North Korea and China recently forged a deal to develop two North Korean border towns into an industrial belt and introduce, in part, free market practices, a North Korean government document showed.

According to the document obtained by the Yonhap news agency, Pyongyang and Beijing agreed to foster the development of the North’s towns of Rason and Hwanggumpyong into an industrial belt.

Rason, in the country’s northeasternmost region, became a special economic zone in 1991 but never fulfilled its proposed role as a transportation hub, amid tough United Nations sanctions imposed for the North’s pursuit of ballistic missiles and atomic weapons.

Under a goal to build a Kangsong Taeguk (great, prosperous and powerful nation) by 2012, the North has strived to revitalize the Rason free economic zone in its northeastern region near the border with China and Russia by attracting foreign investment.

Hwanggumpyong is a North Korean island located in the mouth of Yalu River in the west, near the border with China.

According to the paper and sources, North Korea is apparently moving to develop Rason into an all-purpose industrial and technology hub, and Hwanggumpyong into a tourism and information hot spot.

The sources, who requested anonymity, said that Pyongyang and Beijing forged the deal to co-develop and co-manage Rason and Hwanggumpyong and were in the initial planning stages for development.

The document envisioned the belt as becoming a “test zone for the Choson (North Korea) foreign exchange,” “leading zone for the Kangsong Taeguk” and “trial zone for the Choson-China economic cooperation.”

“It seems that (the proposal) is a comprehensive package of agreements between North Korea and China made in the past,” said Cho Bong-hyun, a researcher at the Industrial Bank of Korea’s Economic Research Institute in Seoul. “It is aimed at establishing an industrial belt base in Rason and Hwanggumpyong through government-level consultations between North Korea and China.”

Later this week, North Korea and China are scheduled to hold a groundbreaking ceremony for a joint project to turn Hwanggumpyong into an industrial complex.

It is widely speculated that North Korean leader Kim Jong-il, who is currently visiting China, may attend the groundbreaking ceremony in Hwanggumpyong.

The isolated country has been wary of opening up to the outside world, while Beijing has been urging North Korea to follow its footsteps in terms of embracing economic reforms.

During his visit to Japan for a summit over the weekend, China’s Prime Minister Wen Jiabao said that Beijing invited Kim so that Pyongyang could better examine China’s economic development process and use it as a reference to revive the struggling North Korean economy. So far on his China trip, Kim has visited an economic development zone and a discount store in the eastern city of Yangzhou, in a itinerary apparently designed to study China’s economic reform, sources said.

Kim also toured an information technology company in the Yangzhou Zhigu industrial complex and visited a large discount store, sources said.

According to details in the obtained Pyongyang document, North Korea and China agreed to develop basic infrastructure, logistics, raw materials, facilities, light industry facilities and service industries in 10 individual complexes in the belt.

Rajin, inside Rason, will see new warehouses, logistics, equipment manufacturing and technological complexes, and Sonbong, also inside Rason, will have four industrial complexes built.

The country is also seeking to develop wind, solar and other alternative energy sources and ramp up telecommunications networks in the zones.

Rason’s traffic facilities are also expected to see a major facelift as the plan mandates a revamped transportation and traffic scheme.

The deal comes on the heels of Pyongyang’s recent campaign to blossom Rason into a hub for foreign investment as Pyongyang struggles to resuscitate its moribund economy, according to informed sources and media reports.

According to a source familiar with North Korean affairs, the city has seen both new factories built and upgrades of previous ones in recent months.

A couple of large Chinese companies have also reportedly signed deals on either providing construction parts or investments in the region’s resources development.

North Korea has been wary of opening up to the outside world, while Beijing has been urging North Korea to follow its footsteps in embracing economic reforms. 

(Yonhap News)