Foreigners in Pyongyang yesterday expressed astonishment at North Korea's plan to set up a Hong Kong-style special administrative region (SAR), and at its choice of leader, Chinese businessman Yang Bin. 'This goes against everything that North Korea has done since it was established after World War II,' said one European businessman. 'This is a 100 per cent capitalist enclave run by a foreigner.' North Korean leader Kim Jong-il has selected Mr Yang - said to be China's second-richest businessmen - to run the SAR at Sinuiju on the Chinese border and has given him sweeping legislative, executive and legal powers and the right to decide who lives in the zone. Mr Yang yesterday said the enclave's 500,000 people would be moved to other parts of North Korea over the next two years, and 200,000 migrants would be brought in, including young and technically qualified people from North Korea and China. He said he planned to set up a temporary legislature of 15 people, more than half of whom would be foreigners, and recruit a European as chief judge. The zone will be capitalist, cut off from the rest of North Korea by a wall, and will give visa-free entry to everyone except North Koreans, who will need a visa to visit and a permit from the new zone's government if they want to live there. 'Since many Chinese companies and people will be there, and we will import most of our raw materials from China, I would prefer to use renminbi. But the PBOC [People's Bank of China] will not allow it,' he said. The SAR will have no import or export tariff and income tax will be set at 14 per cent. The businessman - who has been investing in North Korea for only two years and does not speak Korean - said: 'Tung Chee-hwa is a chief executive with billions of dollars in reserves. I am a very poor chief executive without a penny. But the North Korean government has given me very good policies and good land.' Japanese and other foreigners who do business with North Korea say they are given the e-mail address of a North Korean company in Shenyang which checks the material it receives before sending it home. 'Perhaps Kim wants to leave space between himself and Yang. If the zone succeeds, it will be good for everyone. If it fails, then he can blame the foreigners,' the European businessman said. An Asian businessman said the SAR was a remarkable idea and the biggest change in economic policy since North Korea was founded. 'They will be able to do there what they cannot do in the rest of North Korea - such as private land, private ownership and majority control by foreign countries. It is more like Hong Kong than Shenzhen. It is a more ambitious step than the establishment of Shenzhen in 1980,' he said. The most likely investors were Chinese companies, followed by those from South Korea, Japan and Taiwan, he said. But an American investor was more sceptical. 'There are many safer places to put your money. Any investor will demand third-party jurisdiction. He will not agree to be subject to North Korean law in the case of a dispute. The reliability of a contract and the rule of law is a big issue,' he said. 'Another issue is the right to repatriate profits and access to offshore banking. North Korea has to agree to this. It has some things to offer - minerals like zinc, lead, bronze and coal - but many of the coal mines are flooded.' One South Korean businessman was pessimistic. 'Foreign investment is not protected in North Korea. There is no trust. 'If there is a legal dispute, what rules apply?'