A Regional Development Strategy for the Tumen River Economic Development Area and North East Asia 4.22.94

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The Tumen River Area Development Programme RDS Sub-Group, "A Regional Development Strategy for the Tumen River Economic Development Area and North East Asia 4.22.94", Aprenet, April 22, 1994, https://nautilus.org/aprenet/a-regional-development-strategy-for-the-tumen-river-economic-development-area-and-north-east-asia-4-22-94/

Tumen River Area Development Issues

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REPORT A

A Regional Development Strategy for the Tumen River Economic Development Area and North East Asia

Prepared by: The Tumen River Area Development Programme RDS Sub-Group

United Nations Development Programme

New York Consultant: PDP Australia Pty Ltd.

“Carinya” Private Bag 7

Wodonga Victoria 3690 Australia

____________________________________________________________________

 

INTRODUCTION
This report presents the overall strategy that the participating Governments have determined 
for development of the Tumen River Economic Development Area (TREDA) and its associated 
hinterland. The strategy has evolved over the duration of the Tumen River Area Development 
Programme (TRADP) which is now nearing the end of its first phase. Its evolution reflects the 
ideas and contributions that have been made by the National Teams that helped develop the 
strategy and it also reflects and supports the significant developments that have been taking 
place in the region over the past two years. The strategy is dynamic and will continue to evolve 
as the development in the region gathers pace.
The report builds on the Preliminary Draft Report "A Regional Development Strategy for the 
Tumen River Economic Development Area" in three ways.
    	It seeks to summarize the findings from the work done by the Regional Development 
Strategy (RDS) team and to integrate these with the work that has been carried out by 
others on sectoral aspects of development in the region. Importantly, it attempts to 
integrate the environmental considerations that were raised by the recent "Preliminary 
Environmental Study";
    	It seeks to add some insights on the perspective of Mongolia since that country was 
unable to participate in the earlier work of the RDS team. This aspect has meant that 
the document also includes the broader North East Asia view whilst still placing major 
emphasis on TREDA;
    	It seeks to develop the basis for an Action Plan for future work in developing the region 
as discussed in the most recent Program Management Committee (PMC) in Moscow in 
July 1994 (PMC (IV)).
The report is presented in 11 sections as follows:
    	An introduction to the report;
    	Where the Tumen River is located and how it fits into the regional context;
    	The vision and goal that Governments have set for development of the region;
    	A description of the resources that are available in the region;
    	The strategies for development of the key sectors in the region;
    	The progress towards development of the region under TRADP;
    	The Governments’ broad strategy designed to enable TREDA to compete successfully 
against other regions;
    	The nature of the arrangements for cooperation amongst the participating 
Governments in the region;
    	The approach to implementation that has been chosen by Governments;
    	The benefits expected from this approach;
    	Overall summary and action plans.
The report seeks to achieve two purposes:
    	First, it aims to provide those agencies and potential investors outside the region with 
an appreciation of the potential of the region and to summarize the substantial progress 
that has been made in developing the region.
    	Second, it seeks to provide those Governments and agencies involved in the 
continuing regional development with a summary of the agreed development strategy 
and a outline of the Action Plan that will deliver the benefits all Governments seek from 
the Programme in the future.
These two purposes are closely linked—development of the region requires both the 
commitment of Governments to an agreed, realistic cooperative development strategy and the 
support of outside agencies and investors.

THE REGIONAL FOCUS
The geographical scope of the Tumen River Area Development Programme (TRADP) has 
been defined more by the actual and potential economic linkages amongst participants than by 
any strict geographical boundaries such as those of a river basin. As a result, TRADP has had 
two levels of geographic focus—TREDA and its broader hinterland in North East Asia (NEA). 
As will become evident from this report, the strategy for development refers both to the 
narrowly defined TREDA and to the broader NEA hinterland. Nonetheless, TREDA is the 
principal target area for development and is seen as the generating the basis for the regional 
growth.
The major focus of TRADP has been on the development of the resources of TREDA which 
has been defined to include all of the major growth centres in the local administration areas 
adjacent to the Tumen River that forms part of the boundary between the Democratic People's 
Republic of Korea (DPRK), the People’s Republic of China (PRC or China) and the Russian 
Federation (RF or Russia). These local administration areas comprise North Hamgyong 
Province in DPRK, The Yanbian Autonomous Prefecture in Jilin Province in PRC and the 
southern and central part of Primorsky Territory (or Krai) in RF. The growth centres within 
these administrative areas comprise: The Rajin-Sonbong “Golden Triangle” and the port city of 
Chongjin in DPRK; the Hunchun Border Economic Cooperation Zone and the cities of Yanji 
and Longjing in PRC; The Nakhodka Free Economic Zone and the cities of Vostochny, 
Ussuriyisk, Vladivostok and the Khasan district of Primorsky Krai.
The development of the resources in TREDA will draw on and be closely integrated with 
development elsewhere in the broader region of North East Asia. This integration particularly 
involves the eastern part of Mongolia which has strongly developing trade and economic 
linkages with North East China and the Far East of Russia. Similarly, although for different 
reasons, the Republic of Korea (South Korea) has growing economic linkages with TREDA

THE VISION AND GOALS
THE VISION FOR DEVELOPMENT
The Vision shared by the participating Governments is that the welfare of people in TREDA 
and in its North East Asia hinterland will improve rapidly as a result of development of 
infrastructure, industry and trade in forms that are ecologically and economically sustainable 
and equitable. This development will provide benefits for all participants, including those 
outside TREDA, and will be made possible through varying forms of cooperation amongst 
participating governments.
More specifically, the Governments envision the future as one in which the people in the region 
become part of a vibrant, rapidly developing region with closely integrated economies. The 
sources of growth are expected to be twofold but inter-related: the expansion of industry and 
trade as a result of increased investment and reduced impediments to trade; and the 
expansion of transit trade as a result of improved transport capacity and access to new or 
expanded eastern ports.
There are some important implications arising from this vision:
    	The Governments’ ultimate goal is to improve the welfare of the people in the region;
    	The Governments have agreed that development must be ecologically sustainable and 
must not adversely impact on the environment which would reduce its capacity to 
provide benefits for future generations—this means that development projects will need 
to pass environmental impact assessments;
    	The development must be economically sustainable and so must be based on sound 
economic analysis—the projects must pass the benefit-cost test using world prices;
    	Although the initial emphasis may be placed on the geographical region known as 
TREDA, the effects of such development will be felt beneficially outside TREDA and 
specifically in Mongolia and in the ROK. More generally, the beneficial effects will be 
felt throughout North East Asia (NEA).
THE GOAL AND OBJECTIVES
The goal of participating Governments is to accelerate the rate of economic growth and 
improvement in social welfare of the people in TREDA and therefore in North East Asia by 
working individually and cooperatively (both bilaterally and multilaterally) to establish and 
maintain a more attractive investment climate and by facilitating the growth of intra-regional 
and transit trade whilst conserving the environmental values of the region.

RESOURCES AVAILABLE

TREDA and its hinterland are particularly rich in a 
wide range of resources.  This resource base provides 
a comparative advantage over other regions and will 
prove to be one of the major attractions of the region 
to potential investors.  Although the region is rich in 
resources, its Governments are conscious of the need 
to manage those resources in a sustainable manner so 
that they can provide benefits into the future.
This section briefly describes the resources available 
in TREDA and the region overall and assesses their 
strengths and weaknesses in comparison to those of 
competing regions.  It also outlines the environmental 
considerations that Governments are likely to take into 
account in planning for the future development of the 
region.



INTRODUCTION
TREDA and its hinterland in NEA are resource rich in comparison with neighbouring 
development zones. The Governments participating in TRADP are concerned that these 
resources are used efficiently to provide the greatest possible long term benefit: and they have 
agreed to cooperate in their utilization so as to ensure their sustainable and profitable use. The 
strategy that Governments are adopting has two major considerations. First, it judges that the 
resources would be used more efficiently and beneficially if the economies in the area were 
more closely integrated. This would allow resource use to reflect comparative advantage. 
Second, Governments judge that greater long term benefits would flow from these resources if 
their use were subject to some common environmental guidelines. This would reduce any 
adverse environmental impacts from development and avoid costly impact mitigation measures 
in the future.
The sections below briefly outline the relevant considerations for the region’s resources from 
these two perspectives of comparative advantage and environmental sustainability.
HUMAN RESOURCES
The current population of TREDA is estimated to be around 3.5 million. TREDA is defined here 
as comprising: Yanbian Prefecture in China with 2,138,000 people; the part of Primorsky Krai 
in Russia which is south of Artem but including Vladivostok, Nakhodka and Vostochny with 
about 1,200,000 people; and the northern part of North Hamgyong Province in the DPRK with 
140,000 people. The population of eastern Mongolia is some 137,000 and, within Mongolia, it 
is these people that are likely to benefit most from future development of TREDA.
The rate of population and economic growth within any part of TREDA will depend on the 
policies and resources that are in place in that part of the region. Based on information 
currently available, it is likely that the population growth in the period to 2000 will be in excess 
of 10% per annum in the growth zones such as Hunchun and Rajin-Sonbong and perhaps 5% 
per annum for the more densely settled and more developed parts such as Nakhodka and 
Khasansky.
Each of the Governments of the region has policies that support continued improvement in 
education and health services and current levels of these services are adequate to provide a 
basis for sustained economic growth in the region.
The occupational distribution of the workforce varies considerably within TREDA and it is 
changing as the area develops. Agriculture provides employment for about one third of the 
workforce in Yanbian Prefecture but less than 6% in Primorsky Krai although the fisheries are 
major employers in coastal towns and cities.
The level of education, skills and incomes of the people of TREDA also varies considerably 
throughout the area. A high proportion of workers in Primorsky Krai have received high levels 
of technical training and there is generally a small but well-trained core of technically-skilled 
workers available throughout the region. In those parts of the region where such skills are 
more abundant, such as in Primorsky Krai, there is a comparative advantage for technology-
intensive production. There are relatively large numbers of unskilled labourers available in the 
southern parts of TREDA and in eastern Mongolia. Wages for labourers are lower in these 
areas than in the more developed areas of southern China and this provides the region with a 
strong comparative advantage for labour-intensive manufacturing.
In summary, in comparison to other economic development zones in Asia, the workforce in 
TREDA has a very strong comparative advantage in labour-intensive manufacture and 
assembly but it also includes an unusually high level of technically-skilled operators.
LAND RESOURCES
The land resources of TREDA have been outlined in the Preliminary Environmental Study. A 
high proportion of TREDA, certainly over half, is described as mountainous with the balance 
being coastal plains or river valleys. Agriculture is concentrated on the flatter land and the river 
valleys. The predominance of steep land coupled with a highly indented coastline provides 
attractive scenery with high landscape values. It also results in potential concerns with soil 
erosion and, when considered in association with the drainage patterns, gives rise to strong 
environmental interactions between different parts of the region. Consequently, erosion or 
pollution in the upper part of the area can have serious downstream effects, some of which 
may occur across national borders. The Preliminary Environmental Study recommends that an 
expert assessment of landscape values of the area is needed as one component of a regional 
identification of appropriate land uses.
The land use within TREDA is not comprehensively documented. In Primorsky Krai, which has 
the highest proportion of flatter land, the population is low and there is little land used for 
agriculture. In the past it is understood that the southern part of the area was used for cattle 
and rice production. There are several large scale fur farms and deer farms as well as several 
small aquaculture operations in the Khasan district. Within Yanbian Prefecture, agricultural 
land use is associated with the river valleys, predominately the Tumen but also its tributaries. 
Generally only about 10 -12 % of the area is arable. There are reports of serious erosion 
problems in some catchments said to be associated with the clearing of steep lands. Sediment 
loads in the rivers are much higher than elsewhere in China. There is no information available 
on land use within DPRK but it is likely that all available arable land is used intensively since it 
is in relatively short supply.
Part of the area has been designated as parks or reserves of various kinds. Within TREDA in 
Primorsky Krai, there are three reserves. The Kedrovaya Pad (18,000 ha) seeks to protects 
several endangered species and to provide a representative sample of one of the main 
Bioregions of North East Asia. The Barsoviy Zakaznik is a reserve used to build up and to 
protect the world’s last population of Amur Leopards. The third reserve is the Far Eastern State 
Marine Reserve (Dalnevostochny Reserve) which comprises three sections: an area along the 
coast and the sea adjacent to the Gamova Peninsula which is a Total Protection Area 
representing the ecosystems of Peter the Great Bay; an area along the coast and sea 
adjacent to the Tumen River Wetlands which is designated as a Scientific Research Zone; and 
a area around Popov Island in the North which includes the headquarters of the Reserve 
management.
Within TREDA in Yanbian there are four nature reserves. The most significant is Laoyeling 
Reserve which is adjacent to Primorsky Krai’s Barsoviy reserve and seeks to protect the 
Siberian Tiger and the Amur Leopard. A major reserve is located outside TREDA to the south 
to protect part of the Changbai Shan Biosphere Reserve.
Eastern Mongolia has vast resources of relatively fertile land (steppe) much of which is 
currently unused. Most of the land is natural grassland with only small areas cropped. It was 
reported that Mongolia has capacity for livestock population of some 5 - 6 million head 
compared with a present population of some 2 million. Also, Mongolia is understood to have 
some 270,000 ha of fertile crop land and there have been some investigations of commercial 
rice production by a Japanese company.
WATER RESOURCES
Freshwater Resources
The freshwater resources associated with the Tumen River Basin have been studied 
reasonably thoroughly as part of the TRADP. In terms of comparative advantage, it would 
appear that TREDA is not well-endowed with water resources and that some areas within 
TREDA such as southern Primorsky Krai may face water supply constraints. Cooperation 
amongst the riparian countries could provide significant benefits both through possibilities for 
sharing water supplies and, more importantly, through possibilities for reducing effects of 
downstream pollution and stream erosion.
Parts of the area are reported to be flood-liable and there has been a suggestion of a need to 
take greater account of this in determining land use in the low-lying areas.
Water quality is reported to be a problem both for domestic and industrial use in the lower 
reaches of the Tumen River. It is also reported to have declined to such a level that the lower 
reaches of the Tumen River are biologically dead in winter and its fisheries have been virtually 
wiped out. Some studies report that 90% of the pollution in the Tumen River results from four 
sources—an iron mine and three factories.
TREDA includes three linked areas of wetlands that are reported to provide internationally 
significant refuge for wildlife: the wetlands adjacent to the Tumen around Jingxin in Yanbian 
Prefecture; the coastal wetlands associated with the mouth of the Tumen; and the shallow 
coastal waters in Posiet Bay and around offshore islands. These wetlands are reported to be 
the most environmentally significant part of TREDA.
Marine Resources
The seas adjacent to TREDA are particular productive and fish products provide 75% of 
Primorsky Krai’s exports and a large share of DPRK’s exports. Nearly all of the fish come from 
offshore waters. Part of the high productivity of these offshore areas is the result of the mixing 
of the warm northerly (‘Korean’) current with the cold nutrient-rich southerly (‘Primorsky’) 
current. These conditions provide the fishing industries in Primorsky Krai and DPRK with a 
comparative advantage in fisheries production. The long term productivity of these fisheries 
depends on avoidance of over-fishing (resource management) and of pollution of the area. 
Both aspects will require cooperation amongst the countries exploiting the resources and those 
potentially contributing to pollution in the area. The inshore fisheries adjacent to TREDA are 
understood to have been over-fished and will require good management to allow recovery to 
take place.
In recognition of the importance of protecting the area, Russia established the Far East State 
Marine Reserve in this area in 1978 and has created several zones within this 630 sq km area.
FORESTRY AND OTHER VEGETATION RESOURCES
The forest resources of TREDA and, more particularly those in the adjacent parts of the 
Russian Far East (Khabarovsk and Amursk), are regarded as offering the basis of one of the 
most promising sectors of industrial development in the region.  The region has a comparative 
advantage over other areas as a result of its proximity to the major markets of USA, Japan and 
China. Russia’s Far East is regarded as one of the more important future world source of 
supply of softwoods and although the supply area lies outside TREDA to the north and north-
east of Vladivostok there would be strong economic benefits within TREDA if these resources 
were managed on a sustainable basis. Within TREDA, the forests have already been 
selectively logged and future commercial production would require clear felling and the 
establishment of plantations. The harvested low grade timber from the clear felling would be 
used for pulpwood production.
Studies carried out as part of TRADP have identified a range of options for phased 
development of the forest resources in association with sound environmental management.
The Preliminary Environmental Study reported that fires and logging have had heavy impact 
on the vegetation in the Chinese and, to a lesser extent, in the Russian parts of TREDA. The 
original coniferous forests have been replaced generally by deciduous forests of lesser value. 
Logging practices have been poor. Although generally the natural (primary) forests are only 
now found in mountainous areas, there are reported to be larger areas of remnant forests in 
the Changbai Mountains to the south. The Changbai Shan Nature and Biosphere Reserve is 
the largest remaining area of temperate forest in China.
TREDA is reported to be within a region which is regarded as a globally important reservoir of 
bio-diversity and both China and Russia are currently developing bio-diversity action plans. 
There are reports of there being some 1,200 economic wild plant species in the Tumen River 
catchment.
MINERAL RESOURCES
The mineral resources within and adjacent to TREDA and Mongolia are extensive and there is 
widespread interest in the region amongst major international mining and processing 
companies. The economic potential of most of these resources have not been assessed and 
there is a need to help facilitate such assessments as quickly as possible. Until this is done, it 
is impossible to be definitive about the mineral potential and the comparative advantage that it 
will provide to the region. However, it is clear that there will be increased exploitation of these 
resources and this will help develop the region in three ways. First, it will generate a demand 
for infrastructure improvements and help justify investment in these improvements. Second, it 
will lead to increased export earnings. Third, it will help industrial development by providing raw 
materials.
There are extensive mineral resources in Mongolia, of which currently only the Erdenet copper 
reserves have been developed. The export of copper concentrates from this mine could be 
important in the development of alternative trade routes from Mongolia east through China to 
the TREDA region. These concentrates and other minerals could provide the "base load" for 
alternative transport links from Mongolia through TREDA. Apart from copper, the mineral 
potential in Mongolia includes: lead; zinc; silver; gold; selenium; tellurium and uranium. There 
are six polymetal deposits (silver/lead/zinc) that have been surveyed near Choybalsan by 
Japanese companies and US and Russian firms have shown interest in the uranium. There 
are four extensive coal deposits and some oil reserves and several US companies are 
prospecting for oil.
There are very extensive mineral reserves in Eastern Siberia. Exports of these minerals or 
metal produced from these minerals are already a major part of throughput of the TREDA ports 
and will continue to be important to the development of both rail and port facilities in Primorsky 
Krai.
The quality iron ore reserves in DPRK, together with the coking coal reserves in Heilongjiang 
and reserves of many key minerals necessary for the production of ferrous alloys already form 
the basis of a significant ferrous metal industry in DPRK. They could provide the basis for an 
expanded industry either within TREDA or on the periphery of TREDA which could be a 
significant exporter in its own right as well as supporting the development of higher value 
added manufacturing industry in the TREDA region.
TOURISM RESOURCES
TREDA has considerable potential as a tourist destination both for local and international 
tourists. The major attractions of the region are its cultural richness, scenic beauty, ecological 
diversity and interest and its scope for water sports. It has particular potential for the 
development of eco-tourism given its unique bio-diversity and large numbers of rare plant and 
animal species.
The mouth of the Tumen River has possibilities as a holiday resort, Yanbian Prefecture offers 
interesting examples of Korean culture, the Rajin-Sonbong area has potential as a maritime 
resort with mountain scenery and hot springs, and Primorsky Krai offers a beautiful coastal 
area suited to a range of leisure activities as well as hunting, fishing and cultural interest. The 
relatively warm waters of the southern part of Primorsky Krai including Posiet Bay make the 
region attractive for water sports. Outside TREDA, Mongolia offers unique scenery, rare 
animals and plants, interesting history and culture along with opportunities for fishing, hunting 
and camping.

SECTORAL CAPABILITIES AND STRATEGIES

Balanced development of TREDA and its hinterland 
including Mongolia requires that attention be given to 
the formulation of strategies for each of the major 
sectors of the economy.  Governments have agreed to 
develop such strategies in a co-operative manner to 
ensure that best use is made of the resources and 
potential of the region.  The underlying theme for all 
strategies is that they must build on the comparative 
advantages of the region and help build a competitive 
edge that will attract investment and sustainable 
development to the region.
This section examines the capabilities of those sectors 
with potential for development and outlines the 
strategy that seems best suited to each sector.  It takes 
the perspective of comparative advantage to indicate 
how TREDA might compete with other regions and 
establish a competitive advantage.




THE SERVICES SECTOR
Successful development of trade and industry in TREDA will require ongoing improvements in 
the services provided throughout the area. The participating Governments have made a strong 
commitment to ensuring that the services available in the region are world class and that they 
are provided efficiently and in response to demand. Under the TRADP, Governments have 
participated in the formulation of indicative masterplans for infrastructure development and 
telecommunications which are recognized as being of critical importance to the development of 
the region. These masterplans have the full support of the Governments and have identified 
priority actions based on assessments of likely future demand for the services. The 
Governments have commenced work to prepare the way for external investment in these 
projects by supporting designs and concepts that will avoid excessive and wasteful competition 
and by indicating a willingness to make their own commitments of resources both to the 
feasibility studies and to part of the investment requirements. Even more importantly, in order 
to boost investor confidence and help to ensure profitability of the investments, Governments 
have indicated a willingness to negotiate pricing and regulatory arrangements in relation to the 
services to be provided.
The Transport Sector
The work carried out under TRADP has confirmed the assessment of Governments that the 
current transport capacity in TREDA is inadequate to serve present demands and that future 
expansion of trade and industry requires significant expansion in transport capacity. 
Improvements in the transport sector are recognized as the most important step to accelerate 
development in TREDA and eastern Mongolia. The participating Governments have agreed 
that the broad transport sector strategy will be to progressively develop an integrated modern 
transport network that has the capacity to meet two major transport tasks: to service the growth 
of industry and trade within TREDA and between TREDA and its hinterland including North 
East China and eastern Mongolia; and to capture part of the transit trade from North East 
China and central and eastern Europe so that it can be re-directed to a number of expanded 
TREDA ports serving as gateways to and from the Pacific Rim markets.
Sea Ports
The region has a significant comparative advantage over other development zones in that it is 
strategically located in an area that can and already does provide gateways to the Pacific, and 
that it already has a number of excellent ports with good prospects for expansion. In contrast 
to the ports serving southern China, the TREDA ports are under-utilized now and they also can 
be rapidly expanded to match the large increases expected in future demands. The initial 
improvements in capacity are expected to require only minimal investment since they will result 
from better management of the ports and their facilities. The broad threat that must be 
carefully assessed is that the ports outside the area may develop faster and reduce the 
volume that can be competitively handled through the TREDA ports. This makes it important 
that the expansion plans for TREDA ports are realistic and that they are implemented in a 
manner that leads to greater efficiency and lower handling costs. The broad strategy for the 
TREDA ports that has been recommended as part of the Infrastructure Masterplan8 is as 
follows:
    	Vostochny—servicing transport associated with its role as eastern terminal of the Trans 
Siberian Railway and expecting expansion to handle more potash, oil and grain;
    	Nakhodka—servicing regional trades and expected to expand its oil handling capacity;
    	Vladivostok—servicing local industries and general export/import trades;
    	Zarubino—servicing part of the growing trade from within TREDA especially from 
Yanbian and part of the diverted transit trade from NE China (especially Heilongjiang 
and Jilin) and ultimately from Mongolia. (Development of the port at Zarubino will need 
to include appropriate safeguards to protect the fragile and economically and 
ecologically important marine ecosystems dependent on the Tumen River/Posiet Bay 
wetlands);
    	Other Russian ports—expected to develop in response to demands and include 
Sukhodol, Bolshoi Kamen, Chazhma near Dunai and Narva near Bezverkhovo;
    	Rajin—servicing part of the growing trade from within TREDA especially from Yanbian 
and part of the diverted transit trade from NE China and ultimately from Mongolia;
    	Chongjin—servicing regional trades and part of the growing trade from the southern 
part of Yanbian.
In order to build on the comparative advantage offered and turn this into a competitive 
advantage for the transport sector, the key recommendations for short term action in the 
Conceptual Infrastructure Masterplan are to:
    	use Inland Container Depots to allow transit through Russia and DPRK to China (and 
ultimately to Mongolia);
    	continue development of the Zarubino and Rajin ports by planning for the 
establishment of two PANAMAX container berths in each.
Railways
The railway network needed to serve TREDA and the transit trade is largely in place and thus 
offers a comparative advantage to the region since it is the preferred transport mode for most 
of the freight likely to be handled. The broad strategy for improvements within TREDA itself 
should be to: complete the missing links in the network; to improve the integration of the 
network by minimizing the need for gauge changes; and to improve capacity in the short term 
through improvements in management of the network.
The key recommendations for short term action in the Conceptual Infrastructure Masterplan 
are to:
    	complete the missing links i.e. Hunchun - Zarubino and Hunchun - Saebyol;
    	prepare market demand studies;
    	upgrade the network in TREDA eliminating the need for gauge changes where 
possible;
    	review all operating alternatives to defer the need for capital investments.
As part of the broader strategy for infrastructure development in the North East Asia region 
including TREDA, the Russian authorities at the Moscow Working Group Meeting stressed the 
need to integrate the rail network within TREDA with that linking TREDA to NE China (Harbin-
Mudanjiang-Ussuriyisk and Harbin-Mudanjiang-Tumen). In addition, Russia has proposed that 
railway improvements should also include reconstruction and augmentation of existing rail links 
including:  Ugolnaya-Vladivostok;  Ugolnaya-Nakhodka; Ussuriyisk-Baranovskiy; Baranovskiy-
Makhalino; Baranovskiy-Amursk Bay; Makhalino-Khanka; and Ussuriyisk-Grodekovo. Russia 
plans to: re-develop a number of stations and junctions; to build new stations (Ussuriyisk-
Sortirovochnaya and Kamyshovaya); and to augment the rail links to ports and border 
crossings including: Sukhanovka-Zarubino; Yekaterinovka-Vostochny; Grodekovo-Suifenhe; 
and Makhalino-Hunchun. Russia also plans to investigate the feasibility of new rail links 
including: a By-pass of the city of Artem; and a section of rail linking the bridge at the 
Razdolnaya River Mouth.
Mongolia’s development strategy is largely reliant on establishing improved rail links, initially to 
the Chinese network and ultimately to the TREDA ports. The preferred link that is under 
consideration by the Governments of both countries comprises a 470 km section linking 
Choybalsan with Yirshi in China. The critical issue will be the economic viability of such a link 
and this seems dependent on development of high value minerals that would justify such 
expenditures.
China has also accorded a high priority to the investigation of the feasibility of linking its railway 
network with Eastern Mongolia.
Roads and Highways
The roads and highway network within TREDA is limited and in poor condition and provides no 
comparative advantage to the region in comparison with other areas. This argues against 
TREDA attempting to develop industries that are dependent on good road networks i.e. those 
needing to move goods or people quickly. The broad strategy recommended for the roads and 
highway sector is to: give priority to roads that enable better use to be made of sea ports; link 
the major cities to the major ports; and to introduce harmonized regulations for road design 
and specifications of load limits etc.
The key recommendations for short term action in the Conceptual Infrastructure Masterplan 
are to:
    	complete the primary highway network linking major cities and ports as soon as is 
practical;
    	monitor traffic and forecast demand to assist future planning;
    	establish highway maintenance systems in each country.
The specific proposals for improvements proposed for inclusion in the Masterplan by Russia 
include:  Reconstruction of A-188 Artem-Nakhodka; M-60 Artem-Ussuriyisk; A-189 
Raznolnoye-Border; A-184 Ussuriyisk-Pogranichniy; A-198 Pokrovka-Poltavka; M-60 by-pass 
Artem-Nakhodka; connection of M-60 and A-189 with the bridge on Razdolnaya River; and 
construction of Sedanka-De-Friza Peninsulat-Nadezhdinskaya road out of Vladivostok.
Air Transport
TREDA is currently served by three airports located at its periphery and although there is no 
centrally located airport, all of the commercial centres within TREDA can be reached by road. 
The location of TREDA straddling three national borders, the existence of "no-fly zones" and 
the limited access to international airways raises some difficulties with air services to TREDA.
The broad strategy recommended for air transport is to: make best use of the existing facilities 
in the short term by strategic improvements; to provide a mechanism for coordination of air 
transport development in the region; and to conduct an air transportation study that would lead 
to an overall development plan for the sector.
The key recommendations for short term action in the Conceptual Infrastructure Masterplan 
are to:
    	complete the planned improvements to facilities and services at Vladivostok and Yanji 
as soon as is practical;
    	establish a mechanism to coordinate air transport development;
    	prepare a Development Plan.
Russian authorities note that the international air cargo facility at Zolotaya Dolina will be 
available to serve the Nakhodka Free Economic Zone and they have proposed heli-pads in 
Vladivostok, Nakhodka, Zarubino and at border crossings Khasan-Tumen-Ula, Kraskino-
Hunchun, Poltavka-Dunnin, and Pogranichniy-Suifenhe.
The Power Sector
TREDA has abundant sources of energy in the form of coal and lignite as well as access to 
good sites for hydro-electricity generation. It also is strategically located within reasonable 
distance of extensive oil and gas deposits outside TREDA. However, although these attributes 
indicate that TREDA has a comparative advantage in power generation, realization of these 
advantages will require concerted action. The Governments are giving consideration to a 
range of issues in this regard including: the efficient transmission of power between new 
potential power sources and demand sites; the reduction of pollution associated with the use 
of lignite; the negotiation of agreement on cross-border transmission; and the problems 
associated with the different operating frequency used in DPRK. Governments recognize that 
in order to realize the comparative advantage, they would need to capitalize on economies of 
scale and build a few large regional plants, rather than smaller city-based generating plants. 
This will also mean that Governments will need to tackle the issue of pricing and to site the 
power station(s) in locations that provided energy at the lowest delivered cost.
Scope exists for a number of larger scale hydro-electricity stations in the Far East of Russia 
including: Dalnerechensk (Primorsky Krai); Nizhenimansk of Urgalsk (Khabarovsk); 
Bureisk/Nizhnebureisk and Dagmarskaya/Giluyskaya (Amurskaya). Investigations into the 
feasibility of using these stations is warranted along with other options for improvement in 
power supplies. Scope also exists for extension and reconstruction of thermal power stations 
in Russia and China including: Partizanskaya; Artemovskaya; Ussuriyskaya and 
Vladivostokskaya. There are also proposals for nuclear power stations including: 
Dalnevostochnaya (Khabarovsk) and Primorskaya (Primorsky Krai).
The Telecommunications Sector
Telecommunications services in TREDA are currently limited but the Governments have been 
investigating the scope for improvements under TRADP. These improvements are currently 
being considered on a country-by-country basis.
In China, all improvements will be based on the existing public network which is currently being 
expanded according to a longer term plan. Local networks are being developed in Hunchun 
and a new area is scheduled for development near Wonjon bridge on the DPRK border. A joint 
venture between Jilin Province and DPRK is establishing a fibre optic connection between 
Hunchun-Wonjon-Sonbong-Rajin-Chongjin-Pyongyang. A radio link is expected to become 
operational this year between Hunchun and Zarubino.
In Russia, there are plans to install a new international gateway-switch in Khabarovsk with 
connections to Niigata in Japan, Moscow, and Harbin-Beijing in 1995. Agreement has been 
reached for local networks connecting Vladivostok-Zarubino-Kraskino-Hunchun, however, the 
timing and financing arrangements are still being determined.
In DPRK, except for the cross-border traffic with Jilin Province, all international 
telecommunications is to be handled by the Pyongyang international gateway with satellite 
links to Beijing, Hong Kong and Singapore.
The Telecommunication Masterplan has proposed a unified approach to the development of a 
regulatory regime as a means to enhance TREDA’s competitive advantage over other 
development areas. Governments are broadly supportive of this approach but it will be some 
time before it could be implemented. The Masterplan has identified a number of measures that 
need to be addressed to facilitate the rapid improvement in services. These include the 
financing of improvements and the related question of cost recovery and tariffs. The 
Governments are investigating these matters and although at this stage they are precluding 
foreign investment in the public networks, scope may exist for other avenues for investment.
The Water Supply Sector
The total water available in TREDA is expected to be adequate to meet projected needs but 
there may be a need to re-distribute the water to meet local needs. Overall, as mentioned 
elsewhere, TREDA has no comparative advantage in water supply. The broad strategy 
proposed in the Conceptual Infrastructure Masterplan is to carry out studies to assess the 
feasibility of providing water and waste services to meet requirements as soon as these 
requirements are defined. It is envisaged that the initial studies will need to be in development 
areas including the coastal cities in Primorsky Krai. The studies proposed by Russia include: a 
water reservoir on Tsukanovka River to supply Kraskino and Posiet; a reservoir on Gladkaya 
River to supply Zarubino; a water intake in Pushinsk subterranean aquifer to supply 
Vladivostok and Artem; development of the Vtoroluzhskiy hydrosystem to supply towns in the 
Vladivostok agglomeration; and water from the Olga River to supply the Nakhodka Free 
Economic Zone.
The Tourism Sector
TREDA and North East Asia have under-developed potential for tourism and the participating 
Governments have been supporting efforts within their own countries to develop the potential 
further. However, while much of the development will necessarily be planned and implemented 
at an individual country level, there is considerable scope for cooperation amongst the 
participating Governments to generate greater benefits from tourism. These benefits reflect 
three factors:  the opportunity that joint action offers in terms of environmental protection 
especially with resources that extend over national borders; the greater marketing efficiency 
that could be obtained through joint promotion; and the increased attractiveness of tourist 
packages that make use of tourist services, resources and investments in several countries.
One element of the attraction of the region for tourists concerns its environmental values. 
Given the fact that the environmental resources of the region are shared amongst the 
countries and that what happens to the resource in one country affects other countries in the 
region, Governments have recognized the need for collaboration amongst the countries to 
ensure that the environmental values of interest to tourists are maintained.
Effective marketing is the most important part of the strategy for developing the tourist 
potential of the region and each country plans to prepare a marketing programme as part of a 
coordinated regional approach. The initial emphasis would be targeted on the East and 
Southeast Asian tourists.
Development of tourism will require significant investment in facilities and services throughout 
the area and Governments have acknowledged that it will prove easier to attract such 
investment if it is clear that there is a degree of coordination in planning the expansion of the 
facilities so that investors are able to generate adequate returns. Similarly, there is a major 
need for training of staff and there is scope for cooperation in this field.
Other Business Services
Apart from the sub-sectors considered above, the tertiary or services sector also includes a 
large range of services aimed at supporting business. This business services sub-sector has 
not yet been carefully analyzed under TRADP but it is expected to have considerable 
development potential. TREDA is the natural entry point to a huge hinterland in Eastern 
Russia, North East China and Mongolia. As a geographical "gateway" to the region it has many 
of the characteristics of Singapore as a gateway to South East Asia. Potentially TREDA, 
especially the environs of Vladivostok, could serve a similar role as an agent and a principal for 
the delivery of tertiary services to this region of North East Asia, in just the same way that 
Singapore developed initially as a conduit for, and more recently as a principal for the supply 
of, many tertiary services to South East Asia.
The potential for development of trade through TREDA has already received considerable 
attention and this has focused attention on the needs for investment in the physical 
infrastructure to handle this trade. However, in addition to the physical infrastructure, the range 
of services that will be needed is considerable. These include a full range of financial services, 
not only services connected with regional trade but with the flow of capital from developed 
North East Asian Countries and other regions into Russia, China, Mongolia and DPRK. These 
services will include not only currency services but insurance, broking and other financial inter-
mediation services which are now emerging in the region following development of modern 
banking laws. There is also considerable scope for a wide range of marketing and market 
information services to be provided both to domestic and foreign firms looking to tap the large 
new markets of Russia and North East China.
There will also be a wide range of tertiary institutes and technology-based industries, based on 
the educational and research institutions and human resources available in the region. Some 
examples might include computer programming and support services, interpretation of satellite 
images and interpretation of a wide range of geological data.

Governments have recognized that these business services are essential to the rapid growth 
of the area and have taken the view that the growth of such services should not be restricted 
by unnecessary licensing or other restrictions. As a result of the demand and the favourable 
attitudes of Governments, there has been a rapid increase in the number of representative 
offices being opened in the region. This is one indication of the substantial potential for the 
development of the tertiary sector if it is allowed to develop competitively.
THE PRIMARY INDUSTRY SECTOR
This sector comprises a number of sub-sectors of which only forestry has been extensively 
studied under TRADP. The results of the analysis of the Forest Sector are summarized below 
along with some observations on the other Primary Industry Sub-sectors.
Forestry
The areas of Khabarovsk and north Primorsky Krai which are adjacent to TREDA have a 
comparative advantage in timber production through access to productive timber growing 
regions located relatively close to the major growth markets of Japan and China and, to a 
lesser extent, the ROK and Taiwan. Parts of TREDA itself are also potentially well-suited for 
timber production through plantations which could be established by re-planting low-grade 
secondary forests. The availability of skilled, low-cost labour with experience in timber 
harvesting in Russia’s Far East also provides some comparative advantage although it is likely 
that future operations will be increasingly mechanized.
The broad strategy that has been proposed for the forest sector is to: secure long term (20 - 50 
years) concessions to forests in Primorsky Krai or alternatively, in Khabarovsk; develop a 
management plan to ensure that resources are used on an ecologically sustainable basis; and 
to establish a phased industrial programme to establish processing facilities near ports and to 
export wood chips and sawlogs in the first stage and to export sawn timber and plywood in the 
second stage.
The TRADP report on “Project Development and Environmental Strategy for the Forest Sector” 
sets out the projects and an environmental strategy in detail. It indicates the scope for 
significant employment prospects and good long term returns provided that the industry is 
established on the basis of world-best practices including long term environmental and 
economic sustainability.
A companion document "Project Presentation Report" gives detailed information about 19 
specific industrial projects that could be set up in TREDA. Significant portions of this document 
have been incorporated into Report F in this publication.
Fisheries
The offshore fisheries accessed from the TREDA ports are reported to be the most productive 
in the East Sea (Sea of Japan) and this resource base provides the region with a comparative 
advantage in fish production. There have been no studies of the fisheries sector under TRADP 
and no specific strategy has been formulated for the sector. Governments in the region have 
been advised that some of the past practices may not be sustainable and they have been 
encouraged to manage the fishery in a manner that allows sustainable harvests in future. 
Suggestions have been made that there is scope for considerable improvement in the 
marketing of fish and fish products based on the recognition of quality within the catch. The 
need for marketing improvements is likely to generate significant investment opportunities for 
suitably qualified companies: already there are a number of joint ventures being developed 
with Vietnamese companies amongst others.
Mining
Whilst the mineral resources of TREDA are known to be extensive, the Governments 
recognize that there is a need to carry out economic assessments of the potential before 
further development plans can be finalized. Currently Mongolia is exporting copper 
concentrates from the Erdenet mine in Northern Mongolia, and smaller quantities of uranium 
from Dornod, as well as producing significant quantities of coal for local power generation. 
Given the remoteness of Mongolia from world markets, the Government acknowledges that the 
development of bulk minerals for export is problematical, though it is possible their 
development for export to regional markets in North China or Siberia could be viable.
Eastern Mongolia, however, possesses some significant deposits of higher value minerals 
including significant Silver/Lead/Zinc deposits containing reasonable grades of silver, tungsten 
deposits and some gold (placer) deposits. The development of some of these deposits are 
potentially more economically promising. Indeed the Japanese are currently carrying out a 
feasibility study for the development of a high grade silver/lead/zinc deposit at Tsav near an 
existing rail line which provides a link to the Trans-Siberian railway. This deposit has produced 
assays of over 250 g/tonne of silver and good grades of lead and zinc.
The Government of Mongolia plans to link the major mining developments with the 
development of rail infrastructure. Both existing rail links (the main north south link through 
Ulaanbaatar linking the Trans Siberian Railway to China, and the separate link from the Trans-
Siberian south to Choybalsan are Russian Gauge. (1524 mm). The Government is 
investigating the feasibility of establishing new links to the east through NE China.
Mining developments in Eastern Mongolia may well provide the justification for providing a rail 
link from the existing Eren - Choybalsan line to China. This would link Eastern Mongolia 
TREDA. This may need to be associated with some upgrading of sections of the line in 
Northern China to provide a cost effective route for mineral exports. There are several 
alternatives, but the all up cost including necessary upgrading in China is likely to be of the 
order of half a billion dollars or more.
Given the importance of the mineral trade to the development of these links, Government is 
seeking private sector investors interested in the mineral developments to participate in the rail 
development. In the awarding of prospecting and development licenses, major mining groups 
are being encouraged not only to investigate the geological potential but also to carry out 
feasibility studies on the development of the rail infrastructure in Mongolia and China (or 
Russia) to allow the economic development of these Mongolian resources.
The Governments involved are not only seeking private sector equity in the development of 
such rail links, they are also considering joint approaches to the multilateral development 
banks for the provision of official development assistance in association with private sector 
partners. Planning for development of such links is being coordinated with the development of 
mining activities to provide the economic justification for their development.
Agriculture
The agriculture sector in TREDA is dominated by the production in China which is in surplus to 
local demand. In NE China the agriculture sector is accorded the highest priority as an engine 
for growth by both the national and regional planning authorities. NE China accounts for 
almost 35% of the nation’s maize production and 42% of its soybean output. The grain surplus 
(maize, rice, other coarse grains and soybeans) is about 19 million tonnes although it still 
needs to import some 3 million tonnes of wheat. This grain surplus is critically important to the 
development of TREDA’s transport network because it is expected to provide part of the base 
load for transport improvements. The World Bank is assisting China in developing improved 
grain handling facilities in the region and in the southern ports. In addition, however, there is 
scope for at least one third of the surplus to be shipped out through TREDA ports. 
Assessments made by others indicate that this grain surplus will be sustained at least in the 
medium term.
At present it would appear that NE China at least has a comparative advantage in grain 
production and, given current investments in grain storage and handling, it seems likely that 
the region will continue to have a comparative advantage in grain exports for some time. Just 
how long will presumably depend on the rate of population growth and whether the present 
levels of production are ecologically and economically sustainable. The World Bank has 
projected that grain exports from NE China will be 40% greater in 2000 than they were in 1990. 
Whether that comparative advantage can be translated into freight volumes for TREDA ports 
will depend on the comparative costs of exporting grain south through Dalian. With massive 
investments planned to improve efficiencies by converting to bulk handling on the main 
southern line to Dalian, TREDA ports will need to offer bulk facilities to attract grain from the 
Northeast.
Apart from grain, the NE of China also generates surpluses of vegetables and fruit that are 
mainly traded with Primorsky Krai. Although we have no statistics for Primorsky Krai or North 
Hamgyong Province, we understand that these areas have requirements for food imports.
THE SECONDARY INDUSTRY SECTOR
Resource-Based Heavy Industries
There is already an extensive heavy industry base in TREDA and in adjacent regions. 
Although the existing industries are generally in need of investment, new technology and a 
greater market orientation, the base for growth already exists. The heavy industries have an 
important role to play in providing inputs and producer and intermediate goods for the "infant" 
light industries. In recognizing this role, Government policies in all TREDA countries are 
seeking to provide conditions that will encourage the appropriate re-vitalization and re-
development of the heavy industry sector.
In the past, Governments have imposed price controls on many of the products from heavy 
industry with the result that resource allocation in this sector and other sectors of the economy 
were distorted. Governments of all the countries within TREDA are addressing the need to 
hasten the reform of markets within their domestic economies and each are developing 
concrete plans and timetables to remove any remaining distortions.
Although sales within the domestic markets will continue to account for an important part of 
output from these heavy industries, much of the future growth will depend on exports. Export 
markets will include the domestic markets in the economies of the TREDA partners as well as 
more distant markets in the NEA region. In order to serve these markets the enterprises are 
seeking foreign joint venturers to inject technology and capital as well as to provide access to 
(and information about) new markets. There is every indication that the current efforts of 
Governments to provide the appropriate investment climate in TREDA will attract joint venture 
partners from industries in Japan, Korea and Taiwan who are feeling the pressures on to 
relocate to other countries.
Labour-Intensive Light Industries
The real strength of the TREDA region lies in its enormous potential for expansion of its 
labour-intensive light industries. Although the light industry sector is still very limited within the 
region, it is expanding rapidly, particularly in Yanbian. Experience in other regions of China 
shows that the availability of low cost labour together with confidence by outsiders in the 
investment climate will lead to an explosive growth in this sector in the TREDA region. The 
region has an unusually well-trained and skilled labour force for a low wage cost region and 
this makes it particularly attractive to light industry. Wages in both Yanbian and DPRK are low 
even by comparison with other industrializing coastal regions of China. Wage rates in 
Primorsky Krai are higher, but still low given the level of training and skills available.
The region also provides considerable industrial support for the basic assembly-oriented light 
industries. This support will allow the diversification of light industry into more complex, higher-
value products far more rapidly than in newly-industrializing regions. These higher value-
adding industries would not normally develop in a newly-industrializing area until there was a 
large agglomeration of light industry. The support comes from two features of the region.
Firstly, there is a large work force already experienced in industrial work, unlike many newly-
industrializing areas where the work force initially is almost entirely rural. In addition to the fact 
that the workforce is already experienced, it is also more culturally adapted to industrial 
development than workforces elsewhere. This cultural adaptation is the result of the high 
proportion of workers with ties to the Korean culture which reduce concerns of cultural 
problems when introducing new management techniques along with new production 
technology.
Secondly, some of the associated industries needed by more specialized light industries are 
already in existence, though in many cases they need modernization. For example the 
electronics assembly industries is supported by extensive electronics design and chip 
manufacture capabilities particularly in Primorsky Krai. The textile industry is supported by 
considerable capability in the production of basic fibres, both cellulose based (rayon, viscose 
etc.) and man-made (acrylics nylons etc.). Plastics and chemical industries like butyl rubber 
production can also support more specialized light industries, and extensive experience 
particularly in ferrous alloy production will allow light engineering manufacturers/assemblers to 
move into higher quality value-added products more quickly.
These somewhat unusual capabilities provide the region with a comparative advantage over 
other new regions because they will enable more rapid horizontal and vertical integration within 
light industry in the region. Governments are tailoring their industrial development policies to 
ensure that such integration is attractive through general support for improvements in the 
business climate but also through specific measures to encourage modernization of supporting 
heavy industries such as steel, chemicals, plastics etc. through joint ventures or other 
technology transfer options.
High-Technology Industries
Whereas the first wave of development in the region will be largely focused on the labour-
intensive light industries, the second wave will involve the high-technology industries. Again, 
TREDA has particular and unusual features that will enable the region to develop its high-
technology industries faster than other regions. The region includes parts of Primorsky Krai 
and NE China that have a highly trained workforce and a history of emphasis on education and 
research. This provides excellent potential for rapid growth of high-technology industry. 
Governments recognize that such growth will only occur if they are successful in creating an 
attractive business climate and they are therefore striving to do this quickly while at the same 
time encouraging investment in the existing industries including the former defense industries 
of Primorsky Krai.
The extensive high technology base in Primorsky Krai associated with the Russian defense 
industry includes significant aeronautical, materials, electronics and machining skills. The 
Russian Federation is already reviewing options for the conversion of many of these facilities 
to civilian production. To do this they are seeking joint venture partners from countries 
including ROK, Japan, Taiwan, US, and others who could introduce capital, civilian goods 
technology and market access and combining these inputs with the technological skills in 
Primorsky Krai and the light engineering/assembly skills in Yanbian and DPRK.
Governments are also planning to identify and subsequently remove any un-competitive 
restrictions on technology transfer that may serve to discourage foreign direct investment in 
these industries.

RECENT ACHIEVEMENTS

The participating countries have already made 
substantial progress towards their common goal of 
development through closer integration of their 
economies based on mutual co-operation.
This section summarizes the recent achievements of 
Governments and the private sector in setting the basis 
for co-operation and in initiating the changes needed 
to provide the foundations for long term growth.




THE STARTING POINT
In 1991, when the participating Governments met at a UNDP-sponsored meeting in 
Ulaanbaatar to consider the concept of a Tumen River Area Development Program, the 
economies of the participants were almost completely independent and there were no 
procedures or venues available to start the process of opening up trade and other exchanges 
between the countries. In the past, the relationships amongst the participants had been 
defined by the political environment operating in each country and this environment 
encouraged an inwards orientation for trade and development. What little trade there was 
amongst the riparian countries was entirely based on barter arrangements. At that stage ROK 
traded only with Japan, China traded mainly with Japan and USSR apart from small volumes 
with DPRK, Mongolia traded only with the USSR, and DPRK traded mainly with USSR but also 
with China and Japan.
The UNDP-sponsored Ulaanbaatar meeting led to a reconnaissance mission in 1991 that 
recommended development of the area as a centre for global trade to and from North East 
Asia. It also identified the likely infrastructure requirements for such development over the next 
20 years in broad terms. This reconnaissance mission proposed that UNDP sponsor the 
establishment of a regional commission and carry out a regional development study. Following 
requests from the participating Governments at a meeting in Pyongyang, UNDP commenced 
the TRADP and established the Programme Management Committee (PMC) which was the 
first inter-governmental organization in NE Asia committed to economic and technical 
cooperation.
Since that time there has been considerable progress both in reaching agreement on the 
principles of cooperation for mutual benefit and in actual development on the ground.
THE MAJOR ACHIEVEMENTS
Agreements in Principle
As a result of the meetings, discussions and joint planning exercises carried out under TRADP 
Phase 1, the participating Governments have been able to reach agreements in principle on a 
number of critical issues that will guide and greatly facilitate the future development of the 
area. These agreements in principle are outlined briefly below.
Complementarity exists
There is an under-developed scope in resource complementarity in NE Asia and particularly in 
TREDA with special opportunities to achieve greater benefits through inter-country 
cooperation. In essence, each country recognizes and acknowledges that it would be better off 
by cooperating than by going it alone.
Cooperation is to be based on common interests
The participating Governments agreed to cooperate to achieve mutual benefits, strengthen 
economic and technical cooperation and to attain greater sustainable development for the 
people of the TRA and Northeast Asia. The principles governing cooperation include mutual 
respect for the sovereignty of each country, equality and good neighbourliness.
Institutional arrangements and International Agreements
The participating Governments have agreed on the need for appropriate institutional 
arrangements and are in the process of defining those arrangements through International 
Agreements. The institutions established would aim to maximize the attractiveness of TREDA 
to the world investment community and would include professional management. One of the 
institutions to be established would be a facilitating entity that would, amongst other functions, 
support investment and trade promotion activities and help to organize the finance and 
management of major infrastructure projects. The International Agreements would help 
establish an agency or commission that would help to establish a coherent and facilitating 
environment for trade development in Northeast Asia. It would provide a venue to reach 
agreement on coordination and harmonization of trade policies and infrastructure 
development. The participating countries have indicated a desire to consult and coordinate 
actions in future on matters concerning telecommunications, transportation, trade and industry, 
minerals and natural resources, environment and financing.
Integrating local initiatives
The content and strategies for development in TREDA will incorporate and integrate the plans 
and strategies of the participants so that they will be compatible.
The Role of UNDP
Governments have sought the continued involvement of UNDP as a facilitator to assist and 
encourage on-going development.
Geographic Definition
The area targeted for development includes the economic development zones that have been 
established in each riparian country and is to be referred to as the Tumen River Economic 
Development Area which is broadly defined as the triangle extending from Chongjin in DPRK 
to Yanji in PRC and to Vostochny in RF. In addition, Governments have agreed that the 
development will also extend to the hinterland of TREDA and in particular will impact on 
eastern Mongolia. Thus, TREDA is not a strictly defined geographical zone comparable to the 
free trade zones in East Asia. The intention rather is to foster a variety of economic activities, 
or "growth poles", within reasonable reach of the Tumen River valley, through appropriate 
infrastructure developments and enabling institutional arrangements. The latter would also 
need to be accompanied by measures ensuring the protection of the physical environment. 
The development of TREDA needs also to be seen in the context of economic pursuits in the 
wider geographical area of North East Asia.
Progressive harmonization amongst zones
Rules, regulation and management of the zones will initially be national but the Governments 
plan to progressively move towards harmonization of these arrangements.
Need for infrastructure improvements
Certain key infrastructure development projects need to be commenced prior to the 
establishment of market demand as a means of improving the attractiveness of the area to 
investors. This infrastructure may be developed as a national or cooperative multi-lateral 
initiative.
Opportunities for investment should be maximized
The facilitating entity will ensure that well-prepared and coordinated feasibility studies are 
made available to potential investors and the Governments plan to provide an attractive 
“enabling environment” for investors by progressively harmonizing taxes, fees, licensing, 
pricing policies, currency transactions and by liberalizing trade in services and goods.
Emphasis on environmentally sound and sustainable projects
The facilitating entity will help ensure that all projects are environmentally sound and 
sustainable by conducting environmental impact assessments for all projects so as to ensure 
longer term attractiveness for international investors. Environment Management Plans will be 
integrated into implementation of all TRADP activities. Participants have also agreed to 
develop recommendations to enable harmonization of key national, bilateral and multilateral 
environmental laws and agreements.
Development strategy to focus on priority sectors
Light industries, agriculture, services, hydrocarbon, forestry and processing industries should 
be priorities for short to medium term consideration. Longer term strategy may be to develop 
heavy industries using environmentally advanced technologies to utilize the rich raw materials 
and energy resources of NE Asia.
Planning Studies
In addition to the important agreements in principle that have been reached, the first phase of 
TRADP has laid the groundwork for the development that is expected in the future. Part of this 
effort has been directed to planning studies that have been carried out in conjunction with the 
experts in each country. As a result of this joint planning and participation under UNDP’s 
support, the studies have not only provided a sound basis for detailed feasibility studies in the 
future, they have helped improve the level of cooperation and understanding amongst the 
participating Governments, particularly at the operational level. The major studies are listed 
below.
    	Programme Document for the Tumen River Area Development Programme (TRADP) 
12/91;
    	Promotion of Industry in Tumen River Economic Development Area (TREDA):  Industry 
Sector Profile, Development Opportunities and Constraints. UNIDO  June 1994;
    	Studies in Support of TRADP. (A compendium of studies carried out by KIEP and 
KIET). KIEP May 1994;
    	A Regional Development Strategy for the Tumen River Economic Development Area. 
Preliminary Draft Report. April 22, 1994. PDP Australia Pty Ltd.;
    	Informal Report of the Workshop on TREDA Regional Development Strategy;
    	Conceptual Infrastructure Masterplan for the Tumen River Economic Development Area 
(TREDA). CPCS Ltd.;
    	Tumen River Area Development Project. Preliminary Environmental Study. Draft  
Chinese Research Academy for Environmental Sciences. May 1994;
    	Water Resources Definitional Tasks. Peter Reiter. January, 1994;
    	Project Development and Environmental Strategy for the Forest Sector  Jaakko Poyry  
May 1994;
    	Business Opportunities in Forestry and Forest Industry Sector-Inception Study Jaakko 
Poyry;
    	Pre-feasibility studies in Forestry and Forest Industries. Jaakko Poyry;
    	TRADP Tourism Study Draft Intermediary Report April 1994. Esko Koskinen, Esuko Oy;
    	Telecommunications Masterplan. Betelcom.
Implementation
The development on the ground in TREDA and its hinterland has been gathering pace over 
the past three years. This development reflects the growing confidence of the private sector in 
the region and the strong commitment that has been made by Governments to support 
development. Some of the most obvious signs of development and growth are reported below.

Development of Economic Zones
Each of the three riparian countries have created special development zones within TREDA 
and these zones are serving as focal points for development in DPRK and in Yanbian 
Prefecture. In Primorsky Krai, although it has established a special zone, the planned 
development extends well beyond the zone.
The Development Zones in DPRK
The focus of DPRK’s development efforts for TREDA is the Rajin-Sonbong “Golden Triangle” 
Zone which was created in 1991. This area of 786 sq km has been designated as the Rajin-
Sonbong Free Economic and Trade Zone (RSFETZ). The nearby port of Chongjin has been 
designated as a Free Trade Port. The initial allocation of land (621 sq km) formed a triangle 
from Rajin port in the south to the mouth of the Tumen River in the north east and upstream on 
the Tumen to Tumengang district in the north. An additional area of 125 sq km included the 
land further upstream adjacent to river opposite the Jingxin Plain in China. The Government is 
developing RSFETZ as a international cargo transit point and an export processing zone while 
at the same time developing the tourism potential of the area. The RSFETZ now includes 59 
factories which DPRK want to see modernized and upgraded via foreign investment.
Government completed its Masterplan for RSFETZ in March 1993 and has planned to develop 
the zone in three phases. The first phase (1993-1995) aims to create a favourable investment 
climate by enacting all necessary laws and regulations and by upgrading the existing 
infrastructure including the railways, roads and ports. The second phase to the year 2000 aims 
to promote investment into export-oriented manufacturing. The third phase to 2010 aims to 
continue the process so that the zone becomes a centre for international trade, export 
processing, financial services and tourism. There are nine designated “industrial parks” within 
the RSFETZ and Government has recently placed priority on two of these.
The Development Zones in Yanbian Prefecture in China
China has indicated a desire for balanced development and has therefore made efforts to 
accelerate development of the three provinces in NE China that were lagging behind the 
strong growth elsewhere in the country. Government designated the city of Hunchun as one of 
the first Open Border Cities and created the Hunchun Border Economic Cooperation Zone 
(HBECZ) in 1992. Since that time it has invested heavily to attract investment to the area. Its 
broad strategy is to commence development by creating an inland port city connected to the 
East Sea (Sea of Japan) through transport corridors to the ports of Chongjin and Rajin in 
DPRK and the port of Zarubino in Russia. It also plans to develop a river port at Fanchuan on 
the Tumen River so as to re-establish the direct access to the East Sea (Sea of Japan) that it 
enjoyed prior to 1938.
The HBECZ comprises an area of 88 sq km adjacent to the city of Hunchun and about 6 km 
from the Sino-Russian border crossing at Changlingzi and 14 km from the Sino-DPRK border 
crossing at Shatouzi. It is 63 km from Zarubino port and 93 km from Rajin port. The initial 
development has involved a 2.28 sq km area within the HBECZ which includes: a bonded 
warehouse; factories; administrative building; hospital; school; and some residential buildings. 
The area is well serviced with roads, power supply, telecommunications, water, drainage and 
heating supplies. Connections with the railway networks of Russia and DPRK are nearing 
completion.
The development strategy for the HBECZ involves three broad phases. The first phase, which 
is already well advanced, calls for the provision of infrastructure, energy and urban planning. 
The second phase of actual development has also started  and aims to make best use of local 
resources while giving emphasis to export production. It was envisaged that initial emphasis 
will be on labour-intensive manufacture with progressive movement towards technology-
intensive industries. In addition to the industrial development, China plans to promote tourism 
and agriculture and to accelerate economic cooperation across the borders. The third phase 
would lead to more high technology industries. The long term vision is that Hunchun would 
emerge as the central industrial city of Jilin Province.
In addition to the HBECZ, the cities of Longjin and Yanji in Jilin Province, both of which are 
considerably larger than Hunchun, have substantial plans for development of their areas. 
These plans include closer linkages with DPRK, the attraction of foreign investment and some 
important infrastructure developments including expansion of the airport at Yanji. The 
development plans for these cities are considered to be supportive of the development at 
HBECZ rather than competitive and it is clear that the Central Government places greatest 
priority on HBECZ.
Already some 370 joint ventures have been approved with a total value of $400 million of 
which some 48% is foreign direct investment. Investors from ROK have been most active and 
have pledged some 43% of the investment to date. More than 77% of the investment is aimed 
at manufacturing.

The Development Zones in Primorsky Krai in Russia
The concept of creating a special economic zone such as those of China had been under 
discussion for many years in the Former Soviet Union but it was only in 1990 that a decision 
was made to create the first two zones in Kaliningrad and at Nakhodka. The Nakhodka Free 
Trade Economic Zone (NFTEZ) began operating in August 1991 and has an area of 4,580 sq 
km and a population of 224,000. It includes the ports of Nakhodka and Vostochny and has so 
far attracted some 230 enterprises including 110 foreign-owned and 97 joint ventures. The 
strategy underpinning the NFTEZ is based on the promotion of trade by the opening of an 
Asia-Pacific gateway. Consequently, the NFTEZ has concentrated its promotion efforts on its 
transport potential to serve as part of a transport hub and on the exploitation of the resources 
in its area and hinterland in particular, fish and seafood, timber, minerals and agricultural 
products. The NFTEZ forms part of the northern section of Russia’s portion of TREDA. In 
addition, there are a number of industrial centres including Vostochny, Ussuriyisk, Vladivostok 
and the Khasan district of Primorsky Krai. The development plans call for a degree of balance 
in the development of Primorsky Krai such that it would include development in the NFTEZ, in 
and around Vladivostok and also in the southern district of Khasanskiy which extends from 
near Vladivostok to the Tumen River.
Expansion of Trade
Trade in the region has already started to grow strongly as indicated in the figure below that 
shows exports (X) and imports (I) out of and into Yanbian Prefecture in NE China from its 
neighbouring countries. The total trade has grown from 129 Million Yuan in 1990 to 1,767 
Million Yuan in 1992. Whilst such growth in trade reflects a variety of forces, it is clear that the 
confidence of investors and business people has been boosted by the clear commitment of 
participating Governments as evidenced by their involvement in TRADP. There have been 
numerous positive measures taken by Governments to encourage trade. One example is the 
opening of Chongjin Port to allow ROK flag carriers. Another is the decision to allow Chinese 
construction workers to operate in Primorsky Krai under contract arrangements.
Chart indicating Growth of Trade in Region (Million of Yuan)
 Specific Cooperative Projects
There are a number of projects already underway in TREDA that involve cooperation across 
national borders. In addition, there are numerous projects that are at an advanced stage of 
planning. These developments have been described in some detail in the UNIDO report 
(RAS/92/01D) and are only briefly mentioned below.
The most advanced projects are those involving rail and road linkages between China and 
Russia and China and DPRK. The China Northeast Asia Railway and Port Group Co. Limited 
is a private sector joint venture company that has developed plans for extensive rail and road 
developments in TREDA. Work is already well advanced on a railroad linking Hunchun in Jilin 
Province in China to Kraskino in Primorsky Krai in Russia. This will then provide a direct 
connection from the Russian port of Zarubino to the Chinese city of Hunchun. The same 
company is at an advanced stage in reaching agreements with DPRK to link the rail system in 
Jilin Province to the system in North Hamgyong Province at Xinyong. This latter link will 
provide a direct connection from the DPRK port of Rajin to the Chinese city of Hunchun. The 
company also has longer term plans to link the rail system in NE China with the system in 
Eastern Mongolia. The development plans of this company include work on expanding and 
modernizing port facilities in both Russia and DPRK.
Road links between China and DPRK are already being improved. Linkages from Yanji to 
Longjin have been completed and connection to Sanhé (DPRK) is underway. On the DPRK 
side, work is well advanced on a toll road to link Sanhé to Chongjin via Haeryong. This road is 
being funded by the Yanbian Gonggyo Trading Company.
A dual highway road link from Hunchun to the Russian border at Chenglingze has already 
been completed and work is proceeding on the Russian side to connect with Zarubino.
Port facilities are being improved in both Primorsky Krai and DPRK with the result that port 
capacity is adequate to handle foreseeable cargoes for some years.
Border crossing facilities are being rapidly improved both in terms of physical facilities and 
services. A new facility has been established at Chenglingze and some existing facilities will 
soon be re-opened on the China-DPRK border.
Specific Commercial Developments
There have been growing numbers of commercial joint ventures between parties across the 
national borders. The Russian company Dalso has established several operations in DPRK 
and is involved in the upgrading of the Rajin port. At least four Sino-Russian joint ventures 
have been established in Primorsky Krai and there are numerous joint ventures between ROK 
firms and Chinese, Russian and DPRK enterprises. Although the trade is still small, there are 
numerous tourist operators seeking to establish joint ventures in the region. These and many 
other ventures are detailed in the UNIDO report.

HOW TREDA PLANS TO COMPETE

The participating countries or regions that comprise 
TREDA and its hinterland have extensive resources 
and their Governments have developed sectoral 
strategies that seek to make best use of those 
resources.  However, in addition to the sectoral 
strategies that are needed, each country or region has 
sought to define the broader economy-wide strategies 
that are needed to accelerate development by 
attracting investment and facilitating trade.  In the 
process of preparing these individual country 
strategies, they have recognized a high level of mutual 
dependence.  Many of the development objectives of 
individual regions within the area are mutually 
beneficial but require co-operation to succeed.  Many 
of the attractions of the area to outside investors are 
reliant on a high degree of integration and co-
operation amongst the participating regions. In 
summary, two points have become clear:
The ability of this area to compete with other potential 
development areas depends very much on the 
willingness of its Governments to co-operate to create 
a competitive edge.
The mutual benefits that will come from co-operation 
both bi-laterally and multi-laterally will be large.
This recognition has shifted the focus from efforts to 
develop each part of the region separately to efforts to 
develop it as a whole.  As a consequence, Governments 
have sought to identify the broad strategies that will be 
appropriate for this task.
This section summarizes the broad strategic thrusts 
that Governments have decided to take to enable 
TREDA to compete successfully with other 
development zones.



Growth Projections for TREDA
 
INTRODUCTION
TREDA has the potential to compete successfully with other trade development zones and to 
capture a significant share of the foreign investment and industrial development and trade that 
will follow. This potential arises as a result of several factors: the region’s resource base; the 
sectoral strengths of the sub-regions comprising TREDA and those of Mongolia; and the 
complementary capital and technology available from ROK and other countries including 
Japan.
In order to realize that potential, Governments have recognized the need to take various 
measures. Some of these measures are internal and are needed to improve the climate for 
investment and for trade and industry development within each country. They will include 
measures to ensure that development is ecologically and economically sustainable. Other 
measures are external and are needed to enable the countries to cooperate more effectively to 
facilitate trade and to protect their common environmental resources. All of the measures have 
been carefully analyzed and have received high level endorsement and support. As will be 
discussed later in this report, implementation arrangements for these measures will vary in 
scope and timing amongst the participating Governments but the broad basis for agreement 
has been reached.
This section outlines the broad measures discussed by Governments and indicates why 
Governments have decided they are necessary. It also reveals the need to establish new multi-
national institutions so that these cooperative measures can be agreed and implemented.
The four key measures that the participating Governments have decided are needed to 
establish a sustainable competitive position for TREDA and Mongolia are outlined below. 
Taken together, these measures form the basis of the development strategy that will make it 
possible to exploit the comparative advantage that the region offers.


	The Broad Strategy
1.  Create an "Enabling" Environment
2.  Improve the Services Available in the Region
3.  Facilitate Expansion of Trade
4.  Attract Investment and new Technology and
Improve Access to Markets



The Governments believe that exploitation of combined comparative advantage of the region 
will be the major force driving growth and development in TREDA and in the whole NE Asia 
region. The opportunity arises because in the past the economies in the region (DPRK, Japan, 
Mongolia, PRC, ROK and Russia) have been poorly integrated with the result that there has 
been insufficient or inappropriate specialization of economic activity. This has been particularly 
marked in the sub-regions within TREDA and in Mongolia. Business growth in all sub-regions 
has been restricted by the limited access to the desired balance of capital, labour, production 
inputs and markets within that sub-region. The Governments have decided that businesses 
would grow faster, trade would expand and the welfare of the people would improve if steps 
were taken to widen access to these factors of production and markets beyond the sub-region 
to include the whole of the North East Asia region.
Governments have agreed that the key to tapping the potential for exploitation of comparative 
advantage is to reduce the restrictions on trade amongst partners within the region. They 
recognize that it will not be possible to remove the restrictions altogether because many of 
them reflect national policies and cannot be removed just in one region. Similarly, they agree 
that while it would be desirable if all countries could agree to act quickly and uniformly, in 
practice it is neither likely nor necessary that the restrictions be removed immediately or even 
simultaneously in all sub-regions.
The four measures or steps that comprise the broad development strategy are discussed 
below. These measures require action to be taken by the participating Governments and by 
the private sector to exploit the combined comparative advantage and to turn it into a 
competitive advantage for the participating countries in the region. The Governments plan that 
they should be carried out concurrently.
THE BROAD STRATEGY
First Step: Create an Enabling Environment
Governments in the region are in the process of creating an environment or business climate 
that enables industry to develop, businesses to prosper and trade to expand. This environment 
will also be one that encourages investment from both the private and public sector. 
Governments have also indicated that the environment they want to create will lead to 
improvement in the welfare of the population in the region and will not lead to loss of 
environmental values.
There are three groups of measures that Governments are taking or plan to take to create the 
enabling environment: They are starting to put in place the new regional institutions needed to 
implement development; they are continuing to put in place the trade and other policies 
needed to guide the development; and they are progressively reaching agreement on the 
changes needed to their own national or local regulations to remove restrictions on 
development.
Although it is clear that improved services are also a part of the enabling environment needed 
to conduct business and to improve welfare, we have treated it as a separate measure to 
make it clear that the provision of such services will not be solely the responsibility of 
government.
The three areas that are the sole responsibility of Governments are outlined below.
Institutions
In order to carry out the functions needed to exploit the comparative advantage of the region, 
Governments have agreed that they will need to establish new institutions and to modify the 
functions of existing institutions. The nature of the new institutions and the changes needed to 
existing institutions have been extensively discussed under TRADP and the draft agreements 
for the international institutions have now been developed to the point that they are ready for 
implementation after final high level approval by participating Governments. Now that these 
international institutions are in virtually in place, it is expected that there will be rapid and 
substantive progress made with cooperative multi-lateral measures.
Trade Policy
The participating Governments have been examining their own country’s trade policy to 
identify how they can best support the expansion of trade in the TREDA and NE Asia region. It 
now seems likely that all participating countries will align their trade policy with the GATT rules 
which will mean that all parties will have compatible rules that will boost trade quickly and 
sustainable. It is expected that further discussions amongst the countries on a bi-lateral basis 
will clarify the implications of the national trade policy at the regional level and deal with the 
important issues of border trade and the practicalities of streamlining transactions across the 
borders. Governments are in the process of establishing the appropriate sub-committees to 
accelerate these discussions and to sort out implementation details. UNDP has indicated that 
Phase 2 of TRADP will assist the Governments to reach agreement and implement these 
critical policies.
Regulations
Having established the appropriate policies, Governments have agreed to meet to identify 
those regulations that are discouraging trade and investment at present. Subsequently, they 
plan to negotiate changes in those regulations taking into account the varied concerns of all 
parties as well as their common commitment to expanded trade and investment. Regulations 
to control trade will be dealt with as part of the changes in trade policy. Regulations to control 
the specification of goods used in trading contracts will be jointly discussed with the objective 
of moving towards common standards for traded goods and services. Regulations to control 
transport, including matters such as maximum axle loads and licensing arrangements, will be 
the subject of discussions amongst local authorities in neighbouring sub-regions. Through 
practical cooperative measures in these areas, Governments are confident that they will be 
able to put in place a much improved business and trading environment.
Governments have agreed on the need to collaborate in reviewing the regulations needed to 
implement national and regional environmental policies. Owing to the close proximity of the 
sub-regions and the fact that activities in one region can have an impact on neighbouring sub-
regions, it was recognized as important that a mechanism was developed for discussing 
environmental regulations and moving towards a degree of harmonization. In order to avoid 
situations where industry may be attracted to regions with lax environmental controls only to 
cause pollution in other areas, Governments are consulting to agree on procedures to limit and 
control pollution. More generally, Governments are meeting to agree on measures to protect 
their common environment—most of these measures will be internal but some will require 
inter-governmental cooperation.
Second Step: Improve Services
With assistance from UNDP under the TRADP, Governments have been planning how to 
improve the full range of services needed by business. By improving these services, 
Governments expect to attract investment and new industries and ultimately this will lead to 
improved welfare of the people in the region. Clearly all the services cannot be improved 
simultaneously throughout the region but they are being improved progressively and cost-
effectively by ensuring that the improvements are in response to anticipated demand. The 
basis for setting priorities for service improvement has been set out in the various sector 
studies on Infrastructure, Telecommunications, Power and Water Supply.
Governments are seeking outside investment to supplement their own budgetary allocations to 
improve services. In order to attract private investment or Official Development Assistance 
(ODA), Governments are collaborating to demonstrate that the investments are technically, 
socially, environmentally, financially and economically sound. Under Phase 2 of TRADP, it is 
envisaged that further studies will be carried out as needed to demonstrate the feasibility of 
the projects and to meet the particular requirements of the lending or investment agency.
In those projects involving more than one country and where public investment is 
contemplated, or where there is to be a mix of public and private investment, Governments are 
working to reach agreement on priorities in advance rather than competing with each other. 
They have agreed to joint participation in feasibility studies of specific proposals or projects as 
a means to determine priorities and to clarify their respective roles. This provides all parties 
with an understanding of the needs of the investors and it will also indicate that some 
rationalization will be needed to make sure that the returns on investment are reasonable and 
competitive with what investors would expect to receive elsewhere.
Business Service Centres
The strategy that Governments plan to implement to provide business people with the "soft" or 
supporting services they need to conduct business is to encourage these services to be 
provided in a number of centres associated with the development. Services such as banking, 
hotels, restaurants, secretarial and translation agencies, printing, business equipment servicing 
etc. will expand in response to anticipated demand. This is expected to lead to the 
development of a number of growth centres within the region. However, although it is 
envisaged that growth will be distributed around a number of existing growth centres or poles, 
the longer term spatial planning of the Governments is leaving scope for the development of 
new growth centres within TREDA (an International City perhaps) should the demand arise in 
the future.
Third Step: Facilitate Trade
The participating Governments believe that although both of the two preceding steps will help 
build trade, there are some specific measures that need to be taken to boost trade more 
rapidly. Even though ultimately trade depends on business decisions based on mutual 
advantage, Governments recognize that they can assist expansion of trade in a number of 
ways as was indicated in the UNIDO report "(TREDA) Industry Sector Profile, Development 
Opportunities and Constraints". Governments are discussing three main measures as outlined 
below and plan to establish a Trade Facilitation Group as part of the inter-governmental 
institutional arrangements to advance these issues.
Streamline Customs and Visa Issue
Governments have indicated an intention to respond to the issues raised in the UNIDO report 
and at the RDS Workshop in Beijing concerning customs and visa issue. Border crossing 
procedures will be progressively simplified so that it is easier and less expensive to trade within 
the region. Efforts will be made to negotiate arrangements that will permit people and goods to 
transit to and from China and Mongolia through DPRK and Primorsky Krai with less difficulties 
and cost. Governments plan to identify the changes that are needed and to start with the 
simple measures such as standardization of custom forms and then to progress to more 
complex measures such as the development of joint customs facilities and procedures.
Governments will also review visa issue procedures aiming to simplify and accelerate the 
process so that genuine business people need not be delayed or discouraged from travelling 
within the region. They have agreed that while it is not necessary that all countries have the 
same procedures; all countries will strive to make it easier to travel in the region.
In order to implement such changes Governments are planning to establish a Working Group 
to review customs and visa issue procedures and to recommend changes in Government 
policies as needed.
Encourage Exchange of Information
Governments are planning to encourage the exchange of information in a variety of ways. 
They recognize that trade amongst the sub-regions would be greater if there were greater 
knowledge of the resources and markets available in neighbouring sub-regions. Interchange of 
information will assist this process and would be further facilitated by reduced controls on visa 
issue. Formal exchange programmes with universities, business organizations and local 
government agencies are also under consideration since it is clear that there will be mutual 
benefits if business people become better informed on the laws and regulations that govern 
business in adjacent sub-regions. UNDP plans to assist this process as part of TRADP Phase 
2.
Rationalize Pricing and Incentives
In most of the countries in the region there is still a number of goods and services whose 
prices are determined by government actions. Trade between the sub-regions and with 
international markets has been distorted in the past as a result and Governments acknowledge 
that such trade will not be sustained if it is not based on real (market-determined) prices for 
goods and services. Governments are therefore progressively examining the existing price 
controls, quotas, and import or export restrictions with the intention to remove such distortions 
as quickly as is practical. Barter trade is already being phased out in all countries and will be 
terminated as soon as is practical.
In line with experience elsewhere in East Asia in particular, in those situations where 
Governments choose to give incentives to particular industries or to exporters, they will 
consider making them "contestable". They will also closely monitor their impact monitored so 
that only the most efficient receive the incentives.
While recognizing that these are internal matters with little scope for cooperation, the 
participating Governments will investigate whether it may be useful to have a forum to discuss 
such issues. Such a forum would mean that each country can be aware of possible changes in 
the pricing arrangements for goods and services in neighbouring sub-regions. A good example 
of this relates to charges for transport—these are of major significance in determining the 
feasibility of transport improvements that rely on freight from neighbouring sub-regions.
Step Four: Attract Investment and New Technology and Improve Market Access
Although the region has a comparative advantage as a result of its location, its resources and 
its complementarities, it requires access to outside capital, technology and wider markets to 
turn this into a competitive advantage. The participating Governments plan to cooperate to 
improve access to such capital as indicated below.
Building Investor Confidence and Reducing Risks
Governments are already helping build the confidence of investors by providing tangible 
evidence of their own commitment and confidence in further growth in the region. One element 
of such efforts is the declared intention of Governments to make a joint commitment to the 
International Agreements that have been proposed as a basis for implementation of the 
TRADP. Those agreements will enable the establishment of an agency whose functions will 
include investment promotion.
Another element is the willingness of Governments to commit funds to providing part of the 
infrastructure and support services. All Governments have indicated their preparedness to 
guarantee finance for a significant part of the priority investments.
Governments are also building investor confidence through their active participation in the 
examination of the feasibility of joint projects and through their agreement on the roles and 
responsibilities of all parties.
Beyond these Government initiatives, however, it is recognized that the most persuasive 
argument from an investor’s perspective will be the proven performance of similar development 
initiatives in the region. For this reason alone, the Governments have started to closely monitor 
the development efforts of private groups and are assisting in whatever ways possible to 
accelerate progress and to resolve problems, particularly in the early stages. UNDP will 
continue to assist this effort under Phase 2 of TRADP.
Whereas the measures above are aimed directly at the investor’s confidence and his or her 
perception of risk, there are various measures that Governments plan to take to actually 
reduce the risks to outside investors. One measure might be that the Investment Promotion 
Agency (in whatever form it takes under the International Agreement) might seek to persuade 
countries within the region to provide some sort of insurance fund to protect the investments of 
its own (private sector) nationals against political risk. It would be particularly helpful if 
Governments such as those of ROK and Japan were willing to provide such protection to its 
own companies investing in the region. Again the Phase 2 of TRADP will help Governments 
investigate the need for and feasibility of such measures.
Investment promotion
Governments are taking steps to make it easier for investors to invest in TREDA. One of the 
proposed measures will create TREDA Investment Promotion Centre (TIPC) which is planned 
to comprise branches in Rajin, Hunchun and Vladivostok and local offices in Chongjin, Yanji 
and Nakhodka or Zarubino. The TIPC will be assisted under Phase 2 of TRADP and will 
streamline the process that investors need to go through to make investments in TREDA. It will 
operate as a “one-stop shop” providing information on business opportunities and investment 
regulations while also handling all aspects of the investment application and approval process. 
The TIPC offices will provide facilities for potential investors including translation and 
interpreters, facilities for meetings and seminars and will help arrange trade missions. In 
addition, the TIPC will handle all investment promotion activities including regional advertising, 
publication of investment guides and videos and trade missions.
Under Phase 2 of TRADP, the participating Governments will be assisted in making full use of 
the various forms of assistance for investment promotion available from the relevant UN 
agencies. In particular, Governments will be assisted in accessing the UNIDO support which 
includes: investment monitoring; preparation of Industrial Development Reviews; identification 
and preparation of investment projects; institutional support for investment promotion activities; 
support for Investment Forums; and follow-up support to help finalize business negotiations. In 
addition, if considered appropriate by the participating Governments and provided suitable 
sources of funding are available, the second phase of TRADP will help in the conduct of 
detailed investment opportunity and feasibility studies for high priority projects.
Facilitate Financing Arrangements
Development will require large amounts of capital: even with modest growth investment 
requirements are likely to exceed US$5 billion in the period to 2000 and perhaps US$30 to 40 
billion in the period 2000 to 2010. At least half of that investment is expected to come from the 
private sector and Governments have therefore set out to attract such finance by establishing 
a favourable climate for business as discussed previously. Governments have agreed to fund 
part of the balance from within their own budget and they are identifying their own priorities so 
that they can allocate their own resources to these projects. However, beyond those 
contributions, Governments are also assisting in attracting other sources of finance in two 
other ways.
First, they are helping attract Official Development Assistance (ODA). This will come in various 
forms: as direct bi-lateral grants from other donors: as soft loans from agencies such as the 
World Bank and the Asian Development Bank; and as equity or commercial loans from the 
International Finance Corporation (IFC) and the private sector “window” of ADB. The key to 
accessing such funds will be the preparation of comprehensive feasibility studies that meet the 
lender’s requirements. Most ODA will only be provided on a bi-lateral basis and will therefore 
only be accessible to those countries that have operating arrangements with the agencies 
providing the finance. In addition, it will generally only be available for expenditures within the 
country borrowing the funds.
Second, Governments are assisting by establishing the necessary implementing agencies as 
part of the International Agreements for the implementation of TRADP. (Governments have not 
yet determined the form of these agencies but are considering options ranging from a 
Secretariat to a Development Corporation). The agencies will investigate the scope for linking 
ODA so as to support investment in projects extending across national boundaries. It will also 
need to seek funding from the major international commercial banks and sources of venture 
capital. It is likely that these financial institutions will need to see some progress with other 
projects before making any investments themselves. It is also possible that the agency could 
help mobilize domestic savings into investments in the region.

THE COOPERATIVE ARRANGEMENTS

The previous section set out the broad strategy that 
Governments have determined is most appropriate for 
their future development.  This strategy implies a level 
of co-operation amongst the countries and sub-regions 
in order to improve the competitive position of TREDA 
and its hinterland.
This section examines the main options for co-
operation that are available to the participating 
Governments in the North East Asia region generally 
and in TREDA specifically.  It concludes that the 
participating Governments would each be better off if 
a relationship were established amongst them that 
allows them to co-operate on both a bi-lateral and a 
multi-lateral basis according to the specific task or 
objective being pursued. This relationship would still 
leave scope for individual efforts to develop industry 
and trade where no benefits could come from co-
operation.




INTRODUCTION
The Governments of DPRK, Mongolia, PRC, Russia and ROK have agreed that inter-regional 
competitive development would severely limit growth in all countries and would mean that all 
countries lose. It would lead to duplication of infrastructure, inefficient allocation of resources 
and it would mean foregoing the benefits from the very significant resource complementarities 
that exist in the region. Governments have therefore decided that it is not an option worth 
considering.
However, Governments have considered a range of strategic options for inter-regional 
cooperative development and these are outlined below.
Strategic Options for Inter-Regional Cooperative Development
The participating Governments have made a commitment to inter-regional cooperation in North 
East Asia and in TREDA in particular. It was this commitment that brought them together for 
the TRADP. In determining how they can cooperate most effectively, Governments have 
considered three strategic options. The first is the geographical basis for cooperation—what 
will constitute the boundaries of the region where cooperation is to take place? The second is 
a management question—what forms of cooperation are desired, what agency will oversee 
this cooperation and how will the cooperative measures be implemented? The third is a 
political question—what agreement amongst Governments is needed to create this region and 
allow it to function?
These three questions are discussed below.
What is the Geographical Basis for Cooperation?
Common Market
The most radical option would have been to create a common single market in which goods, 
people and services could move freely. Given the relatively small size of the sub-regions in 
relation to the economies they operated under, this idea could never be contemplated as a 
practical option since it required the entire country to become part of the common market.
Free Trade Area or Single Special Economic Zone
In the early stages of planning consideration was given to creation of a single economic or free 
trade zone referred to as the Tumen River Economic Zone or TREZ. This zone was to have 
comprised land leased from the three riparian countries and was to have been managed by an 
independent business corporation. The TREZ concept raised a large number of practical 
problems and it was clear that it would delay development if these had to be solved before 
implementation could start. The participating Governments through the Project Management 
Committee (PMC) consequently decided to postpone further consideration of the concept while 
not ruling it out as a future possibility.
Tumen River Economic Development Area (TREDA) with Mongolia and ROK
With the postponement of any further consideration of the TREZ concept, attention has shifted 
to TREDA. It has been identified as the triangle of land contained between the cities of 
Chongjin in DPRK, Yanji in China and Nakhodka/Vostochny in Russia. It can be defined as 
comprising: the North Hamgyong Province of DPRK, the Yanbian Autonomous Korean 
Prefecture of Jilin Province in NE China and the southern and central part of Primorsky Krai in 
Russia. So defined, TREDA occupies some 75,000 sq km and supports a population of 3.5 
million people. Each of the three riparian countries have created special development zones 
within TREDA and these zones are envisaged as growth poles or focal points for development.
Although Mongolia is not riparian to the Tumen River and thus lies outside TREDA, the 
concept that has been advanced in developing the Regional Development Strategy is that 
Eastern Mongolia would form a fourth development growth pole within NE Asia.
Similarly, although ROK is not riparian to the Tumen River and thus lies outside TREDA, the 
concept is that it would form the fifth development growth pole in NE Asia. This concept of the 
geographical basis for development underlies the Regional Development Strategy and has 
been accepted as the preferred basis by the participating Governments.
How Participants Plan to Cooperate?
The participating Governments have decided that they favour the idea of moving progressively 
towards greater uniformity or harmonization of their business climates whilst recognizing each 
country’s right to do things a little differently—a policy of "progressive harmonization with 
mutual recognition". This option, in contrast to a more rapid form of harmonization, means 
that the number of issues that need immediate attention on a multilateral or bilateral basis will 
not be as great.
The multilateral issues are at the heart of the whole concept for development of the region. 
Governments have agreed to put mechanisms in place to resolve any such issues so that the 
goal of accelerated development for the region can be achieved. Foremost amongst these 
issues that Governments plan to address through multi-lateral and bi-lateral action are the 
following:
    	Streamlining of customs and visa issue;
    	Enabling bonded transit trade;
    	Rationalizing transport services and infrastructure;
    	Recognizing environmental inter-dependence;
    	Eliminating barter trade;
    	Providing joint or cross guarantees for joint projects;
    	Providing joint Governmental investment in multi-national projects;
    	Supporting joint efforts to promote the region;
    	Supporting joint efforts to attract ODA, private sector and other forms of investment.
The institutional arrangements that are needed to deal with these issues are now being 
finalized by the participating Governments and UNDP. It is envisaged that there may need to 
be a Commission comprising all participating Governments and a Committee consisting of 
representatives of the riparian countries.
The Governments have agreed that the form of cooperation that is required and appropriate 
will vary according to the particular purpose to be served. None of the Governments want to 
see a situation where they are all obliged to sit down together to discuss every issue of 
development in the region. However, all of the Governments want access to a venue or 
procedure that will allow each to discuss issues that have implications for other participants. 
Hence it is clear that there will be a range of issues that will be dealt with on a bilateral basis 
and others that will be dealt with on a multi-lateral basis. The bilateral issues will be self-
identifying and need not be elaborated here. Mechanisms already exist for dealing with these 
issues although they could be improved in various ways.

IMPLEMENTATION ARRANGEMENTS- GOVERNMENTS’ PREFERRED 
APPROACH

Having identified the potential benefits from joint 
efforts to develop the region, the Governments have 
shifted their attention to the means of implementing the 
development strategy.  They have considered a number 
of alternative approaches and this section describes 
their chosen approach to implement the development 
strategy.




INTRODUCTION
The Governments participating in TRADP considered three alternative approaches to 
cooperative development of TREDA and its hinterland. The first was a so-called Masterplan 
approach which relied heavily on joint decisions by Governments concerning how the region 
should develop. Its weakness was that it was not demand-driven and it would not be attractive 
to outside investors. The second was a so-called Rapid Harmonization approach which 
concentrated attention solely on establishing an attractive and uniform investment climate 
throughout the region and then relied entirely on the market to determine what investments 
were warranted. Its weakness was that it would be difficult to implement because it required all 
Governments to simultaneously agree to identical conditions for investors, businesses and the 
workforce. The third approach was a so-called Progressive Harmonization approach which 
included the best aspects of the first two approaches. It is this approach that is preferred by 
Governments and it is outlined below.
THE PROGRESSIVE HARMONIZATION APPROACH
General Principles
The approach that the Governments prefer is a hybrid which builds on the best aspects of the 
two main alternatives: it focuses on getting the business environment right to encourage trade 
and investment but it also provides for a degree of planning and control when it comes to 
infrastructure development.
In relation to trade and investment, the approach recognizes both the longer term benefits of 
harmonization of the investment climate as well as the implementation difficulties of achieving 
harmonization quickly. It aims to move towards a "harmonized" business environment 
throughout the region at a pace that is acceptable to all Governments but it accepts that some 
countries or sub-regions will "harmonize" more rapidly than others. Hence, while it will lead to 
"balanced" development over time, in the short run it accepts that development and resource 
allocation will reflect both comparative advantage and the attractiveness of the business 
climate in any one location.
In relation to infrastructure development, the approach would provide an indicative plan 
coupled with procedures to encourage joint planning and joint financing of shared 
infrastructure.
Requirements for Successful Implementation
Under a progressive harmonization approach, the requirements would be flexible. In the trade 
and investment area, Governments plan to develop a basic statement of intent and a broad 
timetable for major reforms, however, it would not be unreasonable for this timetable to extend 
up to 10 years for some of the more far-reaching or contentious changes to the investment 
and business climate. The Governments recognize that progressive harmonization of the 
business climate will require on-going consultation and review of policies for development, 
environment protection, trade, industry and investment. They plan to carefully monitor and 
actively encourage this process since they recognize that without a single plan or a 
comprehensive near-term timetable, there is a risk that progress will be slow. Governments 
plan to establish an institution operating as part of or under the Commission and/or the 
Committee with the mandate to negotiate the harmonization process and to monitor its 
implementation.
In the case of infrastructure development, Governments have agreed that the indicative or 
conceptual masterplans that were prepared under Phase 1 of TRADP would serve as the 
basis or starting point for development planning but they are to be progressively refined and 
the timeframe for the plan will be progressively extended. In the early years, the plan will deal 
only with immediate issues—projects already nearing implementation and policies that are 
needed to guide future planning. Subsequently, the planning would move on to medium- and 
longer-term regional issues. Another critical feature of the approach to infrastructure planning 
is that it should be based on joint participation in planning studies by all involved.
Advantages
The major advantage of this approach is that it can be quickly initiated and its implementation 
would not require difficult negotiations nor high costs. It would be based on the principle of 
“mutual recognition” that has guided much of the development of the European Common 
Market. By avoiding setting of absolute priorities and by concentrating on doing the easier 
things first, this approach would minimize political difficulties and provide early benefits. Since 
it will be based on practical outcomes, it is expected to receive support from business as well 
as diverting attention away from the political consequences of change. Over time it will enable 
greater exploitation of comparative advantages and greater integration of economies than 
continuation of the present competitive situation. This will mean that actual improvements in 
welfare, trade and investment will be quickly realized.

INDICATIVE BENEFITS

The participating Governments expect that 
development of the region will provide direct and 
indirect benefits which will lead to improved welfare of 
the people.  The direct benefits will take the form of 
expanded employment opportunities and increased 
productivity and earnings.  The indirect benefits will 
flow from the improved services that will become 
available both to business operators and private 
citizens.
The magnitude of the benefits will depend on the speed 
with which Governments are able to act to establish an 
attractive investment and business climate since this in 
turn will determine the likely rate of investment in the 
region.
It is expected that investment in the region will total at 
least US $34 billion over the period to 2010 and that 
the Gross Regional Domestic Product would grow at a 
rate of 8 to 16% per year.  This would mean that per 
capita GDP would increase almost threefold over the 
period.




THE BENEFITS EXPECTED
The benefits that are expected to flow from the development of TREDA and its hinterland will 
take many forms but all will lead to an improvement in the welfare of the people in the region 
as well as an improvement in the competitiveness of the region. It is expected that the foreign 
direct investment into the region will increase dramatically generating new jobs and increasing 
outputs. The infrastructure throughout TREDA and its hinterland will be progressively improved 
providing benefits not only to the businesses that will use them but also to the general 
population in the area. The improvements in road, rail and port facilities will mean better 
transport services and lower transport costs for business users but the public at large will also 
benefit from the improved services. The expansion of the telecommunications network and the 
introduction of new services will vastly improve the ability of people in the region to 
communicate with each other and with those outside the region.
Preliminary estimates suggest that the combined regional economies might grow at around 8% 
per year up to 2000 and 16% annually for the period 2000 - 2010 even with relatively modest 
growth assumptions. With an investment capital to incremental output ratio of 2.5, this would 
generate an investment requirement of at least $6 billion in the period to 2000 and a further 
$28 billion in the decade to 2010. With these growth performances it could be expected that 
the average per capita incomes in TREDA could almost triple from around $1,300 at present to 
$3,600 by 2010.
It is possible that the region could grow much faster than this if Governments were able to 
quickly bring about the improvements in investment climate and attract investment for 
infrastructure and industry. Growth rates as high as 20% per year could be achieved if it were 
possible to attract around $17 billion in total investment by the year 2000. Assuming a more 
conservative investment capital to output ratio of 3, such investment levels could lead to a 
doubling of GDP per capita by the year 2000.
It is clear that the level of growth will be largely dependent on the investment that can be 
attracted to the region from both the public sector and the private sector. Governments have 
already agreed to the principle of joint investment in the major infrastructure projects and will 
provide clear indications of budgetary allocations as soon as final Governmental approval is 
given to the institutional arrangements for on-going support of TRADP.
In addition to this financial benefit, there are other benefits that are expected such as 
improvements in welfare and conservation of environmental attributes of the region. These 
benefits are obviously of extreme importance but they are very difficult to assess and almost 
impossible to quantify.
The Growth Projections for TREDA shown below represent conservative estimates of likely 
performance.
TABLES 1 & 2
 

SUMMARY AND ACTION PLAN

This section is presented as a summary of the report 
and includes a re-statement of the specific action 
planned by the participating Governments.




THE DEVELOPMENT OPPORTUNITY
The Tumen River Economic Development Area (TREDA) and its hinterland in North East Asia 
has an enormous development potential. This potential reflects the region’s strong resource 
base and its favourable geographical position providing the opportunity to link the region’s 
productive capacity to growing markets through a new gateway to the Pacific Rim. In the past, 
development was limited by the political, economic and physical barriers that separated the 
countries and the people of the region. This is now changing rapidly. The Governments have 
already commenced the process of removing those barriers and development is gathering 
pace. By collaborating in TRADP they have created an opportunity to accelerate the 
development process by working cooperatively to continue to remove the barriers and to make 
full use of the region’s resource potential.
THE CHOSEN DEVELOPMENT STRATEGY
The five Governments participating in TRADP have agreed that development in TREDA and 
NE Asia should be based on an economically and ecologically sustainable exploitation of the 
combined comparative advantages of the region. This will lead to much closer integration of 
the economies in the region and will generate economic and social benefits through 
specialization and economies of scale. It will also enable additional benefits to be gained in the 
region through the capture of transit trade and through joint action to protect the environment.
The Governments have agreed on a broad strategy to achieve this development as indicated 
in the box below.

The strategy is to collaborate and co-operate both bi-
laterally and multi-laterally to create a social and 
business climate throughout the region that 
encourages economically and environmentally 
sustainable development and facilitates trade as a 
means to improving the welfare of the people in the 
region.




To implement this strategy Governments have agreed to continue efforts to remove the 
remaining barriers to trade and to reduce the risks perceived by potential investors. They are 
encouraging their local administrators to cooperate with counterparts across national borders 
to formulate plans that enable sustainable management of the joint resources of the region.
THE AGREED APPROACH TO IMPLEMENTATION
The Governments have decided to create a favourable business and social climate in the 
region through a process of "progressive harmonization" of the business and social climate 
coupled with strategic (demand-driven) improvements to the infrastructure servicing the region. 
The progressive harmonization aspect of this approach recognizes that whilst all Governments 
are equally committed to the same goal, they may vary in the way and the pace they wish to 
achieve it. For some Governments the policy changes needed are already underway, for 
others they are just starting.
The strategic (demand-driven) approach to infrastructure improvement recognizes the fact that 
transport services need to be improved progressively since Governments will need outside 
investment and that can only be attracted on the basis of the return that each investment can 
provide. The Governments plan to make significant improvements simply by making better use 
of the existing infrastructure and removing critical bottlenecks. Such improvements will provide 
a low-cost means to reduce the immediate transport constraints. Subsequently, Governments 
plan to implement new projects to improve services as the demand for them increases.
The Governments’ agreed approach has two elements: trade and investment facilitation and 
infrastructure development. In relation to trade and investment, the approach recognizes the 
longer term benefits of harmonization as well as the implementation difficulties of achieving 
harmonization quickly. It aims to move towards a "harmonized" business environment 
throughout the region at a pace that is acceptable to all Governments but which recognizes 
that some will “harmonize” more rapidly than others. Hence, while it will lead to "balanced" 
development over time, in the short run Governments should accept that development and 
resource allocation will reflect both comparative advantage and the attractiveness of the 
business climate in any one location.
In relation to infrastructure development, the Governments are developing and reaching 
agreement on indicative plans coupled with procedures that encourage joint planning and joint 
financing of the shared infrastructure.
The following two sections provide an outline of the undertakings the Governments have made 
to implement this broad strategy and to support sectoral development.
THE ACTION PLAN TO IMPLEMENT THE BROAD STRATEGY
Governments plan to implement the broad strategy by taking action to:
    	Create the desired "enabling" business and social climate or environment;
    	Improve the services available to businesses and to the people;
    	Facilitate the expansion of trade;
    	Attract new investment and technology and improve access to markets.
The proposed action is outlined below.
Creating the Enabling Environment
Government Commitment and Institutional Arrangements
The Governments are committed to a common and sound development strategy as indicated 
by their actions in:
    	Agreeing to the strategy, the goal and to the vision for development and by designating 
appropriate authority, responsibilities and budget to agencies to commence 
implementation;
    	Reviewing the proposed International Agreements on the Commission and Committee, 
agreeing on how they will function and be financed and by approving their 
establishment;
    	Making a commitment to provide financial support for the phased establishment of an 
implementing executive agency;
    	Designating appropriate people to continue to develop policy recommendations and 
action plans for: Regional Development Strategy; Trade, Industry and Investment; 
Environmental Planning; Infrastructure Planning; Telecommunications Planning; and 
Tourism.
The Governments will be provided with some technical and/or financial assistance from 
external agencies to assist them implement action on the last two items.
Environmental Planning
The Governments have a clear, common policy concerning environmental management in the 
region and intend to negotiate with each other to ensure that development does not adversely 
affect the environment and is environmentally sustainable. This is evident from Governments 
action in:
    	Reviewing, modifying as agreed, and endorsing the "Memorandum of Understanding 
on Environmental Priorities" (MOU) and reaching agreement on the appropriate 
procedures and institutions to implement the agreed MOU including procedural and 
financial provisions for on-going investigations, planning and monitoring of the 
environment in the region;
    	Enabling the Riparian Governments to meet to reach agreement on the form, scope 
and work plan for a Regional Environmental Management Plan as recommended in the 
Preliminary Environmental Study.
The Governments will be provided with some technical and/or financial assistance from 
external agencies to assist them implement action on these items.
Improving Services
Infrastructure Development
Investors, business people and the general public in the region need to have an improved 
regional infrastructure providing services that are competitive with those available elsewhere. 
Governments plan to obtain external investment to help fund infrastructure improvements. To 
encourage such investment, Governments will make available thorough regional assessments 
of needs and estimates of technical, economic, environmental, social and financial feasibility. 
Governments will give priority to those projects that will give the highest returns to the region 
overall. In the transport and telecommunications sectors, Governments are presently reaching 
agreement on an indicative plan as a basis for setting priorities. In the power sector, 
Governments are considering the scope for joint power generation.
The participating Governments are seeking to attract investors and thus improve services by:
    	Reviewing, modifying as agreed, and endorsing the recommendations in the 
Conceptual Infrastructure Masterplan for TREDA;
    	Participating in and contributing to the studies needed to obtain additional finance for 
the construction of TREDA infrastructure and inter-connections;
    	Determining their common policy to joint infrastructure development schemes such as a 
joint power generation and distribution scheme and joint water supply schemes;
    	Reviewing and agreeing on preferred arrangements for telecommunications 
development.
The Governments will be provided with some technical and/or financial assistance from 
external agencies to assist them implement action on the last three items.
Facilitating Trade
The participating Governments are identifying those policies and regulations that are 
discouraging trade and investment and have undertaken to negotiate with each other to agree 
on changes in these regulations over an agreed time period.
They plan to implement these measure to expand trade by:
    	Establishing a Trade Facilitation Group to deal with trade issues.
Streamlining Customs and Visa Issue
The Governments are investigating opportunities to allow business people to travel freely in 
the region and to send and receive goods and services across the borders with minimal effort, 
cost and delay. They are also discussing the arrangements needed to facilitate bonded transit 
corridors, joint customs, standardized inspection and documentation procedures and many 
other such measures.
To help implement these measures, Governments are:
    	Establishing a Working Group to review customs and visa issue procedures and they 
are negotiating simplified border crossing and visa issue procedures and a timetable for 
their introduction.
Encouraging Exchange of Information
The participating Governments are seeking to increase the inter-change of information 
amongst business groups and trade associations in the region. This action is based on the 
judgement that trade within the region would be greater if there were greater knowledge of the 
resources, markets and the laws and regulations that govern business in neighbouring sub-
regions.
Governments are committed to:
    	Encouraging the exchange of information concerning the resources and markets 
available and the laws and regulations that govern business in neighbouring sub-
regions.
Rationalizing Pricing and Incentives
The Governments recognize that trade between the sub-regions and with international markets 
will be distorted and will not be sustained if it is not based on real (market-determined) prices 
for goods and services. Similarly, Governments are aware that trade can also be distorted and 
the total value of trade reduced by incentive schemes if these are not carefully designed. 
Governments are planning to establish a forum to discuss such issues so that each country is 
aware of possible changes in the pricing arrangements for goods and services in neighbouring 
sub-regions.
The Governments plan to progressively rationalize prices and to avoid negative impact of 
incentive schemes by:
    	Removing price controls, quotas, and import or export restrictions and eliminating barter 
trade as quickly as is practical;
    	Reviewing the impact of incentive schemes to particular industries or to exporters to 
make these "contestable" and to ensure that only the most efficient receive the 
incentives.
Attracting Investment and Technology and Improving Market Access
Although the region has a comparative advantage as a result of its position, its resources and 
its complementarities, it requires access to outside capital, technology and wider markets to 
turn this into a competitive advantage. Governments plan to assist efforts to access these 
resources in three ways as indicated below.
Building Investor Confidence and Reducing Risks
Governments are committed to helping minimize investment risks to boost investor confidence. 
Some of the risk may best be removed on an individual country basis; some will require bi-
lateral action; and others will require multi-lateral action. In this later area, the joint commitment 
to the International Agreements will provide the foundation. It will also establish an agency 
whose functions will include investment promotion and inter alia building of investor 
confidence.
The participating Governments will further help build investor confidence by:
    	Committing their own funds to providing part of the infrastructure and support services;
    	Ensuring that representatives from the region are actively involved in the examination 
of the feasibility of joint (multilateral and bilateral) projects and that they reach 
agreement on the roles and responsibilities of all parties in the project;
    	Closely monitoring the development efforts of private groups and assisting in whatever 
ways possible, particularly in the early stages. (The most persuasive argument from an 
investor’s perspective will be the proven performance of similar development initiatives 
in the region);
    	Investigating a range of other measures to reduce the risks to outside investors.
The Governments will be provided with some technical and/or financial assistance from 
external agencies to assist them implement action on item 19.
Promoting Investment
Governments are taking steps to make it easier for investors to invest in TREDA. One of the 
proposed measures will create TREDA Investment Promotion Centre (TIPC) which is planned 
to comprise branches in Rajin, Hunchun and Vladivostok and local offices in Chongjin, Yanji 
and Nakhodka or Zarubino. The TIPC will be assisted under Phase 2 of TRADP and will 
streamline the process that investors need to go through to make investments in TREDA.
Under Phase 2 of TRADP, the participating Governments will be assisted in making full use of 
the various forms of assistance for investment promotion available from the relevant UN 
agencies, and in particular, from UNIDO.
Facilitating Financing Arrangements
Development will require large amounts of capital: even with modest growth we estimate that 
investment requirements will exceed US$6 billion in the period to 2000 and perhaps US$30 to 
40 billion in the period 2000 to 2010. The Governments plan that at least half of the investment 
should come from the private sector. Governments accept the need to fund part of the balance 
from within their own budgets, and to attract the rest from multilateral development banks and 
bi-lateral donors. Governments will help attract these sources of finance by:
    	Undertaking to prepare comprehensive feasibility studies that meet the requirements of 
the various potential lenders including Official Development Assistance (ODA) 
agencies;
    	Directing the implementing agency established under the International Agreements for 
the implementation of TRADP to investigate the scope for linking ODA so as to support 
investment in projects extending across national boundaries.
ACTION REQUIRED TO IMPLEMENT THE SECTOR STRATEGIES
In addition to action to implement the broad development strategy as outlined above, the 
participating Governments plan to take action to encourage the development of those sectors 
of their economies that offer actual or potential comparative advantages. In contrast to the 
broad strategy, these actions will need to be taken by individual countries or regions, however, 
their impact will be felt throughout the region to the benefit of all.
Primary Industry Development
The riparian Governments plan to foster the development of the forest sector by:
    	Reviewing the recommendations of the report on "Project Development and 
Environmental Strategy for the Forest Sector" in relation to timber harvesting, 
plantations and downstream processing and deciding the degree of integration of the 
industry that they judge desirable between the three countries;
    	Reviewing and implementing as agreed the recommendations of the Environmental 
and Forest Strategy in conjunction with decisions on environmental planning.
The Governments in the region plan to manage the fishery in a manner that allows sustainable 
harvests. To develop the appropriate management plans.
Governments of RF and DPRK plan to discuss measures to protect the fisheries resources 
and to examine scope for improved marketing.
Mining
Governments are encouraging private sector investors interested in the mineral developments 
to participate in rail development throughout the region. They are also considering joint 
approaches to the multilateral development banks for assistance with funding of transport links 
in association with major private sector partners. Planning for development of such links will be 
coordinated with the development of mining activities which provide the economic justification 
for their development.
Secondary Industry Development
The participating Governments’ basic strategy for secondary industry will be to exploit the 
comparative advantage that the region offers in terms of relatively low labour costs and good 
access to raw materials. Government’s role in this strategy will be minimal and will concentrate 
on getting the fundamentals right as outlined in the broad strategy. However, the few specific 
actions that Governments are considering to assist the development of the sector are:
    	Encouraging modernization of supporting heavy industries such as steel, chemicals, 
plastics etc. through joint ventures or other technology transfer options with the result 
that labour-intensive light industries will have improved access to intermediate goods 
and equipment;
    	Accelerating the reform of markets within their domestic economies for goods which are 
still subject to significant price controls;
    	Progressively removing technology transfer restrictions that might inhibit the 
development of high-technology industries.
Tertiary Sector Development
The tertiary sector has received relatively little attention to date but has considerable potential 
for growth. Government’s role in assisting such growth will be minimal although there may be 
some specific contributions that could be made to assist tourism, particularly by joint 
promotional efforts. Overall, Governments will contribute by:

    	Avoiding excessive regulation of the industry and by helping promote foreign or 
domestic firms planning to provide tertiary services into the region.
Indicative Benefits
The participating Governments anticipate that the regional GDP for TREDA will grow at an 
average of 8% per year over the period to 2000 and perhaps at 16% in the decade to 2010 
given the high level of commitment that Governments are making to the development of the 
region. They anticipate that the proposed development strategy will enable them to conserve 
the environmental values of the region and to provide the basis for sustainable long term 
development.

ACRONYMS AND ABBREVIATIONS
ADB		Asian Development Bank
DPRK		Democratic People’s Republic of Korea
EC		European Community
FDI		Foreign Direct Investment
GATT		General Agreement on Tariffs and Trade
GDP		Gross Domestic Product
GEF		Global Environment Fund
ICOR		Investment Capital to Output Ratio
IFC		International Finance Corporation
ITC		International Trade Centre
MOU		Memorandum of Understanding
NEA		North East Asia
ODA		Official Development Assistance
PMC 		Programme Management Committee
PRC		People’s Republic of China
RDS		Regional Development Strategy
RF		Russia Federation
ROK		Republic of Korea
TRADP	Tumen River Area Development Programme
TREDA	Tumen River Economic Development Area
UNCTAD	United Nations Conference on Trade and Development
UNDP		United Nations Development Programme
UNIDO	United Nations Industrial Development Organization

ACKNOWLEDGEMENTS
This Final Report is one of the products of an intensive effort involving a great many people. 
The major contributors to the report have been the members of the National Teams who 
participated in the Beijing Workshop and provided their valued inputs to the study at various 
stages. The contributions made by the National Team representatives were outstanding and 
went far beyond the written word because it was through those contributions that 
understanding and cooperation amongst the participants continues to grow. Special mention is 
warranted to those who participated in the field visit and workshop including Mesdames Liu 
Jing Sheng of PRC and Hwang Ran of DPRK and to Messrs Ick Soo Kim of ROK, Vladimir 
Stegniy and Ioury Kochevoi of Russian Federation. In addition to the contributions of the 
National Teams, we benefited immensely from the time and effort made by other 
representatives of Governments and private sector organizations who not only provided us 
with as much information as was available but also extended a very generous level of 
hospitality.
The Team received excellent support from the TRADP Secretariat, from the Office for Project 
Services and from the Regional Bureau for Asia and the Pacific. In addition, the support 
provided by the Resident Representatives of UNDP were invaluable. Special mention needs to 
be made of the support and assistance provided by Dr. Ian Davies, the Country Director for 
UNIDO in China since without his detailed knowledge and field support it would have proved 
very difficult to operate.
We also benefited greatly from the contributions of the various consultants both at the 
Workshops and in the field.
On behalf of the members of the PDP Australia team we gratefully acknowledge the 
outstanding assistance and cooperation provided and the warm hospitality extended to us.
	G. B. Hayes
	Team Leader
	PDP Australia Pty Ltd


TABLES, CHARTS & GRAPHS

	TABLE 1



Rajin-
Sonbong
Yanbian
South 
Primorsky
Population (million)
  2000
  2010

0.32
0.84

2.87
3.85

1.43
2.33
Gross Value of 
Output
per person (US $)
  1994
  2000
  2010


400
710
1,400


640
1,140
2,240


2,760
3,100
5,060
Gross Value of 
Output
(billion US $)
  1994
  2000
  2010


0.06
0.23
1.17


1.40
3.26
8.61


3.30
4.44
11.80



	TABLE 2


Rajin-
Sonbong
Yanbian
South 
Primorsky
Population (million)
  2000
  2010

0.15
0.24

2.55
4.16

1.43
2.33
Gross Value of 
Output
per person (US $)
  1994
  2000
  2010


400
425
700


640
860
2,230


2,760
2,930
4,765
Gross Value of 
Output
(billion US $)
  1994
  2000
  2010


0.06
0.06
10.17


1.40
2.19
9.27


3.30
3.30
7.23


Chart indicating Growth of Trade in Region (Million of Yuan)
 

“A Regional Development Strategy for the Tumen River Economic Development Area”. Preliminary Draft Report. April 22, 1994. PDP Australia Pty Ltd These studies have been reported separately and include: UNIDO: Tumen River Economic Development Area (TREDA) Industry Sector Profile, Development Opportunities and Constraints. NC/RAS/92/038 Informal Report of the Workshop on TREDA Regional Development Strategy Conceptual Infrastructure Masterplan for the Tumen River Economic Development Area (TREDA). Interim Report CPCS Ltd. Tumen River Area Development Project. Preliminary Environmental Study. Draft Chinese Research Academy for Environmental Sciences. May 1994 Tumen River Area Development Project. Preliminary Environmental Study. Draft Chinese Research Academy for Environmental Sciences. May 1994 Peter Reiter, Water Resources Adviser, TRADP. Personal Communication. See also the report “Water Resources Definitional Tasks” January, 1994. See “Preliminary Environmental Study” See “Project Development and Environmental Strategy for the Forest Sector” Jaakko Poyry My 1994. See the “TRADP Tourism Study” Draft Intermediary Report April 1994. See Interim Report “Conceptual Infrastructure Masterplan Tumen River Economic Development Area” CPCS Ltd May 1994. These estimates are extremely crude since the RDS team has no access to reliable measures of regional GDP, population projections or Input Capital to Output Ratios (ICOR).

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