Country Report North Korea February 2011

Foreign trade and payments: China starts to ship coal via North Korea's Rajin port

In December 2010, on the other side of the peninsula, North Korea's north-eastern port, Rajin, began shipping Chinese coal. Between early December and early January 20,000 tonnes of coal mined in China's Jilin province passed through Rajin, destined for the Chinese ports of Shanghai and Ningbo. The coal was transported from the mine to Rajin by road, which was no easy task, since on the North Korean side of the border the roads are winding, hilly and unpaved. Even so, for Hunchun this is the best logistical option. Rajin is not only close at hand, but is also the region's most northerly port that is free of ice all year round.

It will be better still if plans to develop Rajin-Sonbong (Rason), which was declared a special economic and trade zone in 1991, are realised, as the zone has struggled to take off. Apart from a casino-hotel that was built by a property developer from Hong Kong, Emperor Group, which had to close for some years after China cracked down on crossborder gambling tourism, Rason remains quiet. Recent visitors have found no sign on the ground of reported projects by both Russian and Chinese firms to modernise harbour facilities. A Chinese company, Chuangli Group, reportedly signed a ten-year deal in 2008 to lease a dock at Rajin and expand its annual capacity to 1m tonnes.

Kim Jong-il has high hopes for Rason, and North Korea has produced a video depicting an ultra-modern vista of skyscrapers as part of its promotional efforts. The government aims to turn Rason into a world-class economic and trade zone based on international freight brokerage, export processing and finance business, making it "a beautiful cultural port city". The video's narrator quotes Kim Il-sung as saying that the port must become "a better city than Singapore".

Hopes that some development might actually take place this time received a boost in December 2010 when another Chinese firm, state-owned Shangdi Guanquan Investment, signed a letter of intent to invest up to US$2bn in Rason. A US newspaper, the Wall Street Journal, quoted a company official as saying that the plan was to develop first infrastructure (docks, a power plant and roads) and then industrial projects, including an oil refinery-there is already one, North Korea's largest, at Sonbong-in the next five to ten years. The spokesman added that the company was still awaiting permission from the North, and that US$2bn was what North Korea hoped for, not necessarily what his company could deliver.

© 2011 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
IMPRINT