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Rason Special Economic Zone development plan

North Korea announced the adoption of a comprehensive plan to develop a free trade zone in Rason, which will focus on promoting the zone as a center of the MICE industry. MICE stands for meetings, incentives, conferences, and exhibitions.

24 years after the designation of the Rason Special Economic Zone, the North Korean government has agreed to permit North Korean companies that will operate in the zone to receive foreign investment, manage themselves, and make profits. Experts who think the plan is meaningful point to its level of detail and its feasibility, along with its aggressiveness.

On Nov. 18, North Korea made public detailed plans in seven categories, including potential industrial complexes and tourist resorts, tax policies, investment policies, and corporate registration procedures. At the same time, it posted about 50 regulations related to investing in the Rason Special Economic Zone on Naenara, North Korea’s official web portal, which is available in English and eight other languages.

Ten locations are slated for development as resorts, among which are Sinhae International Meeting District, Bipa Island Ecological Tourism District, and Haesanggeum Tourism District.

Nov. 8

There will be nine industrial districts, including the Rajin Harbor Logistics Industrial Complex and the Sinheunggyeong Industrial Complex. The Rajin Harbor Logistics Industrial Complex is connected with the Rajin-Khasan Project, a cooperative logistics project involving South Korea, North Korea, and Russia.

North Korea announced plans to invest a total of US$15.48 billion in these development projects, with US$9.22 billion earmarked for industrial complexes and US$6.26 billion for tourism districts.

In addition, North Korea agreed to accept foreign investment in the form of joint ventures in the Rason Special Economic Zone, to allow foreign capital to manage their businesses freely, and to guarantee their profits. Investors will be able to remove legally acquired assets from the economic zone without restraints and will be allowed to independently plan their production, sales, and profit distribution.

North Korea also defined the taxes that would apply the Rason Special Economic Zone - including transaction tax, management tax, corporate income tax, private income tax, local tax, property tax, and inheritance tax - and provided a detailed explanation of the tax rates and benefits.

Experts are paying attention to the Rason development plan because it is specific and practical. In particular, business plans for the areas of logistics, tourism, and meetings are tailored to the needs of China and Russia, which border North Korea.

Experts also think that South Korean companies are starting to take more interest in the idea of investing in North Korea. Another noteworthy aspect of the plan is that it specifies the role of North Korean companies and takes into account the North Korean domestic market.

“Companies with investment potential from China and Russia - as well as South Korea - are waiting for their chance to move into North Korea. Since this plan means that North Korea is ready to receive them, you could say that the time is ripe for developing economic zones,” said Lim Eul-chul, a professor at the Kyungnam University Institute for Far Eastern Studies.

“The plan that North Korea just announced implies that North Korean companies, which have been largely sidelined until now, will play a role in developing the special economic zones. While economic zones focus on exports, this plan also keeps the domestic market in mind, indicating that North Korea intends to meet demand in other parts of the North,” Lim said.

There is also speculation that the announcement is designed to achieve tangible economic results before the 6th Congress of the Workers’ Party of Korea, which will take place in May 2016, for the first time in 36 years.

It also shows that North Korea’s economy is more stable than it used to be. It is commonly thought that the success of this plan would lead the North to begin opening up.

In 1991, North Korea designated Rason as a free trade zone, with the goal of making it a base for trade, finance, and tourism, but it failed to attract investment. Currently, there are around 20 economic zones in North Korea.

By Kim Jin-cheol, staff reporter

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