Using Western Ways, North Koreans Tout Another 'Hong Kong'

By all accounts - and they are rare because few outsiders have ever been there - the towns of Rajin and Songbong in North Korea would not seem to be a promising place to become the new Hong Kong of Northeast Asia.

At this moment, there are no hotels, offices, telephones, paved roads, airport, and not much electricity. The Rajin-Songbong Free Economic Trade Zone obviously has no place to go but up.

It was in that optimistic spirit that a delegation from Pyongyang is visiting Hong Kong and other Asian countries touting the future prospects of the zone. Don't miss this "superb investment opportunity," says delegation leader Kim Jong U, North Korea's chairman for promoting external economic cooperation.

As they peer from the window of their five-star hotel during their week-long stay in Hong Kong, the delegation may take inspiration from the fact that Hong Kong's prospects were not that bright 150 years ago. And while Rajin and Songbong have almost no modern infrastructure, they do have, like Hong Kong, two advantages: location and an excellent natural harbor.

Founded in 1991, the free industrial zone covers approximately 300 square miles in the extreme northeast corner of North Korea, where its border meets with Russia and China. Despite its seeming remoteness, promoters say it is an ideal location for shipping raw materials from China and the Russian Far East to the rest of Asia or Asian-made goods across the Trans-Siberian Railroad to Europe. Communist leaders in Pyongyang have also promised to cut taxes and provide highly disciplined, low-wage workers.

North Korea is probably the most rigidly communist country left on earth, but Mr. Kim assures investors that Rajin-Songbong will be a capitalist enclave. "You can rest assured that the state will not interfere in your legitimate economic activities," he promises.

Some work is already under way to install rudimentary amenities in anticipation of an international investment seminar to be held there in mid-September. Roads are being paved, and two small hotels will be completed by August's end.

Thailand's Loxley Corp. has a $28 million contract to develop telecommunications in the zone, with the anticipation that lines should be installed by the time of the conference. Kim insists there will be plenty of electrical power available from nearby dams and from a large oil-fueled power plant nearby.

Naturally most of the investment interest - such as it is - is centered on infrastructure development. Kim said he obtained several letters from Hong Kong companies interested in constructing or managing hotels or developing tourism. Shell Oil Corp. pledged $1 million to build fuel tanks.

Getting to Rajin or Songbong is no picnic since there are no direct flights. For most visitors it means a long, roundabout trip to Beijing, then to Yanji in China, by car to Tumen City on the border, and then by car to Rajin.

But for all its potential, the trade zone remains a pretty hard sell. Kim has to contend not just with the inadequacies of the site, but with the widespread perception that the country is disintegrating. The Japanese, who have seen grandiose North Korean plans come and go, showed little interest in the investment mission. Most attendees have been South Koreans wanting to gain a foothold in the North in anticipation of reunification.

The last time that Pyongyang knocked on capitalist doors seeking funds, it raised more than $1 billion in hard currency loans. Unfortunately, it defaulted on many of them. By the 1990s, it had a zero credit rating and a reputation for being a severe political risk.

North Korea has no diplomatic relations with South Korea, Japan, or the United States. Trade is embargoed. Relations with Russia and China have been strained since the breakup of the Soviet Union. And two years after the death of Kim Il Sung, his son and designated successor has not assumed his father's posts. Famine threatens the country and may be exacerbated by summer floods.

Undaunted, Kim says that these are merely temporary problems. Then, in a rare lapse from commercial pitch man to communist apparatchik, he gives his reasons for optimism: "For 30 years our Great Leader, Comrade Kim Jong Il, has been at the top of the leadership. The party, the leaders, and the masses are united as one organism."