A lonely farmer and his ox-cart are the only sign of activity on a dusty island meant to be an industrial hub that will raise North Korea’s wrecked economy.

Despite talk of reform by the secretive state after the third generation of the Kim family dynasty took over nearly a year ago, about all that seems to be growing is the gap between the tiny population of rich and the already malnourished poor.

And while the government is hoping to lure in foreign investment, more often the money, and tens of thousands of workers, are heading out of the impoverished North. The 14km2 Hwanggumphyong island is one of four economic zones that were designed to be a magnet for Chinese capital and manufacturing.

It lies on the Yalu river, across from the bustling Chinese border city of Dandong and one of the few areas where North Korea allows its citizens contact with the outside world. Chinese investors are showing little appetite for North Korea, whose economy is worse off than it was 20 years ago from a combination of sanctions over its nuclear weapons ambitions, famine and mismanagement.

“We Chinese would like to go to North Korea to invest because they have space for business. But policies are not stable, so we dare not invest there,” said trader Zheng Qiwei from the Chinese province of Zhejiang, far from North Korea.

Zheng said an acquaintance of his, a businessman from China’s Liaoning province that borders the North, had invested 240 million yuan (R333.7m) to sell machinery, but was “driven out”, an experience that is becoming common.

This year, a multimillion-dollar deal to refine North Korean iron ore by China’s Xiyang Group soured as officials shook down the Chinese investor. Xiyang went public with its complaints, triggering a furious response from the North.

The Hwanggumphyong economic zone was launched with great fanfare by Jang Song-thaek, the uncle of North Korea’s 20-something year old ruler, in 2011 with a pledge of tax breaks and repatriation of dividends, hoping to emulate a formula that has worked for economic zones the world over.

Many analysts say the North Korean leadership is terrified that reforms could weaken its iron grip on the state and it has repeatedly baulked at any sweeping changes, ignoring pressure from China, its only real ally, to emerge from a self-imposed cocoon.

China’s leverage is limited and its fear that North Korea could collapse appears to make it willing, albeit begrudgingly, to support the government of leader Kim Jong-un.

Any improvement in living standards looks to be entirely focused on the capital, Pyongyang, home to the elite.

North Korea restricts travel within the country and the authorities make it extremely difficult for any but the chosen to live in the capital. The rise in the standard of living in Pyongyang may also have something to do with the more open style of the young leader Kim, a far cry from the dour image his father cultivated. – Ju-min Park China from Reuters