North Korea: Kim's Keystone Kops Caper

How the dictator's initial attempt to set up a cross-border economic zone with China quickly crumbled into a farce

By Mark Clifford

Take an aging playboy dictator with a taste for lurid movies -- and for real-life kidnappings and nuclear blackmail. Add an up-and-coming hustler from a country where private business and law-breaking are almost synonymous. Put them together, and throw in this plot twist: The playboy wants to open an economic zone, so he names the hustler as commissar of his commercial mini-kingdom -- but the hustler gets thrown in jail.

If anyone tried to sell this screenplay to Hollywood, they would probably be laughed right out of the producer's office. But this bizarre saga has been playing out in North Korea and China over the past couple of weeks. The September announcement of North Korea's new Sinuiju special economic zone was just the latest in a string of surprises that Pyongyang's self-styled Dear Leader, Kim Jong Il, has been springing on the world in recent months.

Kim appointed one of China's richest men, 39-year-old Yang Bin, as governor of the groundbreaking special economic zone on the Chinese border. Yang promptly promised visa-free access for foreigners -- a milestone in a country that generally regards foreigners as about as helpful as anthrax. But similar economic zones, designed to attract labor-intensive industries, worked wonders in China as it made the transition from communism to something approaching capitalism.


  Indeed, Beijing has been pushing the concept on North Korea's Kim for months. It certainly makes sense: A relatively small amount of foreign investment could quickly start bringing in hard cash for a country that is collapsing because of shortages of food and fuel.

The plan degenerated into a farce almost as soon as it was announced, however. Within days, local authorities in China said Yang owed more than $1 million in back taxes. Late last week, in a predawn raid, they whisked him away for questioning. Chinese Foreign Affairs Ministry spokeswoman Zhang Qiyue says Yang and his companies are suspected of "various illegal activities." Zhang denies widespread speculation that Yang's arrest reflected problems between Beijing and Pyongyang. But given how politicized the Chinese legal system is, it's a pretty strong bet that if Beijing backed Yang, he wouldn't be cooling his heels in the slammer.

Yang could be sitting in jail for quite some time. With China's government deficit ballooning, Premier Zhu Rongji has spearheaded a recently launched campaign to ensure that China's burgeoning class of nouveaux riches pay their fair share of taxes. If Beijing wants a poster child for tax evasion, Yang could prove to be their man.


  Perhaps worse for Yang, his business group looks like it's on the verge of collapse. Hong Kong-listed Euro-Asia Agricultural (Holdings) has seen its shares fall more than 80% this year. Just a week before Yang was detained, he sold big blocks of his shares, lending credence to reports that he badly needs cash. Trading in the stock has now been suspended.

Reporters who visited his greenhouses, the original foundation of his empire, reported that most of them were abandoned. The few that were still in operation were growing mostly roses and chrysanthemums. The higher-priced orchids, which had been a company mainstay, weren't in evidence. As if that weren't bad enough, reports in Hong Kong papers say authorities there are investigating accounting fraud. And -- I'm not making this up -- its auditors were Arthur Andersen.

So what's the next act in this farce? And will it end in laughter or with tears?


  Credit the Dear Dictator Kim Jong Il -- or maybe we should make that the Dear Director. He certainly likes to keep the world guessing. After years of official denials, Kim startled Japanese Prime Minister Junichiro Koizumi with his admission last month that Pyongyang had in fact kidnapped 11 Japanese nationals. Pyongyang cruised the Japanese coastline in mini-subs looking for its victims, whom it brought back to the Hermit Kingdom for use in language training, part of its scheme to help its spies to pass as Japanese.

Kim is a movie buff with a legendary taste for women and whiskey. During the 1980s he reputedly masterminded the kidnapping of a South Korean actress and her movie-director husband. They were forced to stay in Pyongyang for years making films to suit Kim Jong Il's whims.

So far, the script in the Sinuiju zone isn't unfolding the way Kim Jong Il intended. But this farce hides a more serious side. If Kim turns away from the idea of a special economic zone, it'll set back the cause of economic reform in North Korea. If, however, he finds a suitable replacement for Yang and pushes ahead with the project, it'll be a positive sign that the Dear Director has his eyes on a happy ending. This bizaare plot still has some thickening to do.

Hong Kong-based Asia Regional Editor Clifford lived in South Korea for five years and visited Pyongyang in North Korea two years ago

Edited by Douglas Harbrecht

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