SEOUL, South Korea -- North Korea has appointed a wealthy Chinese businessman to manage a new economic zone with far-reaching autonomy, underscoring leader Kim Jong Il's apparent intent to follow communist China's market economy reform path.
The establishment of the Sinuiju economic zone, North Korea's second such enclave, was announced last week amid an unprecedented series of contacts between the two Koreas and a historic summit between the leaders of North Korea and Japan.
Analysts take the combination of diplomatic outreach and embryonic economic reform as a sign that the country U.S. President George W. Bush has labelled part of an "axis of evil" is moving away from five decades of isolation and militant communism.
But they say North Korea pales next to China as an attractive investment, and its international rehabilitation will not happen until it resolves security disputes with the United States.
The businessman chosen to lead the zone, Chinese-born Dutch national Yang Bin, told CNN from North Korea the Sinuiju zone that borders China "will be a totally capitalist region."
"It will have its own legislative, judicial and executive powers without any interference from the central government," the agro-business executive told the U.S. television news network.
Forbes magazine named Yang, a former Chinese navy officer educated in the Netherlands, as the second richest businessman in China last year, with estimated personal wealth of $900 million.
He told a news conference in the North Korean capital Pyongyang on Monday he would be chief executive of the special financial and commercial zone, which lies just across the river from Dandong in northeastern China.
The Sinuiju zone would have its own legislators, more than half of whom would be foreigners, and its own courts with a European as chief judge, Hong Kong's South China Morning Post quoted Yang as saying.
A wall will be erected to divide the capitalist region from the rest of the country and some 500,000 people living in the area will be forced to move out over the next two years.
Yang said 200,000 migrants would be brought in, including young and skilled people from North Korea and China, to work in the zone's main businesses of industry, finance and processing of export goods. U.S. dollars will be used as its currency.
North Korea set up a special economic zone in Rajin-Sonbong near its border with Russia and China in the early 1990s.
The scheme has largely been seen as a flop, drawing only $140 million in actual investment, a small fraction of its target. South Korean economists have said the area's remoteness and heavy government interference were the chief causes for the failure.
Business analysts say Sinuiju would benefit from its proximity to China, whose investors appear to be the main target of the new policies, rather than South Koreans.
"I think the Chinese are going to invest in this economic zone. It is absolutely for Chinese," said Roger Barrett, managing director of Korea Business Consultants in Beijing.
South Korean businesses, spearheaded by firms from the former Hyundai Group, are negotiating an industrial zone in the North-South border city of Kaesong -- a project agreed at the first inter-Korean summit in June 2000.
Analysts at South Korea's Export-Import bank said Tuesday they expected that North Korea would grant Kaesong special economic zone status and name another zone at Wonsan on its eastern coast to try to draw investors from Japan.
Dominique Dwor-Frecaut, director of Asian Research at Barclays Capital in Singapore, said South Korean firms might be drawn to Sinuiju by "patriotic duty," but otherwise North Korea will face stiff competition from China.
"China still has the edge because the political situation is much more stable, you have infrastructure, you already have lots of companies that have moved there," she said.
Piao Jianyi, a North Korea expert at the Chinese Academy of Social Sciences in Beijing, said North Korea had studied China's experience with special zones and was moving faster than China had 20 years earlier, when there were no blueprints to follow.
However, Piao added: "Their international environment is not as good as ours was then. We'd solved all the problems of diplomatic relations and had relations with the U.S."
Western investors might be put off by North Korea's political pariah status, said Mike Moran, an economist at Standard Chartered in Hong Kong.
"Would investors be willing to invest in Iraq or Iran? That's the kind of environment we're looking at," he said.
"It's more a symbolic gesture than a viable investment alternative ... but if you look 10 years down the road it could be quite a pivotal moment for North Korea."
The establishment of the Sinuiju economic zone, North Korea's second such enclave, was announced last week amid an unprecedented series of contacts between the two Koreas and a historic summit between the leaders of North Korea and Japan.
Analysts take the combination of diplomatic outreach and embryonic economic reform as a sign that the country U.S. President George W. Bush has labelled part of an "axis of evil" is moving away from five decades of isolation and militant communism.
But they say North Korea pales next to China as an attractive investment, and its international rehabilitation will not happen until it resolves security disputes with the United States.
The businessman chosen to lead the zone, Chinese-born Dutch national Yang Bin, told CNN from North Korea the Sinuiju zone that borders China "will be a totally capitalist region."
"It will have its own legislative, judicial and executive powers without any interference from the central government," the agro-business executive told the U.S. television news network.
Forbes magazine named Yang, a former Chinese navy officer educated in the Netherlands, as the second richest businessman in China last year, with estimated personal wealth of $900 million.
He told a news conference in the North Korean capital Pyongyang on Monday he would be chief executive of the special financial and commercial zone, which lies just across the river from Dandong in northeastern China.
The Sinuiju zone would have its own legislators, more than half of whom would be foreigners, and its own courts with a European as chief judge, Hong Kong's South China Morning Post quoted Yang as saying.
A wall will be erected to divide the capitalist region from the rest of the country and some 500,000 people living in the area will be forced to move out over the next two years.
Yang said 200,000 migrants would be brought in, including young and skilled people from North Korea and China, to work in the zone's main businesses of industry, finance and processing of export goods. U.S. dollars will be used as its currency.
North Korea set up a special economic zone in Rajin-Sonbong near its border with Russia and China in the early 1990s.
The scheme has largely been seen as a flop, drawing only $140 million in actual investment, a small fraction of its target. South Korean economists have said the area's remoteness and heavy government interference were the chief causes for the failure.
Business analysts say Sinuiju would benefit from its proximity to China, whose investors appear to be the main target of the new policies, rather than South Koreans.
"I think the Chinese are going to invest in this economic zone. It is absolutely for Chinese," said Roger Barrett, managing director of Korea Business Consultants in Beijing.
South Korean businesses, spearheaded by firms from the former Hyundai Group, are negotiating an industrial zone in the North-South border city of Kaesong -- a project agreed at the first inter-Korean summit in June 2000.
Analysts at South Korea's Export-Import bank said Tuesday they expected that North Korea would grant Kaesong special economic zone status and name another zone at Wonsan on its eastern coast to try to draw investors from Japan.
Dominique Dwor-Frecaut, director of Asian Research at Barclays Capital in Singapore, said South Korean firms might be drawn to Sinuiju by "patriotic duty," but otherwise North Korea will face stiff competition from China.
"China still has the edge because the political situation is much more stable, you have infrastructure, you already have lots of companies that have moved there," she said.
Piao Jianyi, a North Korea expert at the Chinese Academy of Social Sciences in Beijing, said North Korea had studied China's experience with special zones and was moving faster than China had 20 years earlier, when there were no blueprints to follow.
However, Piao added: "Their international environment is not as good as ours was then. We'd solved all the problems of diplomatic relations and had relations with the U.S."
Western investors might be put off by North Korea's political pariah status, said Mike Moran, an economist at Standard Chartered in Hong Kong.
"Would investors be willing to invest in Iraq or Iran? That's the kind of environment we're looking at," he said.
"It's more a symbolic gesture than a viable investment alternative ... but if you look 10 years down the road it could be quite a pivotal moment for North Korea."