Rason SEZ — how economic reform is shaping up in the DPRK

Far
away from Pyongyang, in the north-east of the DPRK, sits the small city of
Rason. Few people have heard of it, even less have been – even amongst relative
frequent travelers to the DPRK. In everyday talk, people imagine that area of
the country to be isolated, impoverished and irrelevant.


Thursday January 01, 1970

This
image is hard to shift when popular discussions about North Korea continually
frame Pyongyang as the only place worth visiting in the country. But is that true?
Rason is a city with a few surprises to the foreign visitor. Far from being an
obscure settlement of little interest, this area is, by North Korean standards,
in fact radical for becoming the first hub of foreign investment in the
country; As a designated “special economic zone” (SEZ) it is an experiment and
a model for the future.


Thursday January 01, 1970

What is a special economic zone?


Thursday January 01, 1970

‘Special
economic zone’ a very technical term. A special economic zone is a designated
part of the country where rules and regulations pertaining to business and
overseas investment are relaxed. For North Korea – a country that prides itself
on having a self-reliant socialist economy where all key industries are
government-controlled –that is huge. This means that in Rason, businesses and
investors have more scope than in anywhere else in the country. Although
similar zones have since been opened, or are planned (such as in Sinuiju and
Wonsan), Rason is famous for the fact that it was the very first one having
been created in 1992. As a result, it has been the primary choice for investors
in the DPRK.

Just
where did the idea of a special economic zone come from? From not too far away.
In neighboring China, following the death of Mao Zedong, the new leader Deng
Xiaoping sought to expand the country’s economy and open it up to the world
through reform. To do this, he famously established the Shenzhen Special
Economic Zone in 1980. This area, selected due to its proximity to Hong Kong,
was famously deregulated, and it helped spur China into a new era of growth. Shenzhen
would become a megacity – the country’s 4th largest – and a booming
hub of manufacturing and enterprise. China would soon create other ones,
including Xiamen and Shanghai, which were equally successful.

The sincerest form of flattery

North
Korea, having observed, were inspired by the scheme. In 1992 they thus created
the Rason Special Economic Zone, selecting the area due to its positioning
between both China and Russia. Of course, the DPRK would encounter severe
economic problems during this decade, as well as political ones with the death
of Kim Il-Sung. As a result, the increased political caution of North Korea
meant that Rason was never as successful as its Chinese counterparts. For the
rest of the decade, there was little incentive to develop the area.

In
2011, however, the DPRK government began to place new emphasis on the Rason SEZ
as the economy began to grow again. They introduced new laws and regulations to
make it more attractive to investors. In 2012, they created an annual trade
fair that companies around the world could take part in. This has been held
every year since. Slowly but steadily, Rason’s significance as a hub of
business and a shipping port has increased. Whilst it is far from becoming the
next Shenzhen or Shanghai, it is nevertheless evolving in a way that makes it
remarkably different from the rest of the DPRK.

A different kind of DPRK

There
are some unusual things to be found in modern Rason as a result. There have
been foreign-owned bars and restaurants present, and there is even a casino in
a hotel owned by Hong Kong investors. Additionally, there are private markets in
which foreigners can participate; in fact, there’s even a bank which foreigners
can open an account with! This brings us to our next point: unlike in the rest
of the DPRK, visitors have much more leeway in using local currency to buy
things! Rather than being a bizarre north-eastern town of little value, Rason
is in fact an exciting place – one which offers an entirely different North
Korean experience!

And
now here is your chance to see it. Young Pioneer Tours are offering an exciting
trip to Rason itself! Our Rason
Essentials Tour, starting in Beijing, we will be travelling to Yanji
in China’s Jilan Province, before heading over the border to the DPRK. If
you’re fan of business and economics, this trip will prove to be an amazing
experience. We have all kinds of economy-oriented activities on offer, such as
visiting banks, markets and many local factories. It is a curious and yet
fascinating glimpse of what North Korea could become if Kim Jong-un holds firm
to his promises to develop the country’s economy. Come and experience North
Korea in a different style. If you’ve already seen it all in Pyongyang and
Kaesong, this needs to be your next adventure!
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