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North Korea desperate for foreign investment
Thu, Mar 04, 2010
The Korea Herald/Asia News Network

By Kim So-hyun

North Korea is making desperate moves to attract foreign investment in a bid to escape the economic quagmire that was deepened by its recent currency redenomination and to make up for the lost income from arms exports after the United Nations Security Council imposed sanctions in response to its second nuclear test in May last year.

Regardless of its questionable charms as an investment spot, Pyongyang began laying out economic policies reminiscent of China's market opening and reform measures in the early 1990s.

North Korea announced a 10-year plan to build infrastructure using foreign investment, and reportedly designated eight cities including Pyongyang as special economic zones.

"The 10-year project is independent from the state budget and involves an improvement of the food supply, railways, roads, harbors, electricity and other energy supplies," Pak Chol-su, chief of Taepung International Investment Group, said in an interview with Chosun Sinbo, a Japan-based newspaper that often speaks for Pyongyang.

Pak said the plan is to improve railways and roads connecting Pyongyang-Sinuiju, Pyongyang-Wonsan-Raseon, Pyongyang-Gaeseong and Hyesan-Kimchaek, seek development in these regions in the next five years and build new electric power generation facilities, as well as establish power transmission networks in the next five to 10 years.

The 10-year project will be carried out by Taepung and a state development bank which will be set up later this month with an initial capital of S$12 million ($10 billion won)  for financing and transaction guarantee purposes.

Taepung and the state bank will launch panels of international advisors and experts to learn from other countries' development experiences, advanced technologies and management techniques, and foster talent through overseas education and international exchanges, Pak was quoted as saying by the Chosun Sinbo on Tuesday.

Taepung started as the North Korean military's money-making agency in 2006, dedicated to raising hard currency for Kim Jong-il aside from the state budget.

China reportedly decided to invest about $10 billion through Taepung to build railroads, harbors and houses in the impoverished country.

The decision was made when Wang Jiarui, chief of the Chinese Communist Party's international department, visited Pyongyang early last month, Yonhap News reported.

Citing an unidentified source, Yonhap said last month that two major Chinese banks and some other multinational business organizations had almost concluded a deal with the North Korean investment agency.

"Over 60 percent of the total investments, which will be announced in March, will come from China," the source was quoted as saying.

North Korea is also mulling tax benefits to attract foreign companies and capital to eight special economic zones, Japan's major business daily Nihon Keizai Shimbun said on Tuesday.

The North plans to build more railways and roads in the new economic zones and develop different industries - high-tech industries in Pyongyang, medicine and edible oil in Nampo, light industries and cotton spinning in Sinuiju, shipbuilding in Wonsan, coal and chemicals in Hamheung, metal refining in Kimchaek, petrochemicals in Raseon, heavy industries in Chongjin.

A North Korean trade department authority was quoted as saying by the newspaper that Egypt, France and Vietnam were showing interest in investing in its economic zones.

A Taepung official said the agency was considering leasing farmland to foreign companies in exchange for technological support.

In apparent efforts to scrape up cash, North Korea recently lifted the ban on foreigners' use of foreign currency within its territory.

Voice of America, a radio broadcasting service of the U.S. government, said yesterday North Korean shops and restaurants were accepting U.S. dollars and euros as well as Chinese yuan, citing an American travel agent who recently visited the country.

Pyongyang had notified diplomats and officials of international organizations in late January to use government notes instead of foreign currency.

sophie@heraldm.com

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