North Korea and China are pushing for bilateral economic cooperation centered on the joint development of the Rason special district in the extreme northeast corner of North Korea. Experts are watching for a groundbreaking ceremony to be held in Rason special city at the end of this month for a highway linking the North Korean cities of Wonjong and Rason. A number of leaders from North Korea and China are expected to attend the ceremony. Wonjong borders directly with Quanhe in Hunchun, Jilin Province in China. When the construction of the highway is completed, it will take about an hour to drive from Hunchun to North Korea’s Rason city. The North’s state-run Korean Central News Agency has already started promoting the development plan to transform Rason city into a venue for international freight brokerage and export processing. Here’s Dr. Dong Yong-seung at the Samsung Economic Research Institute to tell us more details about Rason city.

North Korea designated Rajin and nearby Sonbong in North Hamgyeong Province as an economic free trade zone in December 1991. The region drew much attention as the nation’s first “open” area. It is located close to where the Chinese, Russian and North Korean borders come together. After 2000, the zone was renamed Rason. It was elevated to Rason special city last year, becoming the first “special city” in North Korea. The naming indicates that North Korea is getting serious about making something of Rason by opening the area and attracting foreign investment.

According to domestic media reports, small fisheries processing factories were spotted in Rason until last year but the factories have been expanded and new plants have been set up since this spring. Also, one or two large Chinese companies have signed investment contracts on the Rason development project, while officials from China’s Commerce Ministry and the Jilin provincial government have conducted on-site investigations in the North Korean region. Workers’ Party officials in Pyongyang reportedly consulted with those Chinese officials. Rason city has been modernized, with new apartments being built there. Renovation is also underway in the Rajin Port, which has seen continuous shipping of goods since it was used for coal transportation between Hunchun and Shanghai last January. Why has North Korea been accelerating the development of this area recently?

North Korean leader Kim Jong-il visited China in May and August last year. During his second visit in August, the leaders of North Korea and China agreed on detailed measures to strengthen bilateral economic cooperation. Currently, China is carrying out a regional development plan linking its three cities—Changchun, Jilin and Tumen. North Korea and China agreed on potential projects to implement this plan in tandem with the Rason development plan. Following the agreement between the two summits, Chinese companies have shown growing interest in advancing into North Korea’s Rason region. North Korea, for its part, finds it increasingly important to attract capital from outside in order to achieve its ambitious goal of building a strong and prosperous nation by 2012. In reality, however, it’s hard for the reclusive North to open up all at once. That is why North Korea seeks to lure foreign investment by designating Rason or Shinuiju as special zones, with a greater focus placed on the Rason area.

Right after Chinese Premier Wen Jiabao’s North Korea visit in October 2009, China finalized a development plan in its northeastern region, covering the cities of Changchun, Jilin and Tumen, often referred to as “Chang-Ji-Tu,” near North Korea’s Rajin Port. Measuring 73,000 square kilometers in size, the triangular zone is equal to more than 70 percent of South Korea’s total land area. China seeks to link this vast area with a population of 11 million with North Korea’s Rason city and Russia’s Vladivostok to gain direct access to the Far East and the Pacific. For China, the use of North Korean seaport in Rason is essential to ship goods out to the East Sea and the Pacific. In March last year, China obtained a ten-year right to use Pier No.1 in Rajin Port. It later called for the use of additional port facilities there, securing a 50-year right to Piers No.4, 5 and 6.

North Korea’s Rason area is important for China, because it will give China access to the East Sea. The “Chang-Ji-tu” plan is about developing the Jilin Province, but for this plan to prove successful, securing an exit to the Pacific is crucial. Therefore, the exclusive use of port facilities in Rason is very significant. To use the port facilities effectively, it’s necessary to facilitate access to the port. So, China is eager to construct a road linking Tumen with North Korea’s Wonjong and a highway connecting Wonjong and Rason within North Korea.

The highway construction is interpreted as the first step toward openness of the Rason area and massive economic cooperation between North Korea and China. While bilateral economic cooperation is proceeding rapidly, some remain circumspect about the result of the development plan because there are still stumbling blocks, such as inadequate electricity and social overhead capital. Also, it depends on how extensively North Korea opens itself up when it comes to the matter of drawing foreign capital. North Korea needs to change its laws and systems to attract massive capital from China and guarantee Chinese investors autonomy. For that reason, Dr. Dong says the Rason development project may facilitate North Korea’s reform and openness.

South Korea may be concerned that the development of Rason will increase China’s influence on North Korea. On the flip side, however, China’s expertise in reform and openness, along with its capital, could enter North Korea to induce the North to pursue its own reform and openness. If that happens, it is more likely to positively influence the diplomatic situation on the Korean Peninsula. On the other hand, the Rason project may not proceed well and Chinese companies may fail to produce any substantial outcome, with North Korea showing reluctance to progress in reform and openness. If this proves to be the case, North Korea-China relations could deteriorate, resulting in instability in regional diplomacy.

As experts explain, it is hard to predict how the Rason development plan will unfold and what result it will produce. North Korea should not forget that reform and openness, as recommended by the international community, is a shortcut to successful economic cooperation with China and its own economic development.


[Interview] Economic Class for Teenage Defectors The teacher is asking the students what they would do if they won the lottery. Their answers vary, and the teacher and the students are all smiling. An economic class is being held at Heavenly Dream School, an alternative school for teenage North Korean defectors, located in Songpa District, southeastern Seoul. Unlike other similar schools, this educational institute offers an economics class, apart from other social science classes. Teachers from the Young Professionals Institute of Korea visit the school two hours a week to teach the basic principles of a market economy and some tips on how to adjust to the economic systems of the capitalistic South Korean society. The class is mainly focused on practical economic knowledge the students need to know in daily life, such as what banks do, how to use credit cards and how to pay utility bills. Also, economic experts are often invited to the class to help the North Korean students better understand the South Korean economy. Teacher Yun Shin-jeong explains that the school entrusts this special class to professionals for more systematic education.

I often heard from senior teachers that students here had very little knowledge of the economy because they had never experienced capitalism. The teachers said it was necessary to implant the concept of the economy in the students. When I first came here, the school was small and lacked many things. So, it was hard to think about an economics class at the time. In 2008, we held a program on students’ future career jointly with teachers from the Young Professionals Institute of Korea. We discovered that the institute had consistently conducted economics and information technology education for North Korean defector students and also held various programs to help them start their own businesses. Since then, we’ve invited researchers from the institute to teach our students something the teachers at this school cannot provide.

The greatest advantage of this economics class is that it is tailored to the students’ level so they can learn the rather complex subject in a more interesting and easier way. Here’s Song Na-ra, a researcher from the Young Professionals Institute of Korea who teaches the economics class.

Today, under the theme of “reading the economy in everyday life,” the students learn the basic concepts of the economy and the value of money, while comparing the economic systems of South and North Korea. Many students feel that economics is a hard subject to learn. Through games and videos, I try to help them approach the subject in an interesting and comfortable way.

It is unimaginably hard for the teenagers from the socialist North Korean regime to accommodate to the market economy in South Korea. They are quite unfamiliar with economic terms and brand names expressed as foreign words. There are so many products that they see for the first time in their lives in South Korea, and it takes a lot of courage to simply purchase a single item at a market. It is also challenging to deposit or withdraw money from a bank and they have a hard time figuring out what the monthly mobile phone bill is all about. At first, teachers often felt embarrassed about the disconnect they felt with students of completely different backgrounds. Here again is teacher Yun.

Upon completing the rehabilitation program at Hanawon, a resettlement center for North Korean defectors, many students said their money was withdrawn from their accounts even though they hadn’t drawn money from the bank. They claimed that the bank had taken their money. They understood the concept of the settlement of their accounts when I reminded them that they used their traffic cards and their mobile phone bills were paid through their accounts. Still, it doesn’t seem they trust banks. Many still believe that capitalists are villains they must defeat. Also, they don’t know yet what it means to save money and compare prices. Sometimes, they buy an expensive notebook computer without hesitation.

The teachers are educating the students in economics not only in school but also in their daily lives. While living in a dormitory together, the teachers give them some tips on how to buy daily necessities at cheaper prices and help them manage their living expenses and savings effectively. Thanks to the teachers’ close attention and education, the North Korean students find themselves accustomed to the South Korean economic system and begin to discover the value of money gradually. These young students, who came to South Korea in search of freedom, will lead a unified Korea in the future. It will be necessary to provide them with more attention and support, just as this school does, so the youngsters will be able to develop their abilities on their own and resettle here successfully.