Tumen River project running into problems
Tumen River project running into problems
Mark J. Valencia examines the potential of the only existing multilateral inter-governmental institution for economic cooperation in Northeast Asia.
The United Nation's Development Program's much-touted Tumen River Area Development Project (TRADP) has run into problems and skeptics are pronouncing it dead in the water, if not dead all together. The hope was that economic cooperation would break down political barriers that have made the region a flash point for decades. But Russian and Chinese reservations at the July 1994 meeting of the Program Management Committee in Moscow derailed the previously agreed Tumen River Area Development Corporation.
The Corporation was to be run by the three riparian countries to lease land and attract foreign investment. And on Oct. 31, the UNDP closed its New York office having exhausted its US$3.5 million budget. The role of the UNDP has now been reduced to a liaison office in Beijing. Although talks and studies in the riparian countries continue, the key question being raised is whether the TRADP idea and process can survive without an implementing mechanism to drive it forward.
However, these doomsayers ignore the fact that the fundamental driving forces for development of that area remain and, indeed, are long-term trends. The original concept was to combine Japanese and South Korean capital, know-how and technology with cheap Chinese and North Korean labor to exploit and process natural resources from the Russian Far East and Mongolia. China still wants to develop its economically-backward northeast and to regain access to the sea either through a Tumen River port or by leasing facilities at warm water ports in Russia and North Korea. Mongolia continues to seek trade as well as investment in its mineral rich east from its Asian neighbors, and also needs access to the sea, particularly for exports of raw materials.
North Korea is proceeding with development of its Rajin/Sonbong Special Economic Zone (SEZ) and wishes to use the Tumen River project as a vehicle to attract and perhaps help guarantee foreign investment. As evidence of its commitment, it has approved the concept of land leasing. Indeed, North Korea is greatly disappointed that the corporation idea has been stalled.
South Korea has an abiding special interest in China's Yanbian area with its roughly two million ethnic Koreans, and wishes to use the project as well as direct investment in China's North Korean border area as a means for cooperation and confidence- building with North Korea. Indeed it hopes the project will help persuade North Korea to shift slowly to an open-door policy.
South Korea's motives are also economic. Low fixed costs and cheap Korean-speaking labor can combine to produce value-added consumer goods for South Korea as well as an eventual market for South Korean products. Kim Young-Sam's Nov. 7, 1994, declaration liberalizing South Korean investment in North Korea is a positive initial step to promote direct investment in the Rajin-Sonbong SEZ. Although North Korea responded critically to President Kim's move, it did invite representatives to visit the North. South Korean companies have already begun planning for such investment. The Korea Maritime and Port Administration has applied to the Ministry of Science and Technology to develop ports in the zone. And Samsung plans to invest in the Hunchun-Rajin/Sonbong rail link and to finance the development of Rajin port. These projects represent the first direct South Korean investment in the North, although the risk is being hedged by investing through a Chinese company.
Russia remains mired in its own economic difficulties and is concerned that the project will compete with its existing sea ports and ground transportation facilities. Moreover its constitution does not yet allow foreigners to lease land. And there is some concern that the project would harm its coastal wetland environment as well as attract hordes of Chinese and North Korean immigrants. Nevertheless, Russia realizes that the future of its Far East is in trade and investment with its Asian neighbors. Thus it wants to see how the Tumen project and the Russian Far East will fit in a broader Regional Development Strategy before fully backing the project.
In keeping with Russia's concern, the original somewhat narrow TRADP has now been supplanted by a large vision encompassing the area between Hunchun, Chongjin and Nakhodka, and is focused on more modest objectives. Long-term and large-scale projects such as building 11 specialized harbors and a rail hub have been put aside in favor of improving existing ports and conducting small- scale projects as quickly as possible. Such practical cooperation, which consists more of coordinating the existing infrastructure efforts of the riparian countries, is more realistic at this stage.
Although the TRADP dream has been blurred and blunted, there have been considerable achievements to date. The Tumen River project is the only existing multilateral inter-governmental institution for economic cooperation in Northeast Asia. The area has gone from a forbidden no-man's land to one of relatively easy access. Border trade, particularly between Russia and China, has greatly expanded. There has been incremental growth throughout the area. The Phase II TRADP agreement has been signed and the emphasis has been changed to a regional development strategy.
A Trilateral Coordination Committee has been established to continue the TRADP. Rail links are being built between China and North Korea, and China and Russia. Japan has started to provide official assistance to the Russian Far East. Three free economic zones have been established -- Hunchun, Rajin/Sonbong and Nakhodka. Trade and investment missions to the area are being sponsored by Unido. There has also been some progress in harmonization of regulations among the three riparian countries and some degree of joint planning. In general, political barriers have been lowered and confidence has risen.
A recent region-wide meeting of the non-governmental Northeast Asia Economic Forum in Niigata, Japan, suggested some possible next steps for the TRADP. One way around the sticky questions of national sovereignty would be for each of the nations to establish Tumen River Development Authorities. These authorities could then be linked by a broader Tumen River Management Authority comprised of both the riparian countries and regional investor countries. This authority would facilitate, promote and coordinate development plans, regulations and activities in the area. This would serve to minimize bureaucracy and the lack of accountability which plague many developing countries. Another important facility would be a Tumen River International Commercial Bank. This would be an innovative interim solution to short-term needs for liquidity as well as a lubricant in day-to- day exchanges of goods and services, imports and exports.
It is clear that the short-term future of the TRADP will be the separate development of individual zones. But when regional demand for regional cooperation reaches a certain threshold, the remaining impediments to trade and investment will melt away. Indeed, the area is almost certain to eventually become a commercial transportation and telecommunications crossroads.
In the meantime, the Northeast Asia Economic Forum based in Hawaii and chaired by Lee-Jay Cho might provide a neutral non- governmental locus of discussions to bridge the gap between concept and official inter-governmental implementation.
Mark J Valencia is a Senior Fellow at the East-West Center, Hawaii, U.S.A..