Sino-NK

The bridge from Tumen to Namyang | Via JSChina

Bring the Mountain to Mohammed: Cross-Border Trade Opens in Namyang

by Christopher Green

Recent news that a ‘border market’ in rural, mountainous Namyang, North Hamkyung Province has been opened on a limited basis to Chinese businesspeople is one of the most intriguing stories to emerge from North Korea in recent times. At the very least, it offers first-rate circumstantial evidence to suggest that the Kim Jong-un regime has concluded that it will have to move away from the course charted during the final years of its predecessor.

According to sources in the region, since the beginning of June, between 50 and 70 Chinese businesspeople per day have been permitted to trade directly with North Koreans via the border market. The incoming Chinese are allowed to remain in North Korea for the eight hours from 9AM to 5PM, but not to reside in the country. They take up approximately 1/3 of the stall space, which has been expanded to accommodate them. While they are not permitted to leave the marketplace and its immediate surrounds, which is only around 200m from the customs house at Namyang, it does mean that for the first time in recent history, Chinese capitalists are being allowed to come into contact with the socialist North Korean masses, including some who have presumably not been vetted in advance to ensure their regime loyalty.

It appears that China is providing local oversight on the project via its consul-general in the industrial city of Chongjin. If his June 14 visit to Changbai County were any guide, it would appear that the same gentleman is dealing with this project in Hyesan. This offers proof that the majority of the burgeoning weight of economic cooperation in the North Korean northeast comes with the full backing of China’s Ministry of Foreign Affairs.

For the record, it is said that the North Korean authorities initially agreed to ‘open’ Namyang before Kim Jong-il died. The deal is purported to be a quid pro quo for much-needed infrastructure developments the Chinese authorities are undertaking in the area, notably at Rasun but also road and rail construction work between Tumen, Namyang and Chongjin.

In any case, the first and most obvious question to ask about the border market project is, “Why Namyang?”

North Hamgyong | Via BASPIA

Geographical Control: Tucking Trade Away in the Mountains | Predominantly, it seems to be a question of geography. Look at a political map of North Korea, and it will show that Namyang is the most northerly point in the country and an extremely long way from Pyongyang. But it will not show that the town is flanked to the south by mountains. This means that it is hard to access from the North Korean side; to travel by train from Chongjin, for example, one has to pass through the Rasun SEZ to the northeast before skirting the border with China and Russia for some considerable time.

Conversely, from the Chinese side, Namyang is comparatively easy to reach, or at least easier than the Rasun SEZ. This is especially true from Yanji, the nearest significant city, which is more than two hours from Hunchun, the de facto gateway to Rasun. In part this could be an attempt on the part of the Chinese authorities to level the domestic developmental playing field, since Tumen is not currently growing as fast as Hunchun, despite its geographical advantages.

For Pyongyang, the border market project looks like an experiment in “bringing the mountain to Mohammed.” In other words, rather than allowing employees from various North Korean foreign currency-earning enterprises to go out into China and elsewhere to engage in foreign-currency earning activities, why not get the Chinese to come in and do their buying and selling in situ? After all, just because this is a market doesn’t mean that the Chinese businesspeople entering are “just” traders, and there is no reason to believe that the only customers will be North Koreans hoping to buy cheap rice for the family.

As such, the market could theoretically become a locus for all kinds of commercial activities, large and small. In addition to which, import-export taxes can be levied on stock inventories and income as the Chinese come and go, earning hard currency for the North that it might not otherwise be in a position to collect.

Back to the Future: Old Ideas, New Locations |  While the appearance of Chinese in the Namyang market may appear novel, in fact, it’s not even a new idea. In 2005, when ideas of economic reform were at or around their peak in Pyongyang, North Korea prepared to launch an almost identical ‘border market’ in Hoiryeong. The authorities even went to the lengths of upgrading an existing market (see picture) to accommodate the planned influx of Chinese businesspeople. However, the plan was eventually shelved, allegedly after Kim Jong-il ordered a drastic retrenchment from what he saw as burgeoning ‘anti-socialist phenomena’ that he could envision himself struggling to control.

Hoiryeong Market and Customs House | Via Daily NK

Evidently, either Kim Jong-un is less concerned by this, or feels himself to be in greater need of foreign currency than his father was. Either way, the Namyang border market clearly represents a modest experiment in reform in the 2005 mold, as if Pyongyang had been doing a little housekeeping and in the process stumbled upon a few 2005-era economic planning documents behind the fridge.

Alas, the outside world has not been and will not be privy to the debate that this perspicacious discovery may have engendered. However, even from the outside it is clear that the Namyang experiment fits in with a wider set of pointers implying a modest (and, note, entirely reversible) economic reform agenda.

First, it is worth noting the ongoing Rodong Sinmun prominence since January of Prime Minister Choi Yong Rim (who, as head of the Cabinet, is technically responsible for North Korea’s civilian economy). It is true that Choi was commonly used by the regime of Kim Jong-il to distance the supreme leader from blame for the moribund state of the North Korean economy, but the frequency of his appearances has increased markedly in this calendar year, and the importance of his branch of government, the Cabinet, seems to have grown with it.

Choi is more than just a figurehead. Notably, he visited China for five days in late September 2011, at which time he and Wen Jiabao made a number of business-friendly noises. In the words of Scott Snyder of CFR and Byun See Won, Choi “pledged to improve the investment environment for Chinese businesses in an apparent indication of Pyongyang’s efforts to draw foreign investment.” And in the words of the Chinese Ministry of Foreign Affairs, “Choi said that the DPRK is willing to work with China to actively implement the important consensus reached by leaders of both countries, further expand bilateral exchanges and cooperation in various fields and make positive efforts in promoting social and economic development in their respective countries and maintaining regional peace and stability.”

This Sino-NK bilateral positivity was then followed up when, on October 23 of last year, First Vice Premier Li Keqiang headed to Pyongyang, where he again met Choi. With little preamble, the two sides subsequently signed a number of agreements covering, as one should expect, economic plans.

Second, it is impossible to ignore the ideological element. As Bob Carlin recently pointed out, although Kim Jong-un is being positioned in the propaganda narrative as the successor to the military-first political line, he is also being positioned as a leader who is going to bring a better life to the people (after all, they must “never have to tighten their belts again”).

Stephan Haggard is right on this point; even by the quixotic standards of the North Korean government, this would be an odd communications strategy to employ if one were not intending to at least try some experiments in the direction of economic improvement. This fact alone also implies (though does not by any means guarantee) that there is an economically reformist element (an element which includes the ubiquitous Jang Sung Taek and light industry department head Kim Kyung Hee, no doubt) that is, if not exactly in the ascendency, then at least being included in the discussion down by the Taedong River.

In many senses, Pyongyang is in a “damned if you do, and damned if you don’t” scenario. If it opens its economy, it risks the influx of information on life in South Korea which some experts (though not this one) assert will lead to the regime’s demise as surely as the sun comes up in the morning, and if it doesn’t open its economy at all then it is sure to reach a tipping point from which the state cannot continue to function even to the extent of placating the all-important 2-3 million residents of the Pyongyang metropolitan area and the Party’s provincial fiefs. They know as well as we do that a compromise needs to be found, and one that does “as little damning as possible.” One way or another, North Korea is going to have to open up a little, as it seems to have already done at Namyang.

Christopher Green is the Managing Editor of the Daily NK and the author of Destination Pyongyang.