[EDITORIAL] Efforts in vain

Cash-strapped North Korea is desperately seeking outside investment, recent moves by the North Korean government indicate.

There has been a flurry of reports on North Korea`s attempts to attract foreign investment following the failure of a currency revaluation last November. The North`s foreign currency reserves are drying up as the strict enforcement of the U.N. sanctions, including an arms sales embargo, choke off its supply of cash. Pyongyang is seeking to compensate by reviving the Rajin-Seonbong port on the northeastern tip of the country on the border with China and Rusia.

Rajin-Seonbong, also known as Raseon, was established as a free trade zone back in 1991, but it never really took off. There have been periodic efforts to revive the free trade zone but the efforts did not yield results.

Now, nearly two decades later, Pyongyang has revised the law on Raseon in a renewed attempt to woo foreign investors. The revisions appear to be targeted at South Korean investments, in addition to Chinese and Japanese investments. Under a 1999 revision to the law, South Korean investors were banned from the zone. The revised law also provides for tax benefits and expands the scope of foreign investment to include tourism, retail and finance sectors.

The North Korean government`s keen interest in reviving Raseon was reflected in Kim Jong-il`s first-ever visit there last December. Subsequently, Raseon was designated as a municipality and the local leadership has been replaced by officials from the central government with international experience.



Also at the end of last year, a top trade specialist was appointed as one of the second-highest officials responsible for the North`s relations with Seoul. Ri Kwang-gun, at one time involved with the communist state`s foreign trade, is now in charge of policies on inter-Korean economic cooperation.

There are reports that the Russians have been given a 50-year lease on a pier at Rajin port while the Chinese have been awarded a 10-year lease on a pier. Earlier reports also said that 100,000 apartment units will be built in Pyongyang as part of foreign investment in the country, a move aimed at soothing the party elites living in the capital city.

Despite North Korea`s aggressive moves to attract foreign investment, the attempts seem more likely to fail than succeed. The instability of the regime - a recent report by the International Crisis Group said that the communist regime is facing a series of "mini crises" - is a significant obstacle in the North`s attempts to lure foreign capital.

The North Korean government`s poor track record in the operation of the Gaeseong Industrial Complex, a joint South-North venture, may also deter potential investors.

Most importantly, North Korea must give up its nuclear weapons if it is serious about attracting foreign investment. The U.N. sanctions currently in place will make it difficult to get outside capital.

North Korea knows exactly what it needs to do. Its only option is to return to the six-party talks on denuclearization and give up its nuclear weapons. Before Pyongyang abandons its nuclear ambitions, its efforts at luring foreign investment will be futile.