North Korea recently revised its law to speed up development and better attract foreign investment to the Raseon special economic zone in efforts to scrape up some cash.
"A new article that says 'ethnic Koreans who live outside North Korea can engage in economic or trade activities in Raseon' has been added to the new law on Raseon economic and trade zone," a South Korean government official said yesterday.
When the law on Raseon, formerly known as Rajin-Seonbong, was initially enacted in 1992, it included an article that allowed 'overseas Koreans' including South Koreans to do business in the northeastern area bordering China and Russia. But the article was deleted in 1999.
The reopening of Raseon to South Korean businessmen comes as Pyongyang suffers from an acute need for foreign currency under the United Nations sanctions and with the suspension of South Korean tours. Since the North's rocket launch in April last year, the Seoul government has not approved any new inter-Korean business project aside from those in the Gaeseong industrial complex.
The revised law on Raseon guarantees free choice of investment and corporate management methods, keeps the corporate income tax rate at 14 percent of profit and reduces the rate to 10 per cent for 'industries specially promoted by the state'.
The article under which investors were required to get Cabinet approval to establish companies, branch offices or agencies in Raseon has been removed. The city is to be divided into "special economic sectors" such as industrial, agricultural, science technology or processing trade sectors under the new law.
Investment and tourism have been added to Raseon's legal status as a preferential area for trade, transport, export processing, finance and service.
The revised law permits transactions between businesses in Raseon and North Korean state agencies, companies or organizations, and encourages investment in high-tech development and scientific research, infrastructure construction and manufacture of products with international competitiveness.
A supervisory organ in Raseon, instead of the central government, oversees investment promotion, development and trade businesses in the area, reviews and approves major investments under the new law.
North Korean law is expected to be applied to foreigners in Raseon.
Previously, foreigners could visit or stay in Raseon without a visa, but the new law allows no-visa visits to only those directly entering the special zone without passing through other parts of the country.
To hire foreign employees, companies now have to get approval from the Raseon People's Committee instead of simply consulting the committee.
The Rajin-Seonbong area was designated as North Korea's first free trade zone in late 1991 but never succeeded in attracting much foreign investment.
The North recently began moves to make use of the area by upgrading its status to a special municipality in January and giving China and Russia the right to use the Rajin port.
Pyongyang also set up a state development bank on Jan. 20 and made Taepung International Investment Agency attract foreign investment.
The reclusive state appears to be aiming at China's investment in the Rajin port which can be an attractive logistics base for China's project to develop the Tumen River area.
It is the fifth time the law on Raseon has been revised after 1999, 2001, 2005 and 2007.
Experts note, however, that the revised law is unlikely to bring a breakthrough in foreign investment when North Korea is still under UN sanctions.
