North to Lift Investment Barriers

It has been confirmed that North Korea will significantly reduce or remove various regulations against foreign investment companies which do business in the form of a joint-venture company, by opening its domestic market and cutting taxes.

Also, North Korea has set a minimum wage at 30 euro a month (about 36,700 won) for North Korean workers who work for foreign investment companies. That is lower than the 57.5 dollar wage (about 59,500 won) of those who currently work at the Kaesung Industrial complex.

The North Korean cabinet sent down a policy called “Regarding improvement in economic management under socialism,” which contains the above provisions to ministries related to trade and economy in early November.

The full text of the policy that Dong-A Ilbo obtained on November 29 through a foreign investment company, which is doing economic cooperation business with North Korea, contains various kinds of measures North Korea has recently taken to actively attract foreign investment in eight clauses.

The policy says that North Korea enables foreign investment companies to sell their products at agreed price in North Korea or exchange them with replacing materials that could be used for their business activities if they are a joint-venture company which has a direct contract with North Korean factories or companies.

Foreign investment companies which sell or barter their products within North Korea as mentioned above, will not be taxed.

This means that North Korea intends to open its domestic market to foreign investment companies by changing itself from production bases, which simply provide cheap labor, into a market in which production and sales are allowed.

Also, North Korea will abolish discrimination against foreign investment companies by applying the same fees and rates such as fees for using harbors, power rates, water rates and heating bills as those applied to North Korean companies.

It has been known that aside from this, the North Korean cabinet has considerably decreased items which regulates how much and what kind of products should be produced at the national level, so that each factory and company could set its production and sales plans according to its own circumstances and market environment.

Professor Yang Moon-su of the University of North Korean Studies said, “The policy includes lots of incentives to make a favorable environment for foreign investment, and that catches my eye. That is very meaningful in that North Korea has showed its intention of opening its domestic market and the nation itself to the outside world.”

taewon_ha@donga.com