UN sees future profits in 'messy' Tumen basin

Official appealing to China, Russia and N Korea to drop barriers, lure HK funds

The United Nations is appealing to the Chinese, Russian and North Korean governments to drop barriers to the movement of goods and people across their borders in the Tumen River region and is calling on Hong Kong firms to invest there.

'Getting private-sector investment is absolutely essential to the stability of the region,' said Khalid Malik, the UN's representative in Beijing.

Mr Malik was in Hong Kong to drum up private-sector interest in an investment conference planned to coincide with a ministerial-level meeting of five regional governments scheduled for September in Changchun, Jilin province.

'Investors prepared to commit to the region now could see a large dividend later,' he said.

This is not the first attempt to lure investors to the remote and impoverished border region.

The UN Development Programme has been trying to promote economic growth in the Tumen basin since the early 1990s.

However, its efforts have foundered on the area's lack of infrastructure and the high risks of dealing with the pariah regime of North Korea.

The region will be equally hard to sell to businesses today.

With the six-party talks on North Korea's nuclear ambitions stalled since June last year, and fears mounting that Pyongyang is preparing to test an atomic weapon, the investment environment is hardly favourable.

But Mr Malik is upbeat about the chances of progress at the Changchun talks, which include the three Tumen River countries along with nearby Mongolia and South Korea.

'Here in the same region are the same governments developing positive traction,' he said.

China, Russia and North Korea all offer extensive tax incentives to companies investing in special economic zones in the border region, but so far there have been few takers. One of the only significant projects in North Korea's Rajin-Sonbong free economic and trade zone - a casino run by Hong Kong's Emperor Group - shut down recently after Chinese authorities cracked down on officials crossing the border to gamble with embezzled state money.

Mr Malik admitted that the UN considered closing its Tumen River region development programme last year due to lack of progress. Now, he believed the ministerial meeting in Changchun would lend new impetus to the region's growth.

'The economic reality will drive policy,' he said. 'Everyone wants to see results.'

Among the measures Mr Malik hopes to see signed are the deregulation of cross-border goods trade, easier standards for visas and an agreement to raise tourist numbers from the current 100,000 a year to one million by 2010.

With average wages in the region as low as US$70 a month, plentiful energy resources in Russia's Primorsky territory and both the Chinese and Koreans eager to revitalise industry in the area, Mr Malik described the region's advantages as 'a natural fit'.

He maintained there were substantial opportunities for investors in energy, telecommunications, timber, tourism, textiles and manufacturing.

He added that investment of as little as US$100 million would rehabilitate road and rail links between Hunchun in China and the ports of Zarubino in Russia and Rajin in North Korea, opening up the region's export potential.

Other observers remain deeply sceptical about the region's economic promise.

'The Tumen is simply not on investors' radar screens,' said Paul French, a Shanghai-based marketing director at research company Access Asia and author of a recent book on the politics and economics of North Korea.

'It's all a mess up there. There is no infrastructure, no logistics and it's highly polluted.

'There is nothing to encourage investors at all.'