Also, North Korea has reportedly opened its Rajin Port in the Rason area to China and Russia. Li Loong Si, the governor of the Yanbian Korean Autonomous Prefecture in China’s Jilin Province, said on March 8 that North Korea had decided to extend China’s right to use Pier No.1 at Rajin Port for another ten years and to give Russia the right to use Pier No. 3 at the same seaport for 50 years. Rajin Port, located on the lower Tumen River, is an important location that may enable three northeastern provinces in China to ship materials to the Pacific region. North Korea, for its part, seems to be expecting to use Rajin Port as a key point for bringing in foreign currency and spurring economic development as well when China’s investment hits full stride and development proceeds smoothly. But Mr. Cho predicts that the opening of the Rason City will unlikely bring a breakthrough in foreign investment anytime soon.

China is likely to make some investment in modernizing Rajin Port and constructing additional piers there because it can expect economic effects from the port project. Actually, China has already been working on the project. But it doesn’t mean the influx of cash or dollars into North Korea. Rather, investment has mostly been made in goods and materials. Therefore, it’s hard to expect that the Rason special zone will draw a dramatic amount of foreign capital.

North Korea is so desperate for foreign investment because there’s no other means of easing the worsening economic difficulty besides seeking investment from outside. Since early this year, the communist nation has released a series of new economic measures, such as the expansion of social overhead capital through investment companies and the creation of special economic zones in various parts of the country, such as Pyongyang, Nampo and Shinuiju. In January, the National Defense Commission decided to set up a state development bank and designated the Korea Taepung International Investment Group as an agency in charge of international funding for the bank. North Korea reportedly has another investment agency, the Pyonggon Investment Group, which is seeking investors for construction of 100-thousand houses in Pyongyang. Experts are noting the potential role of these two investment groups.

Many are mentioning the Pyonggon Group these days, although the company’s status hasn’t been officially confirmed yet. North Korea has been renovating or constructing 100-thousand houses in Pyongyang for the last three years, and the Pyonggon Group has been trying to attract investors for the modernization project. It has made contacts with South Korean firms on many occasions in an apparent bid to draw investment from them. But the official channel to link foreign investors with North Korea is the Taepung Investment Group, which is under the control of the National Defense Commission. This group invites foreign capital to various areas in North Korea, including agriculture, the manufacturing industry and even finance.

Meanwhile, the South Korean government remains circumspect about Pyongyang’s latest attempt to attract foreign investment. Mr. Cho says there are both positive and negative impacts of the North’s move on future relations between South and North Korea and inter-Korean economic cooperation. But Cho also says it’s highly likely that North Korea’s efforts to draw foreign investment will fall through as long as international sanctions against the North continue and Pyongyang refuses to return to the six-party nuclear talks.

If North Korea actively seeks investment from South Korean companies in the Rason area and changes its previous rigid attitude toward economic cooperation with Seoul, it will influence South Korean businesses and inter-Korean ties positively. To succeed in drawing foreign investment, North Korea must rejoin the six-party talks and resolve the nuclear crisis. At least, the North may become more committed to these diplomatic issues, because foreign investment would be impossible without solving these problems. But there may be negative consequences as well. If North Korea successfully attracts investment from overseas, foreign investors will mostly consist of companies from China and Russia. The North Korean economy will then depend more on China, and South Korean firms will find fewer opportunities to advance to North Korea even when bilateral relations improve.

North Korea’s recent move to attract foreign investment expand foreign trade will hopefully help resolve its economic difficulty and lead the nation to reform and openness. But North Korea should first closely examine the economic feasibility of foreign investment. Most importantly, Pyongyang must return to the six-party talks soon so it can gain trust from investors.


[Interview]Local High School Students Volunteer to Teach English to N. Korean Defectors
About 20-thousand North Korean defectors have resettled in South Korea. The central and provincial governments have devised a variety of support measures for the newcomers, but many of them still have a hard time adjusting to South Korean society. One of the difficulties they face is the South Korean language, which employs lots of foreign and English expressions. To help ease that problem, an English class is held every Saturday at the office of civic group “The Organization for One Korea,” located in the Jongro District in central Seoul. It seems students from North Korea are unfamiliar with English. But they are pricking their ears to hear what the teacher says, and try to repeat the English words as the teacher pronounces them. Interestingly, students are all grown-ups from diverse age groups, while the teachers are much younger—they’re high school students. The Organization for One Korea, a private group dedicated to supporting North Korean newcomers, organized this class. Let’s listen to group director Shin Mi-nyeo, and one of the young teachers, Hong Ju-won, who is in her second year in Daewon Foreign Language High School.

…In the initial stage, the learners were mostly college students from North Korea. From this year, defectors with counseling certificates began to join this English class. Their job is to offer counseling services to their fellow North Korean defectors, but they often find counseling difficult because there are so many unfamiliar foreign expressions. So they attend this class every Saturday. Students from several foreign language high schools have asked if they can volunteer to teach English. Currently, students from Daewon Foreign Language High School are serving as teachers.

…I was hoping to engage in some volunteer work when I entered high school. I heard few North Korean defectors had been exposed to an English-speaking environment and I was willing to teach them. Four students from my school prepared for the class and started working as volunteer teachers.

The North Korean newcomers are at a loss when they see the words like “self-service” or “napkins,” on the walls of the kitchen. Some of them were told to use an elevator or an escalator but they lost their way because they didn’t know exactly what the “elevator” and “escalator” meant. In North Korea, most students learn the Russian language, not English. Even if they learn English, their pronunciation is different from that of native speakers of English. So, it isn’t easy for them to learn English here in South Korea.

…I studied Russian when I was in North Korea. I was confident with my Russian, but it turned out the language is useless in South Korea. I had to learn English instead. It’s challenging to pronounce English words correctly. In Russia, ‘a’ always sounds [a] as in ‘car,’ but in English, it may sound [o] or [ei]. It’s quite confusing.

…English I learned in North Korea is very different from English used in the South. For example, I used to pronounce the word ‘book’ as something like ‘boo-ku.’ I learned English in North Korea, but that makes it all the more difficult for me to learn the same language here.

About ten defectors have been attending the Saturday English class since January. The students vary in age and the proficiency in English, so the teachers began instructing them in basics, such as the English alphabet and phonetic forms of each word. The teachers also explain in detail South Korean culture or terms the newcomers are not accustomed to. The first session of the class will be over in May, but the students of Daewon Foreign Language High School plan to continue volunteering to teach English until they enter university. Hong Ju-won hopes to create a new name for the volunteer group and make it a tradition to teach English to defectors for younger students in her school.

The learners couldn’t even read a single word at first, but they have improved a lot. They can read many words now. I feel my work is rewarding. Four people started teaching, but they are not enough to meet the rising number of defector learners. I’m going to select new volunteer teachers from tenth graders in my school. I hope the class will be expanded to invite many more defectors hoping to learn English.

The young teachers have never skipped the class, despite their tight schedule and the heavy burden of preparing for a college entrance exam. It seems their generous participation in the volunteering work and the heartfelt concern about the newcomers from North Korea are brightening the future of a unified Korea.