Special Economic Zones as Survival Strategy of North Korea

Abstract

IntroductionNorth Korea has recently begun to develop two new projects: the Gaeseong Industrial project (hereafter Gaeseong SEZ) and the Mt. Kumgang tourism project (hereafter Mt. Kumgang SEZ). In terms of their levels of cooperation, partners and functions, these new projects were distinguished from the two earlier SEZs. The Rajin-Sunbong SEZ is a trade-oriented center that includes China, Russia and Japan. The Sinuiju SEZ has focused on the trade-oriented function in order to cooperate with countries in the Yellow Sea rim area including China. In contrast, Gaeseong is envisaged as a production-centered SEZ to attract small and medium-sized South Korean businesses. The Mt. Kumgang SEZ is also cooperating with the Hyundai Asan Corporation of South Korea in the development of an international tourism course.These two new projects were apparently an advanced step toward economic cooperation when compared with the previous level and form of interaction between the two Koreas. The projects have not only contributed to economic exchange, but also have demonstrated the possibility of advancing the two Koreas' political relations. South-North Korean economic cooperation is important in aiding the recovery of cultural and emotional homogeneity as well as promoting reciprocal economic development, development of infrastructure and building a harmonized structure between the two Koreas. Furthermore, such changes in the economic sector could lead to the political stability of North Korea, which, in turn, would contribute to the political and military stability of the entire Korean peninsula.Table 1 summarizes the economical and political effects of two new North Korean SEZs on both North and South Koreas. The effects of the success or failure of the North Korean SEZs will not be confined to the North Korean government; the result will affect the economic and political atmosphere of the entire Korean peninsula and all Northeast Asian countries.Therefore, this paper will address possible routes to success for the North Korean SEZs. The first section provides an analysis of the complicated features of North Korean SEZs. The second section offers an examination of a short-term and longterm development strategy of North Korean SEZs. The concluding section contains a discussion of the most appropriate way to achieve success for the SEZs through close economic cooperation between the two Koreas, with consideration of the eventual establishment of a future commonwealth.The Concept, Developmental Logic, and Type of a North Korean SEZThe Concept of the SEZ in North KoreaAccording to the Dictionary of Economics of North Korea, the Special Economic Zone (Open Zone for Foreigners) is defined as follows (p. 116):China, in 1979, announced some parts of four cities as the special economic zone. The purpose of establishing special economic zones was inducing foreign capital, technology, and management skills as well as increasing foreign trade and foreign currency holdings, accelerating economic development. The Chinese special economic zone is different from the industrial district in capitalist countries. While capitalist countries develop capitalist economies by inducing foreign capital in the industrial district, in the Chinese special economic zone, various economic systems coexist on condition that a socialist economy predominates. Foreign capitalists have the right to possess the means of production, a part of or whole rights of management, the right to employ and discharge workers, and particular privileges and special favors regulated by the Chinese government. However, foreign capitalists have to undertake economic activity in the special economic zone under the supervision and direction of the socialist country.In the same Dictionary of Economics, the so-called industrial district in capitalist countries is defined as follows (p. 176):The origin of the industrial district was the Manchester Industrial District in Britain in the late 19th century and this model has been diffused all around the world after World War I. …