North Korea Opening
North Korea decided to allow foreign capital to make investment in North Korean companies that will conduct business activities in its Rajin-Sonbong Special Economic Zone, and disclosed the companies and their business projects. Moreover, North Korea will intensively push forward with the General Rajin-Sonbong Economic and Trade Zone Development Plan, including developing the zone into the center of its Meeting, Incentive Trip, Convention, Exhibition & Event (MICE) industry.
On Nov. 18, “My Country,” an external propaganda website of North Korea, released about 50 laws and regulations about investment in the economic and trade zone, alongside detailed plans in seven sectors – tourist attraction development, industrial district development, investment in companies, investment projects, tax policies, investment policies and enterprise establishment processes.
Prior to this, North Korea announced some regulations regarding the Rajin-Sonbong Special Economic Zone, such as investment policies and taxation. This is the first time for North Korea to make public a general development plan that includes tourism and logistics. The General Rajin-Sonbong Economic and Trade Zone Development Plan calls for the development of ten tourist attractions, including the Shinha International Conference District and the Bipa Island Ecosystem Tourism District.
Industrial complexes will include the Rajin Port Logistics District and the Sinheung Light industry District. Notably, the Rajin Port Logistics District draws much attention, since the district is related to the Rajin-Hasan project pursued by South Korea as a joint logistics project among South and North Korea and Russia. What is more, the North Korean government announced that North Korea will receive overseas investment in eight North Korean companies or projects, in the form of joint investment or operation.
Some analysts say that North Korea’s decision to apply the market economy of capitalism such as free business activities for foreign capital and guarantees of profits, is to express its will to develop the Rajin-Sonbong Special Economic Zone into a Hong Kong-style model based on two systems in one country, and, at the same time, to signal a full-scale test for openness to the outside.
“North Korea has presented blueprints about the Rajin-Sonbong Special Economic Zone. But this is the first time to disclose detailed content that foreign investors want to know,” said Cho Bong-hyeon, a senior research fellow at the Economic Research Institute of the IBK in Seoul. “Particularly surprising are the development of tourism attractions and a list of companies waiting for foreign investment.”
“It seems that North Korea is developing the special economic zone with openness on its mind, taking into consideration the fact that North Korea is managing the zone as a special zone by fencing it,” he added. “I suppose that North Korea has a plan to grow the zone into an open trade city like Hong Kong or Singapore in the mid- to long-term.” Back in 1991, North Korea designated the Rajin-Sonbong area as a free economic and trade zone under the slogan of “building international trade, financial and tourism bases” in the area. But poor foreign investment has stalled the development of the area.
At the moment, North Korea has about 20 special economic zones designated the central government and local governments.