DPRK's Special Economic Zone Policies: Recent Development and Future Challenges

Abstract

SEZ development typically proceeds with the Rason and Mt. Kumgang SEZs – the two central SEZs that represent twin pillars – in the lead, with regional SEZs following suit by borrowing and tailoring the development plans of central SEZs. At the center of focus since Kim Jong Un took power, the Rason SEZ is seeking to induce investment from China and Russia as an effort to develop the Chinese Northeast and Russian Far East regions; the ultimate goal is to transform the area into Northeast Asia’s logistics, transport and tourist hub. The Mt. Kumgang Special Tourist Zone is likewise being given greater consideration under the Kim Jong Un regime as a development zone focusing on tourism. As a major source of the DPRK’s foreign currency, tourism is an area towards which the DPRK devotes much care and attention. The regional SEZs with highest growth potential are the Waudo Export Processing Zone, neighboring the DPRK’s largest trade port Nampo, and the Chongjin Economic Development Zone, which is situated near Chongjin port, which comes in second. The DPRK government’s determination toward SEZ development is remarkably strong, but at the same time is faced with sizable challenges. Learning from China’s SEZ examples, it is evident that clear vision, revenue-securing mechanisms for investors, safeguard measures for protection of property rights, and successful case examples at the corporate level, are necessary. The Korean government should focus on the long term when formulating cooperative measures with SEZs in the DPRK.