Jang’s visit promises faster development of joint industrial zones, greater cooperation in technology, agriculture, infrastructure


North Korea and China are furthering their ever-growing economic ties as the impoverished country tries to elicit capital needed to fix its crumbling economy and rebuild industries.

The two allies reached an agreement on Tuesday to stimulate the sluggish development of joint industrial zones in the North and boost cooperation in technology, agriculture, infrastructure and other key sectors.

The deal was made by Jang Song-thaek, the powerful uncle and top guardian of North Korean leader Kim Jong-un, and Chinese Commerce Minister Chen Deming in Beijing on Tuesday.

It calls for the establishment of a joint management committee for two economic zones in the Raseon and Hwanggeumpyeong-Wihwa Islands areas, the Chinese ministry said. Raseon is envisioned as a manufacturing and logistics center and the islands as a knowledge-intensive industrial district.

Pyongyang and Beijing also plan to step up cooperation in technology, agriculture, telecommunications, power supply, personnel training, customs clearance and industrial complex construction, it said.

They will continue to pursue the principle of “government-guided, enterprise-based, market-oriented, mutually beneficial” cooperation, the ministry said in a statement.

“The two sides stressed that further promoting cooperation in developing the two economic zones actively will play a significant role in consolidating the traditional friendly and cooperative relations, reinforcing exchanges in other fields, boosting economic growth of both sides and enhancing regional stability and prosperity,” it added.

The industrial belt along their border should top the agenda for Jang, whose communist country has struggled with decades of poverty amid frequent natural disasters, extravagant atomic projects and ensuing international isolation. 

Jang, 66, is married to Kim Kyong-hui, the younger sister of late strongman Kim Jong-il, and vice chairman of the National Defense Commission. He is the highest-ranking official to visit the communist state’s most important ally since the young Kim took power in December.

He is leading an unusually large mission of 50 officials, chiefly economic specialists. They include Kim Yong-il, chief of the ruling party’s international affairs unit, and Ri Kwang-kun, chairman of the Joint Venture Investment Commission.

“Jang’s visit may focus on talking Beijing into more financial investment and bolstering bilateral economic cooperation. Kim appears to have a more open mind while trying to wipe out the tint of his father’s failed economic policy,” said Lee Cho-won, a North Korea expert at Chung-Ang University in Seoul.

His trip comes as the Swiss-educated, 20-something leader is crafting his own recipe for economic development. His move to ease the rigid command economy appears to be gaining steam especially after the July dismissal of Ri Yong-ho, the top military commander.

The iron-fisted regime is now believed to be phasing out its long-running rationing scheme and employing the so-called June 28 measures, which grant greater autonomy to farmers and businesses.

Despite its lopsided reliance on China, the cash-strapped North is seen striving to draw much-needed investment from its biggest patron. Some news reports suggest that Jang requested loans worth about $1 billion.

A recent series of provocations including an April rocket launch have frozen its relations with South Korea and the U.S., and dried up outside assistance.

“There are few ways to revive the economy while keeping the communist system intact,” said Kim Young-hoon, a research director at the state-run Korea Rural Economic Institute in Seoul.

“To do so, there should be capital inflows on one side and institutional improvement on the other. But it’s unattainable under the existing North Korean regime because foreign capital is strictly regulated.”

The latest bilateral agreement effectively quelled speculation over a potential suspension of the Hwanggeumpyeong project due largely to Chinese investors’ half-hearted attitude on worries about Pyongyang’s policy whims and teetering feasibility.

But some experts point out that it left the grand program exposed to swings as Beijing insists on company-driven development, whereas Pyongyang seeks state guarantees.

In a recent survey on more than 300 Chinese firms having operated in the reclusive state, about 79 percent picked both changing rules and inadequate infrastructure as major constraints. Around 70 percent pointed to regulations.

While acknowledging improvement in conditions there, they “generally have a negative assessment of the business environment,” said the study done by Stephan Haggard and Marcus Noland of the Peterson Institute for International Economics in Washington.

Under the plan, Beijing is building and renovating roads, railways, ports and other facilities in the economic zones. Pyongyang has reportedly offered development, access and mining rights in response. The North’s Presidium of the Supreme People’s Assembly also reportedly amended or approved related laws last year.

About 70 percent of shipments are passed through the island near the North Korean town of Sinuiju and the Chinese city of Dandong. Bilateral trade volume in the first half of the year doubled on-year to hit a record $2.58 billion, according to the Korea International Trade Association in Seoul.

China’s investment focusing on resources and infrastructure in the North has jumped more than 40-fold to $41 million in 2008 from $1.1 million in 2003, Samsung Economic Research Institute data shows. The latest official data was not immediately available but experts forecast the numbers should have gone up sharply over the last couple of years.

“The partnership has seen a shift in recent years from one-sided assistance toward mutual cooperation,” said Jeong Hyung-gon, a senior researcher at the state-run Korea Institute International Economic Policy, in a recent report.

“North Korea is exporting ever more underground resources in line with the infrastructure building in the Raseon and Hwanggeumpyeong regions and its other exports are also related to primary and secondary industries.”

Jang arrived in Beijing on Monday for a six-day stay, which is seen as a prelude to the first visit by Kim. His delegation toured on Wednesday bustling industrial zones in China’s three northeastern provinces ― Heilongjiang, Jilin and Liaoning.

He is speculated to meet with Chinese President Hu Jintao and Prime Minister Wen Jiabao, or top leader-in-waiting Xi Jinping or presumptive premier Li Keqiang during the visit.

By Shin Hyon-hee (heeshin@heraldcorp.com)