North Korea plans to emulate Hong Kong

The North Korean economy has been virtually destroyed by a half century of communist rule. Reports of widespread famine have been coming out of North Korea for the last few years, and the death toll from famine alone could be in the hundreds of thousands. The North Korean regime is probably the most repressive in the world, having locked the country into total isolation. Starving defectors are shot or end up in concentration camps.

The "Dear Leader" Kim Jong Il is now trying to find a way out of his predicament by emulating Hong Kong. The idea is to set up a "Special Administrative Region" in the northern town of Sinuiju on the border with China. Within this region, enterprise and tourism will be encouraged in the hopes of generating the kind of growth that has made Hong Kong so prosperous.

From the Straits Times:

Many analysts believe North Korean leader Kim Jong Il is trying to imitate China's economic reforms in the early 1980s when it set up economic development areas in coastal regions.

'The changes stipulated by the decree are epoch-making,' said Koh Yu Hwan, professor of North Korea studies at Dongkuk University in Seoul.

[...]

The announcement comes just days after an unprecedented North Korea-Japan summit and amid continuing rapprochement with South Korea.

It also follows July's decision by Pyongyang to liberalise pricing and wage systems.

The decree also stipulated no discrimination over 'sex, country, nationality, race, language, property status, knowledge, political view and religious belief' in the region.

If true, this is would give some hope that North Korea might indeed be on the way to liberalizing, however slowly. But I don't think it's going to happen. Once the North Koreans allow an area within their territory to deviate this much from the rest of the country, the regime will be doomed. For a strong and propserous economy, you need an institutional framework to support wealth creation, as well as both capital and a supply of labor. All are lacking. Attractive capital from abroad is possible under the right circumstances. The institutional framework can be built, but doing so is not trivial as the many teething problems of the central and eastern European economies can attest. But the biggest one is labor: it would have to come from North Korea, and if the economic freedom in the Sinuiju SAR is to mean anything, it will sow the seeds of destruction for the totalitarian regime. Either that, or the SAR will have to be sealed off hermetically.

Not very much is known about Sinuiju, except that it lies on the Chinese border and is a center for producing chemical weapons.

Hm, an export-oriented special zone with a chemical weapons factory? Interesting.

The new chief executive of the SAR in Sinuiju will be a Chinese man with a Dutch passport named Yang Bin. He's one of the richer Chinese businessmen, but one who's company, Euro-Asia, has fallen on harder times after allegations of impropriety surfaced. The Dutch newspaper article suggests he may have fled to North Korea to escape the investigation in China.

"It will be a totally capitalist region" Yang said in a CNN interview. "It will have its own legislative, judicial and executive powers without any interference from the [North Korean] central government."

I am somewhat skeptical.