SEPTEMBER 28 Even for this extraordinary country, last Tuesday's scene that played out in an ornate room in the giant Hall of Ten Thousand Years was an unusual one. This room, in North Korea's parliament building, was where Kim Yong-nam, the balding revolutionary who ranks second in the national hierarchy after Kim Jong-il, handed a letter of appointment to China's second-richest businessman. The document gave businessman Yang Bin control for 50 years of one of the country's most prosperous cities and its most important border post. Setting up a capitalist enclave to be run by a foreigner is to repudiate the self-reliance and dictatorial socialism that the country has followed, in defiance of the world, since it was founded in 1945. On the wall, Kim Jong-il and his father, Kim Il-sung, creator of the state, looked down with expressionless eyes on the small group of old revolutionaries who were carrying out this historic decision. Perhaps some knew what the elder Kim, who died in 1995 but remains 'eternal president', would have thought of it. Mr Yang, the new chief executive of the Sinuiju Special Administrative Region (SAR), made a short speech, heaping praise on the younger Mr Kim, before the party moved upstairs for a celebratory banquet. Later, Mr Yang got into a stretch Mercedes, a gift from the state, and with an escort of bodyguards was driven back to his hotel. Slightly drunk, the tubby 39-year-old looked like a man who had just won the lottery. 'What do you think of it all?' he asked waiting journalists with a big smile. 'I am the chief executive now. The models of my new city are London, Geneva and Paris.' Mr Yang is now king of 132 sq km in Sinuiju in the west of North Korea, across the Yalu River from the Chinese city of Dandong. It consists of two parts - an urban area and a port 30km away, that will be linked by an expressway. Under its Basic Law, published on September 20 and modelled on Hong Kong's, the zone will have its own legislature, courts and executive, will retain its own tax revenue and will use the United States dollar and Korean, Chinese and English as official languages. Departments of the North Korean government have no right to interfere in the SAR and Mr Yang says he will listen only to Kim Jong-il, the man who appointed him. 'We will practise capitalism in the SAR. It will be economically independent of North Korea,' said Mr Yang. This means that, like Hong Kong and Shenzhen, the SAR will be cordoned off, preventing North Koreans from entering without a permit, while foreigners will enjoy visa-free entry. Walking round Sinuiju last Wednesday evening, it was a strain on the imagination to picture the dark and grimy streets being turned into the Champs Elysees and Piccadilly Circus. Before dinner, this reporter had gone for a jog through a crowded park next to the railway station. He had managed two laps before a Toyota full of secret police raced up behind him and an officer screamed at him to go back to the hotel. It looks like a Chinese city in the early 1970s, with electricity shortages, unlit streets, roads unpaved and few vehicles. People live in crowded one-storey homes and modest apartment blocks. The city's main department store had little to sell and much of it was Chinese products that make the short crossing over the Yalu River from Dandong. The central square is dominated by a giant statue of Kim Il-sung and the city is full of murals of armed soldiers and slogans praising the 'Great Leader' and his son and the superiority of socialism. Mr Yang said that to create his new city he would have to demolish most of the existing buildings and move the 500,000 inhabitants to other parts of North Korea. Most of the military and political slogans would go, too, said one of Mr Yang's staff members, but they are not sure about the giant Kim statue, which will probably stay both as an historical monument and to avoid offending the North Koreans. The railway station and the Yalu River Hotel, the most luxurious in town, will also go, so too will the department store and main hospital. The fierce North Korean soldiers who guard the Yalu River bridge are expected to be replaced by armed police under the control of the SAR government and the Korean People's Army will disappear into garrisons in the SAR, hidden from public view. During a brief visit under the tight official control that governs contact between foreigners and Koreans, local people said while they knew of the creation of the SAR, they knew little of the details but they would move if the state told them to. Mr Yang's blueprint calls for Pyongyang to build, at its own expense, a new city - outside the SAR's barriers. It will house not only Sinuiju's 500,000 residents but also accommodate government and Korean Workers Party institutions. Meanwhile, as I watched shadows swaying to and fro on bicycles and an old woman selling pancakes from a wicker basket in a dark, silent street, I wondered if this plan was for real. In 10 years, will this city look like Pudong, Shanghai's new financial hub? Will all these people be resettled in a new city? Will the Kim statue become an historical curiosity? Mr Yang has no doubts that cheap Korean labour at US$40 a month, a deep-water harbour, a free port with no tariffs, an income tax rate of 14 per cent and visa-free entry will attract investors from Asia and the West. But who will build the port facilities, roads, power plants and other infrastructure needed to make such investment possible? Mr Yang said: 'We will invite international tenders. Private capital is funding such things in China.' His confidence is shared in Dandong, where five-star hotels, overflowing supermarkets and traffic jams make an astonishing contrast with Sinuiju. A Dandong property developer, Wang Chenggui, said: 'I do not know about the rest of China but companies here are eager to invest in the SAR. It will be good for both sides of the river, especially for the ordinary people. 'Yes, attracting investment for infrastructure will be difficult. That will depend on Yang. Probably that is why the North Koreans chose a Chinese, who will be able to bring in capital from China,' he said. Another Dandong businessman, Wei Guang, said: 'To attract people, the SAR will have to offer things not available elsewhere, like gambling and a red-light area. 'North Korea is poor now but so was China in the 1980s when we set up the special economic zones. You have to start somewhere.' A member of Mr Yang's management team said many North Koreans he had met realised they had to change. 'In public, they support the system but in private they want this SAR. People in Sinuiju watch Chinese television, although it is illegal, and some understand Chinese. When they come here, they are embarrassed by the gap in wealth,' he said. But many difficult issues remain. Who in the Sinuiju government and police will be invited to stay on? Will there be a place for the Korean Workers Party and the sprawling security apparatus? Will the members of the ruling nomenklatura be willing to give up their privileges? In Pyongyang, the view was not so optimistic. 'How much did Yang pay to buy Sinuiju?' asked one North Korean official, in a rare expression of dissent. A foreign businessman said that investing in the SAR was still investing in North Korea, as Mr Yang would essentially be under Mr Kim's control. 'What if, two years from now, Kim objects to something and orders Yang to close it? Investors here have no legal protection and foreign banks will not lend money to North Korea,' he said. He pointed to the failure of the Rajin-Sonbong zone in the northeast corner of the country. Set up in 1991, it has failed to attract foreign investment. An Asian businessman said: 'The SAR will become a haven for gamblers, adventurers, criminals and fugitives from debt and divorce. 'Yang is only 39 and has run a private company. What qualifications does he have to run something as complex as this? What is a legal system based on two pages of a Basic Law? How long did China and Britain take to work out Hong Kong's Basic Law? Some say that he has financial problems at home and so has taken this on as a new project to get away from them. 'This project will not succeed.' Footnote: On October 4, Yang Bin was put under house arrest in the mainland and on November 28 was arrested on charges of fraud, corruption and other commercial crimes, including illegal occupation of farmland. 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