Stephan Haggard’s Comment on Sinuiju SEZs

Hwanggumpyeong Island in 2011; image courtesy Al Jazeera news
Banners in lieu of factories on Hwanggumpyeong Island in 2011; image courtesy Al Jazeera news

Stephan Haggard is frequently described as one of the top North Korea analysts in the United States; his breadth of interest, range of expertise, and command of massive amounts of data, along with his keen analytical eye all serve to confirm his standing in the research community.  I was therefore glad to see that he took interest in one of my recent papers on the subject of North Korean Special Economic Zones in and near Sinuiju, the city that serves as a major conduit for North Korean trade with the People’s Republic of China:

Adam Cathcart’s SinoNK is one of our go-to sources, in part because Cathcart and the writers for the blog visit the border zone frequently, and in part because they draw heavily on Chinese sources others don’t pick up. Cathcart was recently in Washington where he presented a new paper at the Korea Economic Institute on the Hwanggumpyeong and Wihwa SEZ’s. (A direct link to the full text is here; for further background, see our own posts on the two zones and investment more generally.)

A new look at the zones is warranted by the fact that they appeared to fall under the management of Jang Song-thaek; as we noted at the time, Jang’s fall raised the question of whether North Korea’s commitment to the zones would continue. Cathcart provides an excellent overview of the troubled history of the two islands. He details early Chinese critiques, including that North Korea was not investing in basics such as flood control, as well as ongoing institutional and legal squabbles. Outside of investment in a costly bridge—Cathcart estimates as much as $350 million—the lack of Chinese investment in the zones reflected ongoing problems even prior to Jang’s demise. Cathcart details negative reactions to Jang’s purge in China, but he also makes an interesting and obvious link we had missed: that North Korea’s push to set up SEZ’s occurred at the same time as the Jang purge and effectively sidelined all of the effort that the Chinese had invested in the two islands; as Cathcart points out, one of the proposed SEZ’s in Sinuiju would be directly competitive.

Cathcart concludes that there are still political forces in China that are seeking continuity with the zone projects, in effect trying to calm the waters. But the larger arc of Cathcart’s narrative is that the North Koreans seem unable to commit to such projects in a sustained and credible way. The open questions are “why.” Possible answers include fear of Chinese dominance, ongoing struggles over rents, and interference from conservative forces opposed to the effort. Our favored explanation, however, is simple failure to understand the institutional and physical infrastructure required to make such projects work. A must-read piece for anyone interested in the prospects for reform.

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