IntroductionAssistance from United States to Korea has fallen sharply over past few years, as shown in Table 1. Food aid has been scrutinized due to restrictions on donor agencies by Korean government. Furthermore, two most important donors of food aid to Korea, South Korea and China, have little or no monitoring system in place (Manyin, 2006). This may explain why, in summer of 2005, Korean government announced that it would no longer need humanitarian assistance from United Nations, channel for U.S. food aid.Furthermore, United States, its allies, and United Nations have increasingly imposed tougher economic sanctions against Korea in recent years, as communist country has developed more advanced weapons of mass destruction. On September 12, 2005, U.S. Department of Treasury designated Banco Delta Asia (BDA), a bank in Macau at which Korean entities maintained accounts, as a primary money laundering concern and proposed rules to restrict U.S. financial institutions from engaging in financial transactions with it. On October 9, 2006, Korea set off its first nuclear test. The UN Security Council voted unanimously on October 14 to slap Korea with trade, travel, and other sanctions as punishment for its claimed nuclear weapons test.To overcome economic problems caused by falling humanitarian assistance and economic sanctions, Korea has worked very hard in recent years to improve business climate for foreign companies and individual investors, in an effort to boost its sagging economy. Although improved business climate by itself is not sufficient reason for doing business, it is a necessary ingredient for business relations. No external investors or traders will do business with Korea or any other country unless reasonable opportunities exist for making money.Evidence indicates that Pyongyang will continue to improve its business climate so that foreign companies and investors can make money in this impoverished country. If business climate in Korea continues to improve, as expected, several reasons surface for doing business with country. First, in July 2002, Korea introduced most significant liberalization measures-called the July 2002 Economic Reform-since start of communist rule in 1948. Second, denuclearization agreement of February 13, 2007, is expected to lead to easing of a number of stringent economic sanctions against Korea imposed by United States, its allies, and United Nations. Third, Korea has recently established four special economic zones as its survival strategy. Fourth, there are a number of favorable factors for foreign investment in Korea.The July 2002 Reforms in KoreaOn July 1, 2002, Korea carried out an all-out of its economic system in order to manage its economy better. Given drastic changes in economic management prescribed by government in internal document sent to state bodies at all levels on June 1, 2002, North Korean style economic reform is expected to have an enormous impact on not only economy but also regime itself. The comprehensive initiative toward practical and decentralized policies for economic recovery was indeed a historic decision for socialist country, which had adhered to its inflexible centrally planned economic policies despite worst economic crises ever in food, foreign currency, and energy in years following 1995.Five years have now passed since Korea introduced its historic economic reforms, and there are already signs that reforms have improved country's economy and investment climate (Nam, 2007). First, overall price increase of all products has given masses a new recognition of money. Although prices have soared 18 times higher on average, wages have been raised discriminately, according to different occupations. …
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