Ri Chol Sok, General Director of Economic Development Bureau of Ministry of External Economic Affairs, Chairman of Korean Economic Development Association, Democratic People's Republic of Korea (DPRK)
The cooperation between China and DPRK in special economic zones (SEZ)
Since November 19, 2010, the governments of China and DPRK have successively signed agreements on the development and joint management of SEZs, including the Rason Special Economic Zone and Sinuiju Special Economic Zone. Under the framework of those bilateral agreements, the governments of the two sides have organized three meetings respectively during the period from 2011 to 2012, established a common committee for the joint management and co-operation of the two economic zones. More detailed contractual engagements were implemented afterwards.
At the plenary of the Central Committee of the DPRK Workers ' Party in March 2013, the Government of DPRK decided to set up 1-2 economic development zones and and highlighted to adjust development measures to local conditions. On May 19, 2013, the Democratic People's Republic of Korea enacted Law on Economic Development Zones. Up till now, there are more than 20 economic development zones spread over in various provinces across the country , including Pyongyang.
2018 witnessed positive trends on the Korean peninsula, forging a favorable and peaceful atmosphere. Many overseas investors have shown a keen interest in the investment of DPRK. Subsequently, in order to protect the interests of enterprises investing in economic development zones and facilitate more foreign investments, the DPRK government continuously improved relevant laws and regulation and took a series of measures.
Tax policy
The income tax of enterprises in the economic development zones has been reduced to 14% while that of outside the economic development zone is 25%. At the same time, in order to facilitate these investors, we will provide preferential policies that are more beneficial to investors than the surrounding countries, including land leasing, the mode of land development, infrastructure construction, land use rights, and the acquisition of property asset.
Land policy
Land is allowed to lease in the economic development zone with 50-year lease term. User is entitled to use the land independently or in other forms, while the buildings or land that has been developed can be leased to other enterprises. The economic development zones will guarantee the independence of enterprises and comprehensively protect their interests in accordance with relevant laws and regulations. The governing bodies of economic development zones will formulate relevant laws and regulations that are independent of those outside of economic development zones.
In addition, if the foreign enterprises invest in the industries encouraged by the DPRK government, they can gain priority in land use or site selection and may even be exempted from land use fees or corporate income taxes within a certain period of time. If companies reinvest their profits in DPRK development zones, the government could return 50% of their corporate income tax to them. As for these enterprises that reinvest in economic development zones, some of the related corporate income tax can be refunded, while they can be offered a priority to gain operating power in the field of tourism and hotels. Foreign enterprises investing in economic development zones can enjoy preferential policies in terms of entry & exit or residence, communications, import and export, etc.
Governance and institutions in the management of economic development zones
I serve as the General Director of Economic Development Bureau of Ministry of External Economic Affairs. The counterpart of the organization in China is the Ministry of Commerce.
Economic Development Bureau of Ministry of External Economic Affairs has full authority on the operation of the special economic zones.
Each economic development zone has its own governing bodies, which are responsible for setting up permits for resident enterprises and providing services to investment enterprises in accordance with the laws and regulations established by the State.
The economic development zones I sin strong desire for competent experts or talents. In terms of personnel training, DPRK has developed a number of relevant training systems, not only domestically, but also involving collaborative work with other countries. We actively learn the lessons from foreign countries. Particularly, since the recent signing of an agreement between China and DPRK, a significant number of people in DPRK have been sent to China every year to learn Chinese experience in reform and opening-up.
In fact, for the DPRK, the experience accumulated by China, especially experience of special economic zones and economic projects in the past 40 years, are of great value to learn from. Beyond this, DPRK also work with some foreign organisations such as the KPP Project at the University of British Columbia. DPRK will continue to strengthen the cooperation with foreign countries, and actively learn some advanced experience from them, which also allows the world to better understand DPRK's investment and economic development.
Kim Chol Ryong, Vice-Director of Department 18 of the Presidium of the Supreme People’s Assembly
With the efforts of the Workers ' Party, the DPRK economy has entered a new era. The seventh session of the Party Congress in May 2016 summarized the economic progress of DPRK.
Under the upsurge of industrial revolution in the new century, equipments and projects in DPRK have been modernized. Outcomes includes:
Independent invention of 80-horsepower tractors and cargo vehicles with a load of 5 tons;
Well-established information and communication networks as well as other technical facilities, which promotes the rapid development of telecommunications;
Conducted "seed revolution" and “potato agricultural revolution", rectifying about 320,000 of the land;
Achieved an increase in cereal production, and 2016 acquired the highest production in DPRK’s record .
These achievements are in line with global trends in development.
Opportunities of economic development
At the seventh session of the party conference, the five-year plan for country's economy was put forward. This five-year plan is a very good opportunity for the future economic development. The five-year plan refers to the balanced development of the people's economy from 2016 to 2020, that is, promoting the sustainable development of the country's economy. According to this objective, every sector of the economy should develop their own projects.
The targeted goals of future development are also established:
Using solar heat or tides for electricity production;
The establishment of the main steel production base - by using own iron stone and steel;
The production of main fertilizer
Using abundant coal resources and integrating into the chemical industry, the use of our own raw materials to produce all kinds of chemical products for daily needs.
The main purpose is to realize self- supply.
Advanced technology is the core of economic development that need to keep up with. We have achieved a considerable degree of gains in the development of technological industry. automation in implemented in production line to improve efficiency and the quality of industrial goods.
At present, we are planning to actively build residential housing nationwide. Currently residential houses are state-owned that are invested by government and distributed to residents for free. Although people in DPRK do not have the concern of no house, yet people will have more diverse demands. Therefore, the scale or quality of these homes needs to be improved, which attach great importance to people’s living quality.
Since June 2013, given the external tension, the state has put forward the parallel route of nuclear force construction and economic construction. However, in April 2018, the state proposed to concentrate on economic construction, which is regarded as a good opportunity for DPRK shift focus on economic development and people’s well-being.
There are still many import demands for raw materials in various fields, DPRK is on the mission to realize the localization of raw materials and products and enhance the capacity in various economic fields, in order to gain more economic independence and autonomy. Some investment used to go directly to the field of national defense technology, but now it is gradually transferred to the field of livelihood. Economic management has close relationship with good governance and strong leadership. DPRK should identify and implement suitable approaches and developmental mode to itself, so that the enterprises can fully grow based on the guiding ideology.
In the field of industry, we put forward the socialistic corporate responsibility management system. The project or enterprise itself should formulate some development strategies and take the initiative to pursue their own development. There also exist an opportunity for development – the rapid changes in the external economic environment, which will also bring very good chances for DPRK's economic development.
So Jong Chan, General Director of Department of Treaty & Law, Ministry of External Economic Affairs, DPRK
New diplomatic Trend of DPRK Diplomacy in 2018
The cooperative relations between China and Democratic People's Republic of Korea (DPRK) develops on the basis of the traditional long-standing friendship of the two countries. The trade between China and DPRK has been maintained at a certain level. DPRK exports mainly coals, galvanized products, industrial goods, agricultural products, aquatic products. Products imported from China include crude oil, processing products, rotary printing presses and other machines, as well as electronic products, fertilizers, synthetic resins and other industrial products. At present, China and DPRK are actively promoting economic and trade activities in the Rason Special Economic Zone and other economic development zones. DPRK's labor force is also constantly pouring into China's market. Currently, the momentum of economic and trade cooperation between the two countries remains strong.
The top leaders of China and DPRK held three summit meetings in March, May and June of 2018, which acts as an opportunity for China-DPRK relations to enter into a new period of development. Earlier of 2018, the Chinese government provided DPRK with 100,000 tons of fertilizer, as well as equipment related to phosphate fertilizer. These projects have brought great benefits in promoting economic cooperation between the two sides and the development of agriculture in DPRK.
DPRK’s diplomatic progress goes beyond this. Three historic summit talks between DPRK and Republic of Korea was held respectively in April, May and September of 2018. In June, the DPRK-US summit talks was held in Singapore that draw the world wide attention. All these talks not only promoted the cooperation and reconciliation between the North and South Korea, but also contributed a lot to the peace and stability on the Korean peninsula.
With the formation of a friendly atmosphere, the China - DPRK bilateral negotiation, even China - DPRK – Russia trilateral negotiation is ongoing that would bring new development opportunities for China-DPRK economic cooperation, while creating a favorable external environment for trade exchanges.
In April 2018, the third plenary session of the seventh meeting of the Workers ' Party of DPRK was held, highlighting the concentration on economic construction. This is DPRK's new strategic map. We must seize this opportunity to facilitate DPRK’s opening up and exchanges with the international community, especially the economic cooperation and communication with China. DPRK will explore a variety of development models and identify suitable ones for implementation.
The importance of finance
DPRK published the Economic Development Zone Act and 16 related interpretative regulations in May 2013. Under the this framework, diverse forms of tourism development zones and top technology zones are under the construction to attract foreign capitals.
In order to facilitate foreign capital investment, we have introduced many preferential policies. However, there are also external factors impeding cooperation and development in the special economic zones. DPRK's foreign relations have been widely improved, and the trend towards peace on the Korean Peninsula has seen a ray of hope, though DPRK is still facing a number of sanctions from the international community that are stumbling blocks to impede the country's economic development. It is firmly believed that the two governments of China and DPRK are consistently promoting economic cooperation that will advance the relation between China and DPRK to a new level. The experience accumulated by China can offer great helps and enlightenment to DPRK. We will also find a suitable way for our country's development based on China's experience.