“North Korea’s Special Economic Zones: Plans vs. Progress”
The Wonsan-Mt. Kumgang International Tourist Zone, in the southeast of the DPRK, was announced in 2014 and is the only SEZ project to be both publicly referenced and visited by Kim Jong Un. Perhaps not surprisingly, it also appears to have received the most state-directed investment of any of the SEZs that have been announced since 2013.
Unlike other SEZ’s, which are discrete and often isolated geographical areas, this project encompasses cultural, tourist and leisure destinations scattered throughout Kangwon Province. This zone encompasses the former Mt. Kumgang Tourist Region, which operated from 1998-2008, accommodating mostly South Korean visitors. Rather than drafting all new laws for the new International Tourist Zone, North Korean officials reportedly just extended and updated the regulations that existed under the Mt. Kumgang arrangement. And while, in general, the tax rates, incentives and regulations are largely the same as before, it is worth noting these laws were drawn up in 2002 to facilitate South Korean investment and travel in the zone.
In Wonsan, big projects such as a new civilian airport and the Masikryong Ski Resort have been widely publicized, building up the region’s tourist appeal. Some lesser known developments have also been underway including upgrades to the sewage system, refurbishment of hotel facilities and the development of a beach area (that is currently still used for live artillery drills). However, problems with transportation infrastructure and electricity supply remain.
In private conversations with potential foreign investors, officials at the tourism zone have acknowledged the significant role that South Korean and/or Japanese tourists and companies will need to play in the zone’s development in order for it to be successful. Although this may seem plausible in the long-term, the short-term prospects seem bleak.
In early 2015, the Wonsan Area Development Corporation was formed, merging previously separate administration teams from Wonsan and Mt. Kumgang. It was given the remit to both attract and execute investments in the tourism zone. Since then, the corporation has organized at least two investor seminars, one in China in 2014 with about 200 participants and one in May 2015 at the zone itself.
Foreign participants in the latter seminar raised a number of concerns, including the need for minders during visits to the region. Currently, the vast majority of foreign visitors to the DPRK have to be accompanied by two Koreans for most of their sojourn. This issue of freedom of movement for tourists poses a particularly sensitive challenge for this region’s growth potential, pitting old ways of doing business against more aggressive business goals. For instance, in 2014, Pyongyang stated that its goal was 1 million tourists per year. This year, Kim Sang Hak, a senior economist at the influential Academy of Social Sciences, told the Associated Press that the goal was 2 million visitors per year by 2020. These lofty targets are impossible to achieve under the North’s current guide/minder system requirements, given the sheer manpower that would be required. It is no surprise that the North Korean officials at the meeting did not seem to have any easy answers to this challenge, but for the zone to succeed, it will eventually have to grapple with this clash of values.
“Wonsan Kalma Airport imagery (UPDATED),” North Korean Economy Watch, August 17, 2015, http://www.nkeconwatch.com/2015/08/17/construction-of-new-wonsan-airport-continued-through-winter/.
The resort was closed in 2008 after the shooting of a South Korean tourist by a North Korean soldier. Blaine Harden, “S. Korean Tourist Is Shot Dead in North,” Washington Post, July 12, 2008, http://www.washingtonpost.com/wp-dyn/content/article/2008/07/11/AR2008071100314.html.
“Outline for Development of Wonsan-Kumgangsan Tourist Region Revealed,” IFES Briefs, http://ifes.kyungnam.ac.kr/eng/FRM/FRM_0101V.aspx?code=FRM150326_0001.
“中 기업인 호등, 남포 수출가공지대 등 투자 의향,” Tongil News, January 6, 2015 http://www.tongilnews.com/news/articleView.html?idxno=112207.
“A Tourist in North Korea,” The Atlantic, October 30, 2014, http://www.theatlantic.com/international/archive/2014/10/north-korea-travel-tourism/382101/.
“North Korea Woos Tourists, Hopes For 2 Million Visitors By 2020,” Huffington Post, May 31, 2015, http://www.huffingtonpost.com/2015/06/03/north-korea-tourism_n_7477800.html.