Tumen River Basin Development Initiative and Rason District Development Byung-Yeon Kim (Seoul National University) 1

Tumen River Area 2 Source: trade-tumen/ html East Sea (Sea of Japan) 67km 80km 15km

Background Tumen River basin development initiative and Rason District Development represent the most frequently discussed plans regarding the North Korean development. – GTI (Greater Tumen Initiative) is based on TRADP (Tumen River Area Development Programme) established in – The member countries include Rep. of Korea, China, Russia and Mongolia (DPRK withdrew its membership in 2009). Rason District Development (RDD), which is based on plan on Rajin and Seonbong Special Economic Zone, was established in the early 1990s but became more active since

Background GTI refers to a multi-country cooperation while RDD is a developed plan initiated by North Korea so as to attracting foreign capital. The essence of the two plans is the same, that is, to achieve high economic growth in the region, and to lead growth in the neighboring areas. 4

Economic significance The region is relatively poor in spite of high growth potential. Complementarity of the resources of the relevant countries appears to be high. – North Korea: cheap labor – China: capital and labor force – Russia: natural resources and land Economic interests in the region are also high. – China and Russia: Regional development and need for seaports. – North Korea: Foreign capital – South Korea: Lower transportation costs 5

Complementarity Source: A case study on TRADP (unknown) 6

Economic and political significance If cooperation for one project among relevant countries turns out to be successful, it will have positive impacts on other projects. A fully blossomed international cooperation involving major world economic powers will lead to not only economic prosperity but also further economic integration in the region. North Korea’s learning can be facilitated, leading to its opening-up and gradual transition to a market economy. 7

Economic ranking of N. East Asia in st 6 th 5 th 8 th

GTI Area TRADPGTI Greater Triangle (China )Yanji (N.Korea) Chengjin (Russia) Vladivostok ( China ) North Eastern provinces and inner Mongolia (Mongolia) Eastern region (N. Korea) Tumen region including Rason (Russia) Far East region (S. Korea) Eastern region Source: Ministry of Finance and Economy (2013) 9

GTI Activities In spite of high complementarity, GTI has not been so active. An important reason is that the member countries preferred projects aiming to develop own country’s region. S. Korea and China are the most active member states. There have been discussions to make GTI an official international organization. One issue is how to relate GTI to AIIB because the activities of these two may overlap. 10

Tumen region international city Some proposals made regarding founding an international city in Tumen river region. Kim, Suk-chul, Chief Commissioner of Presidential Committee on Architecture Policy, Rep. of Korea, proposed an international city in the region surrounding Tumen river. – The city comprises of three areas, each of which is originated from N. Korea, China and Russia. – It has high tech industry, automobile, energy and tourism industries. – The city has 50 thousand population but total residents may reach to 300 thousand. 11

Tumen International City Source: Chosun Ilbo ( ) 12

Rason Development Plan Presidential Committee on Unification Preparation, Rep. of Korea (2014) proposed a plan for Rajin Development based on multi-country cooperation. – South Korea: Industrial facilities – North Korea: land and labor force – China: development of Rajin port – Russia: gas pipeline and railway connection. 13

Rason Development Plan The economic effects are estimated as follows: North Korea – Annual revenue: 0.19 bn USD – Employment: 100,000 South Korea – Value added: 6.6 bn USD – Employment: 20,000 14

Some activities South Korea imported Russian coal twice that was transported from Khasan to Rajin through railway, from which Chinese cargo ship delivered it to S. Korea. To achieve economic efficiency, 4 million ton of coal needs to be imported from Russia. Currently Posco imports 2 million ton from Russia. The amount of coal imported from Rajin totaled to 0.17 million ton. Another problem is the distance from mine to Khasan. The coal was produced in Kuzbass, which is 6000 km away from Khasan. 15

Evaluation Proposals made but so far no main concrete results. Three main problems: – Coordination of different interests among the relevant countries – North Korea’s business environments and willingness to participate in the projects – Inter-Korean relations and economic sanctions against North Korea 16

Business environments in N. Korea 17 Kim (2015)

N. Korean environments Interview with Chinese experts – In spite of inter-governmental agreements, few firms plan to make investment because of high risk. – It is possible that Zarubino may develop faster and it is shorter to get there than to Rajin if a railway connects China to Zarubino. In May, Jilin signed a cooperation agreement with Summa Group, Russia's largest transport and logistics company, to jointly develop Zarubino. – The deal signed at the Conference on Interaction and Confidence-Building Measures in Asia held in Shanghai aims to expand the port's cargo-handling capacity to 60 million tonnes per year, which would make Zarubino one of the largest ports in Northeast Asia. The first phase of the project is due to be completed in 2018 (cited from cnt.aspx?id= &cid=1201.) 18

Natural evolution or a big push? Economic interests will drive the countries to cooperate. A large obstacle is political and security concerns. – If Sino-Russia’s relations keep to improve, Zarubino will develop fast. However, S. Korea’s interest is to develop a North Korean region. – This requires a big-push by the relevant countries. – A program for denuclearization of North Korea can be used to make a case for a big-push. 19