One of the most interesting characteristics of North Korea’s recent economic changes has been the appearance of various special investment zones. In the 1990s, North Korea set up some of these zones in the Najin-Sonbong area, in a move that signaled changes to the country’s economic policies.
North Korea has been seeking ways to resolve its economic issues by building special economic zones and implementing policies aimed at expanding marketization. Recently, the country has begun a massive campaign to promote investment in these special zones through its online websites (“Naenara” and “Chosun Today”), newspapers, and TV.
The North Korean authorities have recently designated Kaesong as a test zone with a view to turning it into an “economic development city.” There is also domestic emphasis on the intention to create more special economic zones, starting with Kaesong.
North Korea’s Rodong Sinmun reported on July 1 that Kim Jong Un conducted a two-day on-site visit to Sindo-gun and Sinuiju, North Pyongan Province, which also included the symbolic hallmark of Sino-DPRK cooperation, the Hwanggumpyong Special Zone. The onsite visit was likely aimed at showing the North Korean people the regime’s intent to revitalize the economy through the establishment of these special economic zones.
Economic development zones are designed to promote business activity by foreign companies with an absence of various regulatory obstacles, but have also continued to be a sensitive issue due to North Korea’s closed political system. Conservatives who oppose economic reforms in the North Korean government (former members of Kim Il Sung’s guerrillas, aging soldiers, etc) have argued that economic development zones “damage North Korea’s sovereignty.” As a result, the decision to build economic development zones in North Korea has taken a long time.
It was only in 2013 that the North Korean authorities first presented a policy aimed at developing economic zones suited to each of the country’s provinces. This led to the adoption of the Economic Development Zone Law on May 29, 2013, through Decree No. 3192 by the Standing Committee of the Supreme People’s Assembly.
The North Korean authorities appear to have concluded that they could manage and monitor an open economic environment in a controlled manner as they watched the development of the Najin-Sonbong EDZ.
The key to success for EDZs is regaining trust
North Korea’s EDZs have taken on the role of test sites for domestic economic reforms and may play a more comprehensive role in developing the country’s local economies. The Najin-Sonbong EDZ is an important link between North Korea and China, and the outside world.
EDZs also reflect decision making within the North Korean government’s policies, which are still in their early stages. They provide indications of the possibility of gradual reform, while maintaining the current regime during the introduction of new systems.
That being said, the success of EDZs depends on whether the country will regain trust from the international community. North Korea must remove its image of being a “gangster country” and “dictatorship” that has had no qualms about seizing investors’ money in the past.
The North Korean authorities must also accept that mistrust toward the EDZs is coming from the contradictions of an economic system where both a planned economy and market economy coexist. Economic growth will be impossible in North Korea if EDZs are stuck within such a system.
North Korea must also make an effort to improve its human rights record. If it continues to argue that South Korea’s North Korean Human Rights Law and Human Rights Foundation are “roadblocks to reconciliation and cooperation”, the country will fail to regain the trust of potential economic partners. North Korean leaders must make efforts to improve the country’s human rights situation because it still continues to be a major stumbling block to further foreign investment in the country.
*The author of this piece holds a PhD from Kyungnam University and is originally from North Korea.