Can Singapore serve as economic model for NKorea?

[May 14, 2012]  SEOUL, South Korea (AP) -- Less than two weeks after being punished with new U.N. sanctions, North Korea has sent its ceremonial head of state and two top economic officials to Singapore and Indonesia on a trip that appears aimed at drumming up outside investment.

Kim Yong Nam, president of the Presidium of North Korea's parliament, arrived in Singapore on Friday for his first reported trip overseas since late leader Kim Jong Il's December death. He is to head Sunday to Indonesia with two senior economic officials, according to North Korean state media. Kim, no relation to Kim Jong Il and current leader Kim Jong Un, often represents North Korea abroad.

The weeklong journey comes on the heels of new U.N. sanctions imposed on North Korea for launching a long-range rocket last month in defiance of Security Council resolutions banning it from nuclear or ballistic missile activity. North Korea insists the launch was an attempt to send a satellite into space.

Washington suspended an agreement to provide North Korea with food aid, and the North could face more punishment if it follows the launch with an atomic test as it did in 2006 and 2009.

Even as it has risked punishment by developing missiles, North Korea also has focused since 2009 on improving its economy by developing light industry, drawing foreign investment and expanding trade.

With ties remaining tense with South Korea, North Korea is looking elsewhere to build economic partnerships.

Singaporean entrepreneurs already are supplying the well-to-do in Pyongyang with everything from Heineken beer to Hello Kitty, and have introduced some locals to hamburgers, fried chicken and Belgian waffles.

North Korea is looking to diversify its trade, import natural resources and export consumer goods with Southeast Asia's help.

Singapore offers an attractive model for attracting direct foreign investment, while resource-rich Indonesia could give pointers on how to make money from minerals, said Cho Bong-hyun, a research fellow at the IBK Economic Research Institute in Seoul.

The North Koreans may also use the trip to Singapore to learn how to develop a successful growth model that does not threaten the political power structure, said Andray Abrahamian, executive director of Choson Exchange, a Singapore-based nonprofit group that has provided business and legal training for about 200 young North Korean government officials and students.

"Singapore's development trajectory has been attractive to a number of countries who are interested in maintaining political stability to manage rapid economic growth," he said.

Trade and investment between North Korea and Southeast Asia have waxed and waned over the past 12 years.

From 2000 to 2006, trade with 11 Southeast Asian countries -- including Indonesia, Singapore and Thailand -- accounted for 10 to 12 percent of North Korea's foreign trade. But after Singapore and others pledged to enforce U.N. sanctions, trade with the region dropped to less than 2 percent in 2010, according to the Korea Institute for International Economic Policy in Seoul.

North Korea has sought to reverse that trend. In 2010, Singapore was North Korea's sixth-largest trade partner, according to the Korea Trade-Investment Promotion Agency in Seoul. And in recent years, North Korea has developed two special economic zones, in Rason in the northeast and Hwanggumphyong in the northwest, and is looking to Singapore for guidance, analysts said.

"Since the 1990s, North Korea has consistently said that it sees Singapore as a model for its special economic zones," said Lim Soo-ho, a researcher at Samsung Economic Research Institute in Seoul.

Accompanying Kim is Ri Kwang Gun, who heads the Joint Venture and Investment Commission in charge of attracting foreign investment.

North Korea could also try to sell itself to manufacturers looking for cheap labor as well as boost exports of its consumer products, analysts said. The other economic official in the North Korean delegation is An Jong Su, the minister of light industry, according to the official Korean Central News Agency.

South Korea, meanwhile, is set to negotiate with China on a free trade agreement that may lift tariffs on products made in North Korea's special economic zones, making investment in North Korea more favorable.

"North Korea has the cheapest labor in the world, less than half of China's (rates)," said Lim. "Foreign investors can manufacture goods in North Korea and export them to China."

Indonesia, meanwhile, may be able to provide guidance on how North Korea can exploit mineral resources that the North Korea Resources Institute in Seoul estimates are worth more than $10 trillion, analysts said.

Indonesia has had strong ties with North Korea since 1964. In 1965, when late North Korean founder Kim Il Sung paid Indonesia a visit, President Sukarno presented him with an orchid dubbed the Kimilsungia.

On Tuesday, North Korean and Indonesian officials signed an agreement to share news stories, photos, video and TV footage, and eventually swap journalists, Indonesia's Foreign Ministry said in a statement.

[Associated Press; By YOUKYUNG LEE]

Associated Press writers Harald Olsen in Seoul and Alex Kennedy in Singapore contributed to this report.

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