Necessity and Directions of Korea's New Northern Economic Cooperation

Yeo-Cheon Jeong

The area of the Eurasian continent north of the Korean Peninsula not only has special historical-cultural significance for the Korean people, but is also important in terms of national security and economy of the Republic of Korea (hereafter, Korea). Bearing these facts in mind, Korea needs to pursue a 'New Northern Policy' for strengthening relations with that area referred to as “the Northern Area” in this report. Insofar as this policy targets a specific area, it should be different from traditional external policies toward individual countries.

It is thus perfectly reasonable to state that Korea's New Northern Policy now needs to focus on the Russian Far East and the Chinese Northeast Provinces where large-scale regional development is underway. As development plans both in the Russian Far East and the Chinese Northeast Provinces are mainly aimed at modernizing regional industrial structure; construction of numerous industrial complexes and infrastructure are currently in progress which are intended to increase efficiency in production and transportation networks across the two regions. The extensive development of the Russian Far East and the Chinese Northeast could provide a firm base for Korea's New Northern Policy.

That both Chinese and Russian governments are emphasizing, more than ever, international cooperation for their regional development plans, is very meaningful for Korea's New Northern Policy. The Russian government under president Putin, for example, considers 'Integration into the Asia-Pacific region' as one of the basic tenets of Russia's external economic policy. In the Federal Program for Developing the Russian Far East, expansion of trade and economic exchange with the Asia-Pacific countries was adopted as one of the main tasks while a number of important projects related to development of mineral resources and transportation infrastructures were set up, with full consideration of establishing direct connections with neighboring countries. Moreover, nationwide industrial policies of the Russian government such as the “Federal Strategy for Energy by 2030” were forwarded, taking direct connection with countries in the Asia-Pacific and, in particular, the Northeast Asian countries into account.

Meanwhile, the Chinese government has been emphasizing international cooperation in connection with its development plans for the Northeast Provinces since the mid-2000s. In particular, Chinese government has been pushing forward policies to develop their border regions in close connection with its neighboring countries. These policies were well-expressed in the “plan for the integration of land routes, sea ports and zones with North Korea” and “plan for integration of land routes, sea ports and the customs with Russia” formulated by Chinese central government in 2007. Such policies of the China's central government were reflected in numerous bilateral cross-border cooperation projects enacted by 3 Northeastern Provinces of China.

Of various aspects of international cooperation taking place in "the Northern Area" today, the one between China and Russia plays key roles in terms of magnitude as well as influence on international relations. For example, the agreement in 2009 between governments of the two countries, which aims at cooperative and concerted development of the Russian Far East and the Chinese Northeastern Provinces, included more than 200 projects ranging from cross-border transportation, customs, labor supply, sightseeing, to environmental preservation. Progress in these cooperation projects will greatly enhance bilateral economic ties between Russia and China vis-a-vis their common border.

Another series of important international cooperation efforts in the development of Korea's “Northern Area” is taking place along the border of North Korea. Since mid-2000s up until the present, a number of Chinese business firms, especially those from Jilin Province, initiated various infrastructure development projects with focus on utilization of the port of Rajin, North Korea. Chinese and North Korean governments signed a convention in 2010 for cooperation in the development of North Korea's Rajin-Seonbong Economic/Trade Zone and Hwanggeumpyong Special Economic Zones that border, respectively, on Liaoning and Jilin Provinces of China. Russia, prompted by Chinese initiatives, embarked upon modernization of the 60 km railroad route between Rajin and Hasan (in the Southern end of Russia's Primorsky Province) in 2007, and subsequently acquired the right to use the No. 3 wharf of Rajin Port for 49 years, which will serve as a logistics hub for Russia's advance into Northeast Asia.

As economic development of the Russian Far East and the Chinese Northeast Provinces is the most essential part as well as the most important driving force that will bring about changes in the “Northern Area”, the New Northern Policy of Korea should utilize it as a foothold. This means that the “New Northern Economic Cooperation” should be the main facet of the New Northern Policy of Korea. However, Korea's New Northen Economic Cooperation should, insofar as it is a part of the New Northern Policy, not only aim at economic gain, but strive towards broader goals such promoting favorable international circumstances, bolstering national security and, furthermore, improvement of inter-Korean relations.

The directions and objectives of Korea's New Northern Economic Cooperation should be as follows. First, Korea should actively participate in the development process of the “Northern Area” in order to increase Korea's presence and have Korea's interests reflected within that process. To this end, entry of Korean businesses, especially small and medium-size firms, into the region would be a necessary precondition. Therefore, the first and foremost objective of Korea's New Northern Economic Cooperation is to support Korean businesses interested in investing in the Russian Far East and Chinese Northeast where the business environment is still relatively poor. It is advisable to establish a number of business information centers in those regions that could provide Korean businesses with proper information, and on-site consultation. Also, it is recommended that industrial parks for Korean businesses in the Russian Far East be established, as no such facilities has been set up presently.

Second, from the perspective of economic interest, it is important for Korea to secure certain production factors from the “the Northern Area”. Considering that Korea is one of the World's manufacturing and export powerhouses but very poor in natural resources, Korea's cooperation with “the Northern Area” should prioritize securing natural resources, especially energy and mineral resources, from that region which are essential for stable development of Korea's manufacturing sectors. Besides, it is also very important for Korea to make use of the trans-Eurasian transportation infrastructure in “the Northern Area” in order to enhance efficiency of its international export distribution lines. In this regard, Korea needs to pay more attention to the railroad networks of “the Northern Area” as a whole; meaning present discussions on utilization of Trans-Siberian Railroads should be extended to include other main railroads lines in “the Northern Area” such as the Trans-Manchurian Railroad.

Third, Korea's New Northern Economic Cooperation needs to focus more on multilateral cooperation. As Russian and Chinese governments are stressing multilateralism in their development plans regarding “the Northern Area”, it is expected that opportunities for multilateral cooperation in that region will increase greatly in the near future. Korea should not only participate actively in multilateral projects, but also spontaneously initiate new multilateral projects to lead the development processes in “the Northern Area”. In this case, it would be even better for Korea's New Northern Policy to organize those types of multilateral cooperation projects that, on the one hand, North Korea could take part in and, on the other, could contribute to the formation of a common economic community among Northeast Asian countries as a whole.

The New Northern Economic Cooperation is closely related to other policies of the Korean government. Hence, a concerted action among ministries and government agencies is essential to the success of the New Northern Economic Cooperation. Also, in order for the New Northern Economic Cooperation to come to fruition, Korean government should endeavor to create efficient consulting channels with governments of counterpart countries both at the central and regional level.

Even though Korea's New Northern Policy will be enacted mainly in the economic field, this policy pursues more wide-ranged goals involving international politics as well as national security. This means that Korea strives to upgrade overall relations with “the Northern Area” by means of the New Northern Policy. If the Korean government's New Northern Policy and the development policies of “the Northern Area” by Chinese and Russian governments can reach common ground, Korea, China and Russia will be able to form a “strategical partnership” not only in name but also in reality.