North Korea Encourages Investment in Rajin-Sonbong (Rason) Economic and Trade Zone

Institute for Far Eastern Studies (IFES)
2011-9-14

At the seventh China Jilin and Northeast Asia Investment and Trade Expo (NEASIAEXPO), the North Korean delegation actively promoted the Rajin-Sonbong (Rajin) Economic and Trade Zone to attract investment.

During the expo, the DPRK’s Ministry of Trade and China’s Ministry of Commerce and People’s Government of Jilin Province co-sponsored the “(North) Korean Business Day and China-DPRK Trade and Investment Session” at the Changchun International Conference and Exhibition Center on September 7. Hwang Chol-nam, the vice mayor of Rason City, briefed the attendees on the current situation, advantages, and special benefits of his city.

According to Hwang, “The spacious 470 square-kilometer Rason Economic and Trade Zone is one of the largest economic trade zones,” and advertised the geographic and economic advantages of Rason as the “transportation hub of Northeast Asia that connects China and Russia via Tumen River and with Japan across the East Sea.”

He also introduced the three ports in the region. “Rajin Port is equipped with the annual loading capacity of 3 million ton and Sonbong Harbor is able to transport 2 to 3 million ton of oil while Ungsang Harbor is able to handle up to 600,000 cubic-meter of lumber annually.” He also boasted the ports to be deep enough where it does not freeze during the winter.

Rason was also introduced to have received the “special city” designation in 2010 and will grow to have a population of one million. The recently amended “Law on the Rason Economic and Trade Zone” was revised and supplement with over 50 articles.

Hwang also elaborated on the eight preferential policies providing special tax benefits to foreign investors. He asserted, “The government of North Korea will guarantee the investment of the foreign investors by not nationalizing or demanding requisitions. For inevitable cases where such demands occur, proper compensation will be provided.”

The income tax is also at 14 percent, which is 11 percent lower than other areas in North Korea. For companies with business plans over ten years, foreign capital companies will receive three years of tax-free benefit starting from the profit earning year and two years thereon after will receive 50 percent tax-free benefits. According to Hwang, over 100 foreign companies and offices are operating businesses currently in the special economic zone.

He also announced that the current highway construction project connecting Rajin with Wonjung is expected to be completed in October, and that the Tumen-Rajin port railway system is to be upgraded to a broad gauge railway next month.

Specifically, Russian Railways reached an agreement with North Korea to repair the Hasan-Rajin Railway and improve the Rajin port facilities, especially focusing on Pier 3. The plans include upgrading Rajin as a container harbor to be capable of transporting twenty-foot equivalent units annually. Russia and the DPRK have already conducted measurement and geological surveys and reached the process design phase.

However, Seo Gil-bok, the DPRK’s vice minister of commerce, stated in a speech that North Korea would “actively work hard to make the Rason region a successful collaboration between the DPRK and China,” saying further that they would “pull out all the stops to realize the goals agreed by the best leaders from both nations.”

Many foreign media and correspondents were present at the event to cover the “Korean Business Day.” At the event, North Korea actively promoted the Rason Economic and Trade Zone by also presenting a promotional video of the zone.

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