[VIEWPOINT]Gaeseong is key to new growth

A picture of North Korea's open-door policy is getting clearer since its "July 1 Measures for Economic Administration Reform." Pyeongyang has recently proclaimed the Gaeseong Industrial Zone Act after the Mount Geumgang Tourism Zone Act.

North Korea plans to develop Sinuiju into a financial hub, Mount Geumgang into a tourism center and Gaeseong into an industrial hub. According to the plan, it will make Sinuiju the Hong Kong or Macao of North Korea through cooperation with investors from the European Union and overseas Chinese, while it will develop Mount Geumgang and Gaeseong through cooperation with South Korea.

Among the three areas, Gaeseong is the most interesting. It was the capital of Korea's Goryeo kingdom (918-1395), but it also has great current economic importance.

First, the city is geographically well located, near the energy of Seoul and Incheon. The Seoul metropolitan area will be a good neighboring market for Gaeseong; in Incheon and Ansan, Gyeonggi province, there are many light industries that can invest in the new zone.

Second, Gaeseong can be the gateway through which the economic energy of South Korea spreads to North Korea and Northeast Asia. At one time, the development of the Duman River area along the northeastern border of North Korea was to be a cooperative zone, but the North turned passive on the project and South Korean firms lost interest in late 1997. But the Mount Geumgang tourist zone has rekindled interest in economic cooperation projects, and the Gaeseong zone has nursed that flame along.

The failed special industrial zone at Rajin-Seonbong, along the Duman River, and the Sinuiju special district near China have one thing in common: they were flawed in their original planning. Pyeongyang started its development of the Sinuiju special district by designating Yang Bin, a Chinese naturalized in the Netherlands.

But the project floundered immediately because there was no policy coordination between the Chinese and North Korean governments, leading to embarrassment when Mr. Yang had to backtrack on his statements about free travel to the zone and then was detained by Chinese authorities for investigation of unrelated business irregularities.

Kim Jong-il obviously wants to develop Sinuiju. When Chung Ju-yung, the late founder of the Hyundai business group, visited North Korea, Mr. Kim told him that he wanted Sinuiju to be the site of a west coast industrial zone. After Mr. Kim visited Shanghai last year, he stopped at Sinuiju on the way back home to give his famous "on-the-spot guidance" to light industry plants there. When Mr. Kim invited European businessmen to Pyeongyang in September, he told them he would develop Sinuiju into a city styled on Hong Kong.

Sinuiju and Gaeseong can complement each other. If Sinuiju is developed after developing the Gaeseong industrial zone, it would improve the international competitiveness of the Sinuiju special district, because a belt linking Korea and China would start in Busan and run through Seoul, Gaeseong, Pyeongyang, Sinuiju, Shenyang and to Beijing, with Gaeseong located at the center. The success of Gaeseong is more critical than that of other special industrial zones.

North Korea deserves applause for the new legal system for the Gaeseong industrial zone and for accepting Seoul's suggestions concerning the shape of the system. But security issues are also shaking the Korean Peninsula, and the start of the construction work at Gaeseong could be delayed.

If problems continue even in trying to set up the rail and road links from South Korea to Gaeseong, it will be difficult to develop the zone into an internationally competitive area.

I hope Kim Jong-il recognizes the importance of the zone and moves quickly to settle with the United States the problems surrounding its nuclear weapons program so the zone can flourish.

* The writer is a senior research fellow at the Export-Import Bank of Korea.

by Bae Jong-ryeol