Supreme People’s Assembly adopts three EDZ-related regulations

Institute for Far Eastern Studies (IFES)

Coinciding with the promotion of the nation’s economic development zones (EDZs), North Korea has recently decided to adopt three new regulations, including the “Democratic People’s Republic of Korea’s Operation Regulation of Economic Development Zone Management,” which opens up high-level positions in management organizations to foreigners within the various EDZs around the nation.

The three new regulations, including the “DPRK Operation Regulation of EDZ Management,” “DPRK EDZ Establishment Regulation” and the “DPRK EDZ Company Establishment Operation Regulation” were obtained and reported by the Maeil Business Newspaper on November 4, 2014 and were said to be adopted by the Standing Committee of the Supreme People’s Assembly just two days later on November 6.

In May 2013, North Korea established the legislative basis for the creation of central-level EDZs (special economic zones, SEZs) and provincial-level economic development zones, and in October, the State Economic Development Board had its status elevated to the State Economic Development Committee and was given total control over business in EDZs. Then, on November 21, the Sinuiju Special Economic Zone (SEZ) was announced alongside thirteen other provincial-level EDZs. The following year, in June 2014, the Wonsan-Mt. Kumgang International Tourist Zone was announced, followed by the July announcement about the designation of six additional economic development zones, including the Unjong Cutting-Edge Technological Development Zone.

It appears that these three new EDZ-related regulations are specific internal regulations in order to better implement the “Law on Economic Development Zones.” According to the first new regulation, the establishment of EDZs will “coincide with the state’s economic development strategy” and will have their establishment agendas written by the “Central Special Economic Zone Guidance Agency.” EDZs are said to be “advantageous to overseas economic cooperation and exchange,” and it was stipulated that EDZs are to be established in “areas of concentrated population,” as well as in “certain remote areas.”

With regards to the regulation on the operation of management agencies in EDZs, it was reported that “management operation at EDZs will be conducted by the EDZ’s Management Operation Association or Management Office (hereafter Management Agency).” Specifically, the regulation states, “Members of the Management Agency may be a person from [the DPRK] or another country who has extensive business experience and who possesses expert knowledge in their field,” showing that foreigners may now be entrusted with high-level positions such as chairman in North Korea’s economic development zones.

Furthermore, it was decided that “foreign and/or domestic experts may be invited to work full time or part time in their appropriate department according to the needs of the Management Agency,” stipulating that foreign experts outside of EDZ managerial positions may also be invited.

In terms of the regulation on the establishment and operation of corporations in EDZs, it was decided that “foreign corporations, individuals, economic organizations and overseas Koreans may invest in EDZs and establish and operate companies through joint ventures or individually.” The regulation also states, “Investment and economic activities are limited only to those who give knowledge to and promote the nation’s safety, the health of the people, a wholesome, socially moral lifestyle and environmental protection, and are prohibited to those who are lagging behind in terms of economic technology.” Instead, the regulation promotes the establishment of companies in the “infrastructure construction and cutting-edge technology sectors,” and has clearly stated that they will receive preferential treatment in the form of tax cuts, favorable land use conditions and other benefits.

Additionally, while the regulation did say that “companies must primarily employ labor from [the DPRK],” it held the door open for foreigners by saying that “a portion of management personnel, specific types of occupational experts and technicians may be employed from other countries.” The regulation also set specific standards for penalties should a company create problems. Businesses caught operating without a business registration or license will face charges between ten and fifteen thousand Euro, businesses who fail to report changes in their company registration will face fines between two thousand and five thousand Euro, and business founders who are caught pocketing investment money without lawful justification will suffer fines between ten and twenty thousand Euro.

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