By Jeremy Laurence
RAJIN, North Korea (Reuters) - Destitute North Korea's push to breathe new life into economic relationships with its neighbors China and Russia appears to be bearing fruit in its far north of the country where foreigners are busy helping rebuild a crumbling infrastructure.
A top local official told reporters on Tuesday that China and Russia had invested heavily in the region in order to gain access to its three east coast ports in the towns of Rajin and Songbon, which are the main centers for the secretive North's Rason Special Economic Zone.
"Rason is situated well geographically, and provides favorable conditions for investment," the city's vice mayor Hwang Chol-nam said through an interpreter.
The ports would more than halve the distance Chinese firms needed to ferry goods from landlocked Yanji in Jilin province to the major industrial center of Dalian which is also a shipping hub for northeast China.
Impoverished and squeezed by international sanctions for conducting a series of nuclear and missile tests from 2006, North Korea has reached out to Moscow and Beijing for help to fill the gap left by the drying up of South Korean and the U.S. economic assistance.
Over the past 15 months leader Kim Jong-il, who in the past rarely traveled abroad, has visited China four times and last week made his first trip to Russia in nearly a decade. Kim's visits were mainly aimed at winning economic support, and have raised speculation he may finally be opening one of the world's most closed economies.
The North announced in June it would work with Beijing to make the Rason zone work, along a similar zone in the west at Hwanggumpyong island near the Chinese city of Dandong.
VISIT TO RASON
North Korean authorities this week escorted a group foreign journalists to the lush Rason area where they are hoping to secure foreign investment and raise much needed hard currency.
Over 100 Chinese bulldozers and diggers were seen working on a new mountain road connecting the Chinese border post of Jing Xin and the North Korean ports, while a new railway line linking the area with Russia is all but complete.
Hwang said that the North had also agreed in principle with a Chinese company to build a coal-fired power plant in the so-called Rason Special Economic Zone, where like the rest of North Korea, there is little power.
"We have finished all the feasibility studies," he told reporters visiting the area, adding he hoped construction on the new thermal plant would start next year. Asked the name of the Chinese company, he said: "It's a secret."
Hwang said the power plant would be coal-fired with a maximum capacity of 600,000 kilowatts.
"Power is the lifeline of industry, that is the first urgent problem for developing the Rason Economic Development Zone," he said, adding the zone had introduced new laws permitting international banking transactions, as well as tax incentives.
The North faces acute energy shortages, and in Songbin a massive thermal coal-fired plant lies idle, while oil refinery, complete with 30 massive tanks, sits derelict.
At night, Rajin is pitch black except for the few buildings with their own generators.
Russian engineers were seen working on the new rail line just outside of Songbon, about 20 km north of Rajin. "The Russians have constructed the railroad from the border city of Khasan to Rajin port, and they are finishing the project this year," he said, adding Russia has leased one of the ports.
The special economic zone near the border with Russia and China, was initially instigated in the early 1990s, but the project fell by the wayside due to lack of interest from foreign investors.
Hwang said the country's leader Kim Jong-il visited the area in 2009, and issued a directive to push ahead with the plan to promote international trade in cargo, and to develop the local fishing and tourism industries.
But even with the improved infrastructure, the twin ports still have a long way to go. A port meant for timber appeared to be in ruins, while the ports in the Songbon were rundown. Rusted and hole-ridden giant water pipes ran along another port near the derelict thermal power plant.
In the biggest port, Rajin, a 250-meter Russian transport vessel, named "Friendship," was moored with a trickle of smoke coming from its engines. It was unclear if it was operational.
None of the 15 giant cranes cargo were operating on the any of the three piers. A few fishing trawlers and small boats were tied to the piers, the longest of which measured about 500 meters.
Foreign experts say the North's plans to develop the port may just work given China's close involvement but doubt it will ever turn into major cargo hub.
Hwang said there had been considerable interest, mostly from Chinese and Russian companies, but also from Thai and Swiss investors. He said China's biggest cement manufacturer, Jilin Yatai (Group) Co. had agreed to build a factory with a 1 million tonne per year capacity. Textile companies from China and Taiwan have also expressed their interest.
Hwang also had his eyes on even bigger things -- shipbuilding, auto manufacture and the hi-tech industry.
"I think one year after the completion of infrastructure we will be at a high stage."
(Editing by David Chance and Jonathan Thatcher)