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DONG Yong-Sueng

Prospects for Sinuiju Administrative District

DONG Yong-Sueng

June 28, 2006

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On September 12, 2002, North Korea announced a plan to set up an administrative district in Sinuiju against the will of then China's Premier Zhu Rongji, who had suggested that Pyongyang give a higher priority to Kaesong Industrial Complex. In November, Pyongyang went so far as to appoint Yang Bin, a Chinese businessman with Dutch passport, as Sinuiju's chief executive officer. Provoked by Pyongyang's move, Beijing had Yang arrested on charge of fraud. Since then, nothing has been decided on Sinuiju's project. This situation was seen a telltale sign of worsening relations between Beijing and Pyongyang .

Their relations are now changing for the better. China's President Hu Jintao, who came to power in 2003, has emphasized stable relationships with China's neighbors for the sake of economic growth. Under Hu's leadership, China appears tilting towards North Korea over South Korea. Hu chose to visit the North first when he made trips to Pyongyang and Seoul in October 2005.

China under Hu pays greater attention for development of Sinuiju. It has asked the North to set up a “ free-trade market” on daily basis in Sinuiju. It has signed an agreement with Pyongyang for building a new bridge over the Yalu River linking the two countries. A highway is under construction along the Yalu River. China is committed to building a railway running through Liaoning, Jilin and Heilongjiang provinces along the border with North Korea by 2008. At the same time, Chinese companies have begun investing in North Korea .

Why is China suddenly changing its policy on the North?

According to "Document No. 36" issued by the government, Beijing hopes to accelerate development of the three northeastern provinces after a long neglect. Understanding the importance of balanced national development and stable domestic politics, the central government has underscored its commitment to development of the area. China experts mostly agree with the government's policy to foster this area, which at one time used to be the center of China 's heavy industries.

China's proposed development of the northeast is closely related with its expanded trade with the North. At the APEC summit meeting in Busan, Hu reiterated China's efforts for stabilizing its border region and neighbors. Beijing not only promotes trade with the North, it provides direct and indirect support to Chinese companies moving to North Korea. The Liaoning government runs an organization supporting Chinese companies moving into North Korean markets.

China's plan for development of the northeast has fuelled expectations for resuming the stalled Sinuiju project. If resumed, the North would run the administrative district on the rules and regulations it suggested in 2002. In its first announcement of the project, Pyongyang declared that it would emulate Beijing's "One Country, Two Systems" model for Hong Kong, by entrusting Sinuiju administrative district with a separate legislative, administrative and judiciary power.

According to the rules for Sinuiju, Pyongyang should help this administrative district to attract investment and pursue economic activities without difficulties. Moreover, the administrative district has its own legislative body consisting of 15 members. The chairman and vice chairman are chosen through elections. The chief executive officer becomes the head-cum-representative of the district's administration and has the right to appoint attorney general and administrative officials. The district has its own prosecutor's office and court.

Pyongyang appears to have finished systematic preparations to transform Sinuiju into an administrative district. Even so, it has yet to find personnel and abundant budget required to run them.

Even if the Sinuiju development project is resumed, there still exist many obstacles. First of all, Sinuiju lags far behind China's border city of Dandong in infrastructure, human resources, and market access. Therefore, it needs to improve its infrastructure and business environment.

Second, Pyongyang should clarify which market it is targeting. If it targets the China market, it should make more efforts to develop Sinuiju administrative district. But if it is aimed at South Korean market, it should pour more resources into developing Kaesong Industrial Park .

Most of all, Pyongyang has diplomatic troubles with the international community. Unless it improves its tense relations with other countries, Sinuiju would face difficulties in attracting foreign investment.

The writer formerly headed the Economic Security Team at the Samsung Economic Research Institute. He is now vice president of Trinity Capital Development Partners, Inc. The views expressed are his own and do not reflect those of the publication that carries them.
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