N. Korea to make all-out efforts to attract foreign investment

North Korea is reportedly working on a plan to build special administrative zones in its 11 cities and provinces to develop its economy and promote tourism. The move is interpreted as the regime’s efforts to attract foreign investment on a large scale. As a result, much attention is being paid to the scope and pace of the opening of its economy.

According to a North Korea source, North Korean leader Kim Jong Un has ordered to develop a plan to build a new economic zone in nine provinces including North and South Hamkyong Provinces, Yanggang Province and Jagang Province and two cities, namely Pyongyang and Nampo. The special economic zone in Rason is not included in the development list since it has already been under development through investments from China. The source said, “North Korea is focusing on developing extensive economic plans and drawing foreign funds,” adding, “North Korean officials from the newly-formed National Economic Development Committee are very likely to announce part of the initiative in the ‘Seminar on Economic Growth in Northeast Asia’ in Beijing taking place in the form of 1.5 track.”

According to the message from Park Sang-kwon, president of Pyeonghwa Motors, who visited North Korea in July, North Korea is attempting to build a special tourism zone in six areas including Mountains Wonsan, Baekdusan and Chilbosan, which seem to be part of the 11 special zones. Reportedly, investors in Singapore and Hong Kong are interested in North Korea’s extensive attempt to attract foreign investment. For example, Singapore is exploring a plan to invest over 1.5 million U.S. dollars at minimum in the Wonsan area. Another source said, “It is continuously rumored that Japan tries to make a huge investment in North Korea, particularly in Nampo, to improve its relations with North Korea,” adding, “North Korea’s recent confidence to push forward with economic change is also related to such flow of foreign funds.”

Yoo Wan-yeong, CEO of UnitecKorea and expert on economic cooperation with North Korea, said, “As far as I know, North Korea has already selected regional footholds for the special zones,” adding, “Although the modification of related legal and institutional systems hasn`t yet been completed, North Korea has started taking actions to meet its target of finishing it by the end of this year.”

The Korean government is paying sharp attention to the flow of related foreign funds as well as North Korea’s actions. Analysts say that North Korea’s attempt to draw foreign funds that may lead to market reform and opening is in line with the regime’s recent actions to expand autonomy for factories and enterprises, followed by the June 28 Economic Improvement and Management Action last year. A government official said, “Although there is no sign for North Korea to promote new economic policies in earnest, it is clear that the North is paying attention to its economy including the plan for special economic zones.”

However, it is questionable how much foreign funds North Korea can attract while not abandoning its nuclear program. Government officials are skeptical about how many foreign tourists would visit North Korea, which is getting more isolated in the international community. Another official from the government pointed out, “North Korea had tried various economic development policies even under the rule of Kim Jong Il, but all failed due to the fundamental limits posed by the regime.”