"Doing Business in North Korea"

Choson Exchange’s Andray recently presented a paper at a conference titled “Doing Business in North Korea. Other presenters covered some subjects that grew out of specific experiences in tourism, textiles and other business ventures over the last couple decades. Andray’s paper focused on issues of perception that North Koreans will need to tackle if they are to turn themselves into the investment destination that they wish to be. Broadly, he highlighted two positive steps taken last year and one negative policy, indicative of some of the economic thinking that currently takes place in the DPRK.

1.     The May 30th Measures

In 2014, the Central Committee of the Korean Worker’s Party promulgated the so-called and not-yet-fully-clear “May 30th Measures”. At, as you might suppose, the end of May. This policy remains not fully articulated to outside observers - information has come out in dribs and drabs. Recent snapshots suggest it could be significant, though, with a change in farming work unit size (down to a 'family size' of 4 to 6 people) and a shift to the work unit being able to keep the majority of its production: 60%. This is up from a 30% farmer-allotted experiment that began in 2012/2013 – the so-called “June 28th Measures.  

It is clearly part of a trend taking place during the Kim Jong Un era that sees the authorities looking towards greater autonomy for companies and farmers, a move away from state planning, even while ownership resides officially with the state. This should create productive capacity, though getting the ball rolling is difficult for companies and farms that don’t have the initial inputs needed. 

2.     The SEZs

Thirteen SEZs were unveiled in October 2013, dotted around the country and fitting into five categories: Export Processing/Trade Zones; Industrial Development Zones; Agricultural Development Zones; Tourism Development Zones; and Economic Development Zones.

In June 2014, Wonsan was designated a Special Tourism Zone and then in July, the Presidium of the Supreme People’s Assembly announced six new SEZs were to be created. Sinuiju was also rebranded as the Sinuiju International Economic Zone at that time. Most of these SEZs will not develop quickly, though there are four with decent prospects.

 These zones can potentially create several platforms for other experiments in governance and policy. The four pre-existing major SEZs – Kaesong, Kumgangsan, Hwangumpyong/Wiwado and Rason have created important precedents, Rason in particular.

3.     Ebola

The DPRK’s procedures related to Ebola are not an ‘economic policy’, per se, but have had as significant an economic impact as any other policy initiative in the last year, if not moreso. The October 2014 decision to require any visitor or returning Korean to undergo a 21-day quarantine has had businesspeople, diplomats, tourist agencies and non-profits struggling to operate normally. 21 days essentially means a travel ban, though in November exemptions to the restrictions were being found, both officially and unofficially. Then followed a period of tightening up, it appears, leaving interested parties simply waiting for news into February.

 As 2014 gives way to 2015, some positive takeaways from both the SEZ policy and the bits of information that have emerged on the May 30th measures have been damaged by Pyongyang’s response to Ebola. It will be difficult for the North Koreans tasked with selling their country as “open for business” to counter the negative PR that this Ebola policy has generated.