Economic Development Zones (2013) « North Korean Economy Watch

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Pyongyang Times: Tourism regulations in EDZ instituted

Monday, February 15th, 2016

According to the Pyongyang Times (2016-2-15):

Tourism regulations in EDZ instituted

The government has set new regulations to control tourism in the economic development zones.

Tourism regulations were adopted by decision No. 90 of the Presidium of the Supreme People’s Assembly on December 23 2015.

The regulations containing 32 articles in five chapters are applicable to EDZs established for tourism.

The DPRK citizens, overseas Koreans and foreigners can tour EDZs in various styles and methods including visit, sightseeing, vacation, amusement, sports, experiencing and medical treatment.

Personal safety, human rights and property of tourists in EDZs are protected by the law of the DPRK.

Management of tourism is undertaken by the managing authorities of EDZs.

The zones encourage planned development and protection of tourism resources such as scenic attractions, historic relics and remains and natural monuments.

Investors can invest, establish and run businesses in such fields of travel, lodging, restaurant, amusement, welfare services, production and sale of souvenirs and development of tourism resources in the zones with the approval of the management authorities of EDZs.

In case of establishing a travel company in the zones, license of the central tourism guidance organ should be gained through the management authorities. After receiving the license, the travel company should register its business with the management authorities and receive business registration certificate.

When an investor wants to set up and run a tourism service business in EDZs, he or she should obtain the approval of the management authorities following relevant regulations.

Tourists who want to travel EDZs should apply for tourism directly or via local and foreign travel companies outside relevant EDZs.

Anyone, who did any harm to personal safety, health and property of tourists, failed to provide proper service obliged by contracts, destroyed tourism resources or caused any damage to businesses and individuals, bears such civil liabilities as to restore them to their original state, or pay compensation, penalty and arrears.

Posted in DPRK Policies, Economic Development Zones (2013), Economic Development Zones (2014), Economic Development Zones (2015), Special Economic Zones, Special Economic Zones (Established before 2013), Tourism | Comments Closed

Labour regulations in EDZ modified

Wednesday, February 3rd, 2016

According to the Pyongyang Times (2016-2-3):

The DPRK has modified its labour regulations for the economic development zones, which were worked out according to a decision of the Presidium of the Supreme People’s Assembly on December 12 2013.

According to them, a foreign investment business is encouraged to employ local manpower as much as possible but it may hire foreign management staff, specialists and technicians.

The fixed monthly minimum wage is set by the central agency for the special economic zones guidance in consultation with relevant provincial-level people’s committees and EDZ management agencies.

An employee is supposed to work 8 hours a day or 48 hours a week on average.

A business shall make sure that employees take rests on local holidays and Sundays.

The forms of payment to the employees involve wage, incentives and bonuses.

According to the quality and amount of work, payment should be done correctly and employees who have carried out the same amount of work are to be paid evenly on an equal footing irrespective of gender and age.

The monthly wage is up to a business. In this case, it cannot be set lower than the fixed minimum wage.

While making preparations to start operation, a business may set the salary for employees, apprentices and unskilled hands within the scope of over 70 per cent of the fixed minimum wage.

A business shall pay for its employees’ regular and supplementary leaves in accordance with the number of their days off.

Female staff on maternity leave shall be paid over 60 per cent of the leave allowances.

If a business works an employee while on leave, it shall pay him or her the equivalent of 100 per cent of the wage per day or hour, as well as their leave allowances.

A business shall give supplementary living allowances that account for over 60 per cent of their wages per day or hour to those who are under training or out of work due to the management.

When it works an employee late at night or overtime, the business shall pay him or her 150 per cent of the wage per day or hour.

If the work is done overtime late at night, 200 per cent of the wage per day or hour shall be given to the worker.

If a business works an employee on holidays or Sundays without compensatory days off, it should pay 200 per cent of the wage per day or hour.

The wage is given in cash, and the bonuses and incentives may be paid in the form of notes or goods.

The DPRK citizens and their families in the EDZ are to benefit from the social and cultural policies of the government, namely free education and medical service, social insurance and social security.

If any breach causes damages to the lives, health and properties of a business or employee, it shall be restored to their original state or compensated duly for the damages.

By Cha Myong Chol PT

Posted in Economic Development Zones (2013), Economic Development Zones (2014), Labor conditions/wages, Special Economic Zones | Comments Closed

Sinuiju International Economic Zone

Tuesday, December 1st, 2015

No sooner do I publish an article on the Sinuiju International Economic Zone (read it here at 38 North) than the DPRK releases more information on it.

In the December issue of Foreign Trade (2015 No.4), the DPRK includes information on the zone, including this map:

UPDATE: Dr. Haggard uploaded a nicer version of the image which you can see here.

The map indicates that the downtown area of Sinuiju and the western coast down to the new Amnok River Bridge will constitute the first phase of development. Space has been allocated for trade, industry, sewage, warehousing, and other designated areas. The map also indicates a new road is to be built linking the Wihwado Economic Zone (to the north east of the Sinuiju SEZ) with the new Yalu River Bridge (which has yet to be opened for business) and Ryongchon County.

Here is a satellite image of the specific areas being designated for the first phase of the zone with proposed roads added for visual effect:

This is what the article had to say about the zone:

Sinuiju International Economic Zone

Located in a border area, the zone has a bright prospect for the development of water and marine transport. Its development area is 40km^2.

The Zone is a flat area composed of deposits of organic fine sand in the mouth of the Amnok. The average height of ground inside the bank is 45m, geomorphology is 0-.7% and the average height above the sea level is up to 100m.

Its annual average duration of sunshine 2,427 hours, annual percentage of sunshine is 58% and annual average precipitation is 1001.5 mm.

The first and second annual main winds are northeast and and north winds respectively. It has the northeast and north winds in winter and southwest wind in summer in the main.

The Sinuiju International Economic Zone will provide opportunity for bonded processing, bonded transportation, trade and financial business, tourism, hi-tech industry, and various other business activities.

To this end, it is planned to develop the zone into a comprehensive economic zone with a large-sized latest IT industry area, competitive production area, exports processing area, cargo area, trade and financial area, public service area, tourist area and a bonded port, and into an international city with an airport and trade port.

Encompassing the whole of Sinuiju and two ri surrounding it, the zone is already furnished with infrastructure. However, it is necessary to upgrade the existing infrastructure and expand its capacity and build in its suburbs on a preferential basis.

The items of the construction of infrastructure include port, airport, railways, roads, power station, heating, and gas-supply system, telecommunications (international, domestic, mobile and computer network), and water supply, sewage-treating and garbage disposing systems.

As the zone has rich and good workforce whose education level is higher than secondary education, and many competitive heavy- and light-industry factories and enterprises around it, the investment by foreign business will be cost-effective and conducive to its development.

Previous posts on the Sinuiju International Economic Zone can be found here. Previous posts on the Sinuiju Special Administrative Region can be found here.

The North Koreans have also set up the Sinuiju-River Amnok Tourist Zone which you can read about here.

The JoongAng Ilbo has additional information here.

Posted in China, Economic reform, Foreign direct investment, Sinuiju International Economic Zone, Sinuiju Special Administrative Region | 1 Comment »

New report on North Korea’s Special Economic Zones

Tuesday, November 24th, 2015

By Benjamin Katzeff Silberstein

Curtis Melvin and Andray Abrahamian have published a new report on the progress (and lack thereof) of North Korea’s Special Economic Zones. Overall, the message seems to be that things aren’t exactly proceeding smoothly. One of the main impediments is still that North Korea’s institutional environment isn’t showing signs of improving much. But not all hope is lost. Particularly on the local level, there seem to be a strong ambition to make the zones work:

Overall, although the Kim regime may be promoting special economic zones as a key piece of its economic development strategy, there is still a long way to go to make these zones successful. Certainly, the North’s strained political relations bring about serious financial and reputational challenges to attracting foreign investment; however, it is not the only impediment to success.

Inconsistent and unreliable communication about plans for the zones and a lack of strategic planning for attracting either domestic or international investment reflect limitations of the North’s domestic economic policymaking capacity. Despite these structural challenges, localized efforts are underway to try to make individual zones work. For instance, teams from Wonsan and Unjong have begun experimenting with outreach and marketing. They are also trying to create more comprehensive development plans and organizations. Around Sinuiju, there are at least two significant construction projects well underway, reflecting a desire for cross-border cooperation in that region.

The unfinished new Yalu Bridge, however, stands as a reminder that the success of most of these zones depends heavily on the DPRK’s relations with its neighbors. In particular, Wonsan and Rason eagerly await better days. Until they arrive, Rason will continue to putter along; domestic capital and visitors may have only a small impact on the Wonsan area; and smaller projects, like the newly announced Kyongwon Economic Zone, will likely remain largely undeveloped for the foreseeable future.

Read the full report here:
North Korea’s Special Economic Zones: Plans vs. Progress
11-24-2015
Andray Abrahamian and Curtis Melvin
38North

Posted in Economic Development Zones (2013), Special Economic Zones | Comments Closed

DPRK announces new EDZ (SEZ) regulations

Sunday, November 15th, 2015

According to the Pyongyang Times:

Regulations on tax in EDZ worked out

Regulations on Tax in Economic Development Zones have been published pursuant to the August 19 decree of the Presidium of the Supreme People’s Assembly.

The regulations have 11 chapters and 72 articles.

According to them, they are applicable to foreign-invested businesses, foreign individuals and overseas Koreans that conduct business transactions or earn income in EDZs, and tax supervision in the zones will be conducted by relevant taxation institutions under the guidance of the central taxation organ.

Enterprise income tax rate is 14 per cent of the net profits, or 10 per cent in case of the priority sectors.

Tax rate on remuneration will be 5 to 30 per cent of the amount of income, if the monthly amount of income is higher than 500 euros, and that on the income from donation 2-15 per cent if the amount of income is greater than 5 000 euros.

Property tax rate is 1 per cent on buildings and 1.4 per cent on vessels and planes, and the property owner is required to submit the application for registration of property to taxation institutions within 20 days of property ownership and register the property.

Individuals who have inherited properties in EDZs and residents in EDZs who inherited properties outside EDZs are bound to pay inheritance tax and the rate is 6 to 30 per cent.

Turnover tax rate is 1-15 per cent of the sales proceeds of products or income from construction work guidance and 16 to 50 per cent in case of defined luxury articles.

Service tax rate is 1-10 per cent, and up to 50 per cent tax rate is applied to special entertainment category, but it is reduced by 50 per cent for businesses engaged in the latest science and technology service sector.

Resource tax rate varies from 1 to 20 per cent according to its kinds and it may be exempted in case the resources are exported in the form of processed products with high value based on modernized technological processes, or sold to local institutions, businesses and organizations by government measures.

It may be reduced by 50 per cent in case the businesses engaged in the special priority sector uses underground water for production.

City management tax rate is 1 per cent and businesses and individuals must pay vehicle taxes on the use of cars and other road vehicles.

Read the full story here:
Regulations on tax in EDZ worked out
Pyongyang Times
2015-11-15

Posted in Economic Development Zones (2013), Economic Development Zones (2014), Economic Development Zones (2015), Fiscal & monetary policy, Special Economic Zones | Comments Closed

Naenara reports on Wonsan SEZs

Wednesday, October 7th, 2015

Naenara carried an interview with Choe Yong Dok, Director of the Economic Zone Development of Kangwon Provincial People’s Committee.

In the interview, Director Choe commented on the Wonsan-Mt. Kumgang International Tourist Zone and the Hyondong Industrial Development Zone.

I tried copying the text here, but was not successful. Here is the PDF.

Posted in Domestic publication, Kangwon Provincial Hyondong industrial development zone, Wonsan-Mt. Kumgang International Tourist Zone | Comments Closed

Wonsan Kalma Airport imagery (UPDATED)

Monday, August 17th, 2015

UPDATE 1 (2015-8-17): Kim Jong-un visited the Wonsan Airport (Kalma Airport) for an air force demonstration reported in Rodong Sinmun on July 30. You can see a video of that event here. A second official video claims that the demonstration took place on July 28. A satellite image of the facility was taken just the day before (July 27) and we can see some of the new facilities and preparation for Kim Jong-un’s arrival. I have already reported on most of this material at Radio Free Asia (새단장 갈마비행장…활주로에 광고도).

First, Google Earth imagery shows thousands of soldiers on the new runway practicing for Kim Jong-un’s arrival at the observation building. They can also be seen in the official images:

We can also see the completed (on the outside) Wonsan Airport terminal building:

Also unveiled is the new logo for the airport which reminds visitors that (despite the heavy military presence) the new airport welcomes civilian vacation travelers. We can see this design at both ends of the runway:

We can also see what appears to be a (fifth!) runway for Kim Jong-un. This runway contains similar facilities to the new Kim Jong-il runway built in Taesong District for use of the individuals that live in the Kim Family’s Ryongsong Complex:

Pictured above: The probable Kim Jong-un light aircraft runway at the Wonsan Kalma Airport

Pictured above: Kim Jong-un’s runway in Taesong district of Pyongyang which bears a close resemblance to the facilities at the Wonsan Kalma Airport.

ORIGINAL POST (2015-5-1): New Google Earth imagery shows continued development of the new civilian airport in Wonsan. The airport is presumably intended to support the Wonsan-Mt. Kumgang International Tourist Zone.

2015-3-26 (Google Earth)

2015-2-10 (Google Earth)

2014-12-25 (Google Earth)

Posted in Aviation, Construction, Transportation, Wonsan-Mt. Kumgang International Tourist Zone | 1 Comment »

The drought that didn’t matter, North Korea says – thanks to agricultural reform?

Monday, August 10th, 2015

By Benjamin Katzeff Silberstein

During the past few months, the World Food Program (WFP) has made reoccurring pleas for increased food assistance to North Korea to alleviate the food shortages expected from a severe summer drought. The North Korean government made similar statements and claimed that the drought was the worst one to occur in 100 years. Aid to the country was subsequently increased from the originally planned level, due to the drought. But now, one North Korean official is saying that food production ended up increasing, after all, thanks to agricultural reforms.

A recent brief by the Institute for Far Eastern Studies at Kyungnam University (IFES) cites a July issue of Tongil Sinbo, a North Korean state-run weekly newspaper. There, Chi Myong Su, director of the Agricultural Research Institute of the Academy of Agricultural Sciences in the country, says that

“the effectiveness of field management system (pojon) from cooperative farm production unit system (bunjo) is noticeable and succeeded in increasing grain production despite the adverse weather conditions.”

The article cited by IFES highlights the smaller work-team structure as key to the success of the reforms. Also, it almost outright states that greater economic incentives were the main factor (although they call it “enthusiasm” and “patriotism”):

“Despite the adverse weather conditions last year, the high grain yield was possible due to implementation of scientific farming methods and field management system to increase enthusiasm of farmers,” and “based on this experience, many cooperative farms across the country will expand subworkteam management system to field management system.”

This is interesting for several reasons.

First, the agricultural reforms seem increasingly pronounced. Though other reforms were reportedly backtracked earlier this year, the government seems eager to claim success for the road travelled in agriculture.

I have written elsewhere that the data doesn’t necessarily support a claim that reforms are working. There is still reason to be skeptical – after all, a North Korean government official claiming that his government’s policies are working is not surprising – but even the claim itself is interesting.

Second, the statement raises questions about monitoring and data gathering capacities, both of the regime and relief organizations in Pyongyang. Again, just a few months ago, alarm bells were ringing about a potential food shortage, and now, a regime official claims that food production has increased. What was the basis of the WFP and regime claims that a food shortage was imminent a few months ago, and what has changed since those claims were made?

Another recent IFES brief also deals with North Korean press reports about the agricultural reforms. It quotes a Rodong Sinmun article from earlier in the summer that brings up some adjustment problems that farmers have had, such as learning how to properly use fertilizers. The most interesting part in my opinion is the following:

The newspaper stressed that “when all farmers claim ownership of their field and subworkteam, one can create innovation in the farming operations.”

Thus, it seems like Pyongyang wants to encourage experimentation and diversity in production methods. This would be a potentially important step towards more efficient agriculture. Perhaps it is part of a pattern. Provinces have reportedly gotten significant leeway in setting up their respective special economic development zones, which could also be a way to encourage experimentation in policies and management methods.

According to the Tongil Sinbo article, reforms are set to expand further in the country given the alleged success. Perhaps it won’t be too long before we can learn more about them through assessments by multilateral organizations like WFP.

Tags:agricultural reform, agriculture, drought, Economics, foreign aid
Posted in 2015 aid from South Korea, 2015 Food Shortage, 6.28 Policy on Agriculture (June 28), Agriculture, Agriculture statistics, Economic Development Zones (2013), Economic reform, Food, Foreign aid statistics, International Aid, North Korea Agricultural Research Institute, Special Economic Zones, Statistics, UN, UN Food and Agriculture Organization, UN World Food Program | 1 Comment »

Real estate and insurance laws adopted for SEZs

Wednesday, July 22nd, 2015

According to KCNA:

Rules of Real Estate and Insurance in EDP Adopted

Rules of real estate and insurance in the economic development parks (EDP) were adopted according to the decision of the Presidium of the Supreme People’s Assembly of the DPRK.

The rule of real estate consists of seven chapters and 59 articles and the rule of insurance four chapters and 52 articles.

The rules deal with possession, registration and employment of real estates, their rent and rate, conclusion of insurance contract, formalities of insurance offices, etc. in the EDP.

Posted in Economic Development Zones (2013), Economic Development Zones (2014), Economic Development Zones (2015), Finance, Insurance, Real estate, Special Economic Zones, Special Economic Zones (Established before 2013) | Comments Closed

Wonsan’s Kalma Street Project

Tuesday, June 30th, 2015

UPDATE 4 (2017-8-6): New Google Earth imagery of the Kalma Street project dated 2017-5-19 shows signs of life, but overall stagnation. Although work continues very slowly on the right-most apartment block, it has not progressed at all for the remaining three original foundations dug in early 2016. However, sometime between 2017-2-14 and 2017-5-19, preparatory work was begun for yet another building (Outlined in red below):

UPDATE 3 (2017-3-7): New Google Earth imagery of the Kalma Street project dated 2016-12-8 shows very little observable progress.

The only visible progress that appears to have been made since February is that the right-most apartment block appears to have been raised to its second or third floor. Maybe some interior work has been done on the two buildings in the upper-left corner.

UPDATE 2 (2016-7-4): Google Earth imagery of Kalma Street dated 2016-5-26 has been published. There has been some modest progress on the project since 2016-2-26:

The exterior of the two buildings in the upper left is near completion. Additionally, construction on the right-most apartment building has begun.

UPDATE 1 (2016-4-3): Google Earth has new imagery from 2016-2-26 of the Kalma Street construction site. I posted material on this project in Radio Free Asia (in Korean). Here is some information in English:

Progress has been made on the Kalma Street project, but not much. So far it appears that six buildings are under construction:

Most of this construction is simply preparatory work on laying the foundation (digging ditches). The most progress has been made on the two rectangular buildings in the top-left corner. In these buildings, walls are going up on the ground-level floor.

There is also a large staging ground for workers and supplies nearby:

ORIGINAL POST (2015-6-30): Pictured below on Google Earth is the Kalma Street construction site in Wonsan

According to KCNA (2015-5-20):

Ground-breaking Ceremony of Construction in Wonsan Area Held

Wonsan, May 20 (KCNA) — The Wonsan area will turn into a world-famous tourist city under the plan of the Workers’ Party of Korea (WPK).

A ground-breaking ceremony took place in Kalma Street on Wednesday.

Present there were Vice-Premier Kim Yong Jin, officials concerned, builders and citizens of Wonsan.

A reporter and speakers said it was the lifetime wishes and behests of President Kim Il Sung and leader Kim Jong Il to spruce up Wonsan area.

Marshal Kim Jong Un launched a big operation for building Wonsan area into a world famous tourist city, model of city formation, with noble intention to bring about a fresh turn in building a highly civilized socialist nation and dynamically aroused the whole party and country to the drive for doing so, they said.

They called for launching vigorous campaigns to carry out the behests of Kim Il Sung and Kim Jong Il and defending the party’s policies to powerfully demonstrate the might of Songun Korea in construction once again.

At the end of the ceremony they started projects including dwelling houses at the entrance of Kalma Street in Wonsan City.

Here is coverage by the Institute for Far Eastern Studies (IFES):

Wonsan: Start of Construction as ‘Global Tourist City’

The state-run Korean Central News Agency (KCNA) has reported that the groundbreaking ceremony for the Wonsan region took place on May 20, 2015 on Wonsan city’s Kalma Street.

The KCNA explained that “in accordance with the plans of the Korean Workers’ Party, the Wonsan region will be vigorously transformed into a global tourist city.” It also reported that Vice Premier of the Cabinet Kim Yong Jin was in attendance at the groundbreaking ceremony.

According to attendees at the ceremony, “The proper management of the Wonsan region is the will of Comrade Kim Il Sung and Comrade Kim Jong Il as well as their earnest dying injunction.” They also stressed that “Comrade Kim Jong Un is committed to bringing about a new change in the construction of a civilized socialist state and has unfolded a magnanimous strategy for managing the Wonsan region as a model of city development and global tourist cities.”

The KCNA reported that after the ceremony ended construction was started on private homes near the entrance to Kalma Street.

The ‘Wonsan-Kumgangsan Tourist Region’ was announced as a central-level Special Economic Zone (SEZ) on June 11, 2014 by way of an ordinance by the Standing Committee of the Supreme People’s Assembly (SPA). It is part of the large-scale tourism belt that includes Wonsan district, the Masikryong Ski Resort, Ullim Falls, and the Sogwansa, Tongchon, and Kumgangsan districts.

The KCNA confirmed that the Wonsan development was the “will” and “dying injunction” of Kim Il Sung and Kim Jong Il, offering as evidence the fact that Kim Jong Il made the development of the Wonsan-Kumgangsan Tourist Region a recent priority of North Korea’s foreign economic sector.

In his 2015 New Year’s address, Kim Jong Un proclaimed to the people, “We need to multilaterally develop foreign economic relations and actively push forward the development of economic development zones like the Wonsan-Kumgangsan Tourist Region.” Also, in February 2015, the Workers’ Party of Korea (WPK) Central Committee and Central Military Commission presented ‘joint slogans’ for the 70th year anniversary of the country’s liberation and the Party’s founding. Among those presented was the slogan, “Let’s actively push forward the economic development of the Wonsan-Kumgangsan Tourist Region!”

In May 2015, North Korea took the ‘18th Pyongyang Spring International Product Exhibition’ as an opportunity to hold an investment briefing session regarding the development of the Wonsan-Kumgangsan Tourist Region. Another on-site investment briefing at Kumgangsan is slated for six days beginning May 25, 2015.

Regarding the upcoming briefing, O Ung Gil, general manager of the Wonsan Area Development Corporation, said, “At the investment briefing, topics such as the favorability of the development zone (which has abundant tourist attractions), the legal environment, its current state, and the overall development plan will be revealed. […] All entrepreneurs and businessmen who have an interest in development in the region are welcome to attend.”

Posted in Construction, Wonsan-Mt. Kumgang International Tourist Zone | Comments Closed

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