The Rajin-Sonbong free trade zone experiment: North Korea in pursuit of new international linkages

Abstract

In 1991 North Korea declared Rajin City and Sonbong County a Free Economic and Trade Zone (FETZ), in which foreign owned enterprises would be permitted to operate. So far, Pyongyang has invested 150 million won in upgrading facilities, and has introduced a comprehensive regime of laws and regulations. Other investments are now also in evidence, notably modernised telecommunications, foreign banking, and containerised cargo facilities. Promised foreign investment in the FETZ now totals over US$1 billion, with $43 million committed to date. North Korean plans envisage three different types of development. First, Rajin is to become a major container port for the Northeast Asian region; second, the zone is to become a tourist destination; third, the zone is to host export oriented industry. Pending improved inter-Korean relations tourism may be the most prominent development. This will undoubtedly entail social and perhaps political costs. Meanwhile (with United Nations assistance) a new Tumen regional agenda has emerged which would tax the commitment of most countries to regional cooperation, but will pose particular difficulties for Pyongyang. Given the economic difficulties North Korea now faces, the success of this experiment (together with the outcome of the 1994 nuclear deal with the United States) will determine whether the government in Pyongyang will avoid collapse. Show more