The North Korean Central News Agency has reported that the nation established a law aimed at promoting joint development projects between North Korea and China. This will hopefully breathe some life into the development of special economic zones in the Sino-North Korean border area. The news agency announced on December 8 that the “Hwanggeumpyeong-Wihwa Economic Zones Law” was introduced in accordance with the ordinance of the standing committee of the Supreme People’s Assembly. North Korea reportedly devised a draft of the new law governing efficient ways to attract foreign investment and tax affairs, and circulated it to government officials as well as political and economic figures in China. It is said that the new law is similar to Chinese laws that proved highly successful after being applied to the nation’s special economic zones. Here’s Dr. Cho Bong-hyeon at the Industrial Bank of Korea Economic Research Institute to explain.

Sources say that the law concerning the development of Wihwa and Hwanggeumpyeong Islands specifies various benefits, including tax benefits, for companies hoping to invest in the two areas. For example, would-be investors will not have to pay taxes for a certain period of time before conducting business there. The law also has an article about tariff advantages when transporting raw materials needed for investment in the areas and taking manufactured goods out of the areas. It stipulates employment and layoff of North Korean workers as well as liquidation of companies. Under the development plan, China is supposed to lease the areas for the next 50 years. The law also states some benefits for companies that would enter the leased areas.

In June, North Korea and China held a massive groundbreaking ceremony on the island of Hwanggeumpyeong. Located between Dandong in China and Sinuiju in North Korea, the two islands, Wihwa and Hwanggeumpyeong, are considered the key to economic cooperation between the two countries. The groundbreaking ceremony was attended by high officials from the two countries, including Jang Song-thaek, North Korean leader Kim Jong-il’s brother-in-law and administrative chief of the Workers’ Party, and Chinese Commerce Minister Chen Deming. At the time, North Korea explained that the development of the special economic zone would contribute to improving people’s lives. According to the guideline on the joint development plan signed by an investment committee in North Korea and China’s Commerce Ministry in December last year, the Hwanggeumpyeong area will be developed into a new economic zone focused on four industries—commerce and information, tourism and culture, modern agriculture and the processing industry.

Having requested China to join the development projects involving the two island areas, North Korea seeks to invite various businesses there. For instance, North Korea hopes to foster clothing processing in the light industry and develop superior varieties of farm products in modern agriculture. In the tourism and culture field, the nation considers creating facilities for viewing animated films or cultural performances. The North is also planning software development in the information technology area. The development of the two islands into special economic zones will require the nation not only to foster the industries but to set up basic facilities, such as a seaport and roads connecting North Korea and China. The development plan also includes the renovation of a nearby Chinese airport with an aim to drastically improve logistics conditions.

When development is complete, it is estimated that 300-thousand North Korean laborers will be able to work in the Hwanggeumpyeong special zone, which will be five times larger than the Gaeseong Industrial Complex, with an annual income amounting to 300 million dollars. In reality, however, little progress has been made in the development plan since the groundbreaking ceremony, and the area still remains a wild plain. It is a stark contrast from another development project in the northeastern region’s Rason zone where social infrastructure has been improved in small steps. In fact, developments of this zone and the Hwanggeumpyeong area started at the same time period. Why did the latter fail to develop faster?

There are various reasons. For China, Wihwa and Hwanggeumpyeong islands aren’t very profitable from a business point of view. Large-scale industrial facilities have already been formed in the Dandong area, and many offices and factories there are empty or inoperative. Under these circumstances, China doubts companies will actually enter a new North Korean economic zone, which is close to Dandong. Also, developing the two islands into special economic zones will cost a great deal of money because infrastructure should be established there first. China will have to share part of the cost, so Beijing wants to delay the development if possible. But North Korea, for its part, must develop the area quickly in order to ease the nation’s current economic difficulties. I think it will take a considerable amount of time for the two countries to coordinate their differing positions.

Experts say that North Korea’s recent legislation is aimed at spurring the sluggish Hwanggeumpyeong development project and keeping pace with the progress of the Rason region. North Korea has opened a bureau on the Hwangeumggpyeong Island recently, sparking speculation that the nation may be attempting to develop the area by introducing the model of the Gaeseong industrial park business, the symbol of economic cooperation between South and North Korea.

North Korea’s previous attempt to develop Rason into a special zone ended in failure, and its Sinuiju development plan also failed due to China’s objection. As a matter of fact, the Gaeseong Industrial Complex is the only successful special zone North Korea has. So, the nation is expected to reflect experience it had accumulated through the Gaeseong project in future development plans. Regarding the Hwanggeumpyeong development project, North Korea opened a bureau in September and it turned out the key official of the new bureau had been involved in the Gaeseong industrial park business. That is, North Korea is determined to apply the development model used for the Gaeseong project to the Hwanggeumpyeong plan.

Some predict that North Korea and China will push for economic cooperation in earnest and bilateral relations will subsequently be closer. There are concerns that closer ties between the two communist allies, both in political and economic areas, may increase China’s influence on inter-Korean relations and regional diplomacy.

Amid the deadlocked inter-Korean relations, the expansion of economic cooperation between North Korea and China and the North’s heavier reliance on Beijing may cause difficulties for South Korean companies to advance into North Korea, even when inter-Korean ties improve. Therefore, it’s urgent to mend the strained relations between the two Koreas. The most effective way to do so is to promote bilateral economic cooperation, including the Gaeseong industrial park project, and to enhance South Korea’s influence on development plans in the North. Also, South Korea could join hands with China, if necessary, to jointly advance into North Korea and elicit reform and openness from the North.

For successful economic cooperation between North Korea and China, the two countries have to address a number of obstacles, including the ever-changing political and economic environment surrounding the Korean Peninsula. We’ll have to watch how the joint development project between North Korea and China evolves.


[Interview]N. Korean Defector Becomes Factory Manager in S. Korea

CK Precision is a manufacturer of heat sink planes, which are installed in water purifiers or air conditioners. In the factory, which is located in Gimpo City in Gyeonggi Province and covers 660 square meters, workers are busy producing various parts. On one side of the plant, Lee Ok-hwa, dressed in working clothes, is examining a heat sink plane herself. In fact, she is the factory manager, and is also a North Korean defector. Lee came to South Korea from Hoeryeong, North Hamgyeong Province. Unlike many other North Korean newcomers who choose to open restaurants specializing in North Korean food such as cold buckwheat noodles, Lee became the manager of the manufacturing firm, the first such case for a North Korean defector. It turns out Lee entered the company as an accounting clerk, and now she oversees the operations of some ten workers,.

I completed the training course for North Korean defectors at Hanawon on May 14, 2006. At the time, I felt discouraged and hopeless thinking of the future. The first institute I enrolled in was Seoul Information Polytechnic College. A teacher at the institute introduced me to the manager of this factory, and I visited the factory to have an interview. I remember that was August 8, 2007. The manager demanded nothing from me but simply asked me to start working as a bookkeeper the next day. That was how I got a job here. Of course, it was a very challenging job.

In the initial stage, Lee didn’t know what an account book was. She didn’t even know how to answer the phone. But she never hesitated to ask questions and studied very hard after work. She cut down on her living expenses and put half of her salary into an installment savings account to save money. As she was used to accounting work, she began to repair products at the factory herself and even promoted new products. In 2009, when the company came very close to bankruptcy, the manager suggested that she take charge of the factory since she knew the situation better than others. After serious consideration, she decided to take over the factory, even though everyone tried to dissuade her. She renamed the factory CK Precision. CK stands for “condensing king,” representing her hope to become a leader in the condensing field. As expected, it was far from easy to revive the factory. But she was able to overcome the difficulties with the help of customers who were deeply impressed by her enthusiasm.

I don’t think I could have made it if people hadn’t trusted me. A manager gave me raw materials worth tens of thousands of dollars that would last for months on credit. Also, I was able to rent a factory at cheaper prices. Giving raw materials on credit to a company on the verge of bankruptcy doesn’t make any sense, does it? Their help made me what I am today.

Also, her two sisters who came to South Korea with her have been of great help. The three women crossed the Tumen River into China in 1996 to escape from hunger. But they didn’t think of coming to South Korea due to the ideology education they had received in North Korea. They wandered from place to place in Yenbien, China, for ten years, working at restaurants. Lee Su-jin, the youngest, left for South Korea first and persuaded her two older sisters to follow suit. In three years, the sisters finally set foot on South Korean soil. They joined forces after Lee Ok-hwa took over the company. They worked all day long, sleeping only three hours a day, driving a forklift or working on the production line when necessary. Thanks to their ceaseless efforts, they were able to clear the factory’s debt, turning the once-declining company into a manufacturer with monthly sales of 100-thousand dollars.

I did business with three firms, but business with two of the companies didn’t work out well. One remaining firm continued asking me to send samples without explanation. In six months or so, the company asked me to make a visit. I felt down, suspecting that the company would also break off business relations with me. To my surprise, however, I was warmly welcomed at the airport. When I visited the company, the company representative praised me in front of many employees, saying, “This young lady came from North Korea and accepted our endless demands without complaint. You should learn from her.” I cried a lot there. I’ve since been delivering my products to the company.

The North Korean expatriate is nurturing her hope with firm determination and relentless efforts. She dreams of delivering her products to large companies some day. We hope she will resettle successfully in South Korea as a female CEO and become a role model for many more newcomers from North Korea.