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International Cooperation for Regional Development in North Korea
국제적 협력을 통한 북한의 지역개발사업 추진방안(RR 2002-13) Sang-Jun Lee and Sung-Su Lee
December 2002․242 pages․Korean
This study aims to suggest international cooperation strategies for regional development in North Korea. It, furthermore, attempts to provide implementable projects reflecting cooperation strategies suggested in this study.
The study consists of seven chapters. The first chapter discusses the background and the need of the study together with research objectives and methods. This chapter also briefly examines basic concepts and characteristics of international cooperation.
In chapter 2, the major issues of regional development in North Korea and the necessity of international cooperation for the issues are examined. International cooperation is one of the most urgent issues for North Korea not only to overcome economic crisis but also to resolve problems of regional development. For the efficient and effective regional development including infrastructure development, it is indispensable to induce foreign capitals from foreign companies and international institutions. International cooperation will form the groundwork to rebuild sound economic foundation of North Korea.
Chapter 3 assesses international cooperation of North Korea and the prospect of international cooperation in consideration of foreseeable changes in the external and internal conditions surrounding the Korean peninsula. As of now, international cooperation of North Korea is carried out with trade, a few investment activities and public investment including humanitarian aid. Foreign direct investment in North Korea is still low. International cooperation of North Korea has revealed many problems. The most critical among them is poor provision of institutional and physical infrastructures.
There exist problems such as less international trust on cooperation with North Korea due to inconsistent policies of the North Korean government, less satisfactory results due to high transaction costs including transport and logistics costs. Taking a broad look at international cooperation in the past years, we can find increasing importance of economic cooperation based on reciprocal cooperative relations.
The future of international cooperation of North Korea mainly depends on changes in the policies related with the nuclear development program and economic policies of North Korea. Although Pyongyang appears to seek economic development by cautiously adopting new economic policies, Pyongyang-Washington relations will not be eased because of the nuclear development program. Regarding the prospect of resolving nuclear problem of North Korea, we can consider two alternatives: a peaceful resolution or an increasing military tension between North Korea and international society. If North Korea wants to introduce foreign capitals, it must take a peaceful resolution on the nuclear problem.
Before the basic policy directions and cooperation strategies are discussed, the experience of international cooperation in transition economies is reviewed in chapter 4.
In this study, the Power Sector Rehabilitation and Expansion Project and the Agricultural Rehabilitation Project in Vietnam, the Szczecin-Swinoujscie Seaway and the Port Modernization Project in Poland and the Budapest Transport Project in Hungary are reviewed as model projects. These projects were supported by World Bank. Also the Trade and Transportation Facilitation in Southeast Europe Project (TTFSE) is reviewed as a model project for multi-lateral cooperation. Seven countries including Albania and Rumania conducted many sub projects to enhance trade and transport in the border areas. IDA and other countries including USA and Italy have supported the project financially and technically. Under the experience of transition economies we could consider two major instruments of international cooperation for regional development in North Korea: one is Official Development Assistance (ODA) and the other is the support of international financial institutions such as IBRD, IDA, ADB etc. For larger projects, international consortium is a feasible and effective way to mobilize financial resources. In the short to medium term, ODA could play an important role in international
cooperation. In the longer run, it is necessary for North Korea to join international financial institutions and to secure funds from those institutions.
Based on the assessment and prospect of international cooperation for regional development in North Korea and review of the experience in transition economies, chapter 5 suggests the basic directions and strategies of international cooperation. In this study, four points are considered in basic directions of international cooperation as follows; 'gradual international cooperation,' 'diverse international cooperation which is acceptable not only to North Korea but also to international society,' 'integration of projects to achieve synergy effects,' and 'consideration of geo-economic strategies.' The gradual development of international cooperation and diverse international cooperation require reciprocal and mutually beneficial cooperation.
Reflecting upon these policy directions, this study suggests two cooperation strategies:
'selective concentrations of international cooperation on some major regional development issues' and 'spatial integration of cooperation projects'. 'Selective concentrations of international cooperation on some major regional development issues' suggested here means that energy and transportation sectors should be considered at first in international cooperation. The main concept of 'spatial integration of cooperation projects' is the integration and spatial linkages of projects, which have the important meaning to minimize benefits and implementation costs of projects. Especially, spatial aspects of implementation of projects should be considered. At first, international cooperation projects can be undertaken in the border regions between North Korea and adjacent countries such as South Korea, China and Russia. International cooperation can be easily achieved in these regions.
In this study, some projects reflecting cooperation strategies are suggested. Among them, enhancing the infrastructure and developing the industrial complex for international trade and logistics in Hanmgyeongbuk-do region is suggested as a model project. The viability of this project and cooperation strategies depends on full cooperation from North Korea and international society because a major problem in achieving cooperation seems to be the lack of trust.
In chapter 6, major policy issues to the South Korean government are reviewed. Our
government can help international cooperation of North Korea and international society in many ways. In the short to medium term, it is needed to hold international conferences related with rebuilding the North Korean economy and to start international joint researches. Also, we can utilize the ongoing Inter-Korean Economic Cooperation Projects such as the Gyeong-ui rail reconnecting project to enhance international cooperation in the infrastructure sector.
