We were quite pleased to recently come across a paper by program alumni of ours (2018) at Kim Il Sung University. Thanks for Theo Clement for spotting the paper and bringing it to our attention. This paper deals with the development of economic zones. It is highly technical but we found it interesting for the attention it brings to the concept of equity, which is still an important but poorly recognized concept in the DPRK system. We believe laws that protect equity rights and fully develop it are critical for better protection of entrepreneurs and for creating incentives for economic development. Read the full paper here (DPRK site).
Funds of Foreign Investment Corporations in Economic Development Zones and their movement
Kang Chol Su, Ri Chung Sim
Faculty of Finance
At present the DPRK provides an environment and conditions favorable for investment in its economic development zones with the aim of revitalizing their operation to reach the 5-year-strategic target of the national economic development presented by Supreme Leader Kim Jong Un in the Seventh Congress of the Workers‘ Party of Korea. Supreme Leader Kim Jong Un said as follows. “A favourable climate and good conditions for investment should be created in our economic development zones in order to revitalize their operation, and wide-scale tourism should be encouraged.”
One way to provide an environment and conditions favorable for investment is to establish a right accounting order for foreign investment corporations in economic development zones as international investment begins and ends with money and accounting reflects the movement of money. In order to establish a right accounting order for foreign investment corporations in economic development zones we should have a right understanding for funds of foreign investment corporations in economic development zones and their movements, which is required for defining the accurate accounting object of foreign investment corporations in economic development zones and for doing corresponding accounting.
The accounting object of foreign investment corporations in economic development zones is the movement of funds retained in foreign investment corporations, which is viewed in two angles: source and use. The fund reflects the economic capital for the business operations in terms of money. The fund is viewed in two angles: assets & liabilities and equity. Assets are viewed from one angle - the fund use and liabilities and equity from the other - the fund source. As assets, liabilities and equity are accounting terms viewed from two angles: use and source, they are equal in value. The interrelations between fund source and use at a certain point is regarded as financial position. Assets of the foreign investment corporation in economic development zones–economic capital retained or controlled for a certain economic profit–are categorized into fixed assets and current assets. The fixed assets are retained and used long for business operations and take more than one year to be turned into cash. They are categorized into tangible and intangible.
The current assets are expected to be consumed or turned into cash less than one year. They include cash, short–term bonds and inventory. Liabilities are debts incurred in the ordinary production and operations of the foreign investment corporations in economic development zones…
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