“Will there be special visa policies for Wonsan? … Is it possible to bring foreign workers in to work? … Can the lease of land be renewed after 50 years? …”
In October, Choson Exchange organized its first ever-training program for North Koreans in Vietnam. Participants spent a week in Vietnam learning about the land lease/sales issues and came to Singapore for another week to further study the issues in a different context.
The workshops concluded with vibrant discussions between our North Korean participants and invited guests, which included industry experts and seasoned investors. For over three hours, they exchanged opinions on the development of the Kangwon province on the East Coast, which includes Wonsan city, and sits on the border with South Korea and faces Japan. For those unfamiliar with this less-visited part of North Korea, this area also includes Masik Pass Ski Resort, the recently renovated Songdowon Children’s Camp, and the Kalma Beach Resort.
With much media coverage on the feasibility of Wonsan’s ambitious plan to become a key tourist destination, we were fortunate to have a group of researchers and managers working on the region’s development, which gave us a more clarity on the status and outlook of the project.
Calvin, the urban planner and architect who put together part of the program, had the following comments:
For a start, the macro strategy seems to make sense. I think there are several broad strategic moves that are generally positive. From a planning perspective, the incorporation of Wonsan, Tongchon and Mount Kumgang into a single development area is a natural choice in terms of their complementary urban, geographical and natural landscape profiles. In fact, this regions development potential has already been identified by Hyundai Asan in 2007 and Kempinski Group in 2011.
In addition, the administration has been streamlined with the creation of the General Development Corporation for Wonsan Region under the purview of Ministry of External Economic Affairs, with the ability to bring in relevant local organisations and ministries to work on specific areas of the project. Such a move would provide clarity for investors in having to go to a single agency instead of negotiating the complicated web of local organisations. Also, it may deter unnecessary duplication of competing infrastructural and administrative functions in different cities within the zone. [Editor: It remains to be seen how stable this entity will be, as many investment agencies get folded into other organizations after failing to make progress]
Given the sheer size of the 430km2 zone, defining the right project to begin with can be challenging. In fact, one of the common discussions throughout the workshop was identifying the priorities for development where participants each echoed their rationale, with some prioritising the construction of new hotels to attract tourists and others prioritising the improvement of road infrastructure to allow better accessibility to the region.
However, one workshop leader emphasized caution in equating the delivery of infrastructure to progress for the tourism zone. He mentioned that while it is easier to measure and track the development of physical infrastructure, it is more important and also more difficult in creating the right experience and environment to attract tourists. In addition, the success of expensive long-term infrastructure projects is highly susceptible to economic and political tides. PLT´s $200 million Korean-drum inspired airport terminal in Wonsan is a case in point. However, according to some of the participants, construction of an airport is currently underway with a simpler clam-shaped terminal.
In addition, some of the workshop leaders also emphasized the need for more creative ways in funding and implementing the projects. One of them explained that developing the tourism zone is not only about creating a unique product for visitors, but also in coming up with a unique strategy to deliver that product.
However, participants often focus on solving technical problems in the most direct way without considering alternative indirect solutions. Take passenger rail infrastructure as an example. Attracting foreign funds to develop the capital-intensive project is a topic of interest. Two workshop leaders addressed this issue, but instead of talking about tax incentives, as participants expected, participants heard about an entirely different funding model. The first workshop leader suggested that apart from seeking funding through direct sources, the cost of transport infrastructure could be financed through the sale of adjacent real estate, while the second questioned the relevancy of developing expensive passenger rail infrastructure all together. He explained that at the current stage of development with low passenger demand, it will be wiser to use bus systems before scaling up to more sophisticated rail systems when demand picks up. It was helpful that the workshop leaders explain the concepts based on their own personal experiences in developing projects as a developer and planner respectively, which helped the participants better understand their rationale behind the suggestions.
Therefore, for this land development workshop, we took a different approach focusing on business fundamentals. Instead of focusing on policy topics, we decided to expose participants to specific topics of real estate development, tourism development, land planning, financing mechanisms, taxation, regulations, etc. We hope that by letting them experience the ground and interact with respective industry experts in Vietnam and Singapore, they would observe and pick up specific best practices and stimulate discussions on concepts that may be foreign to them.
In short, although there are still many details that need to be ironed out, various workshop leaders agreed that the broad strategies are generally pointing in the right direction. The Wonsan tourism zone may not the next Ha Long Bay or Sentosa in the near future. But if they can secure a few early wins, such as proposed by one of the participants, through developing favourable visa policies and twinning tour packages with other tourist destinations in Asia coupled with the completion of the airport, we may see more flights heading towards Wonsan in the near future.