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Trilateral Economic Cooperation Between Russia, the Republic of Korea and the DPRK: Prospects and Obstacles

Authors:
  • Economic Research Institute, Russian Academy of Sciences
Trilateral Economic Cooperation Between Russia, the
Republic of Korea and the DPRK: Prospects and Obstacles
Y Dyomina1
1Economic Research Institute FEB RAS, Tikhookeanskaya Str. 153, 680042
Khabarovsk, Russia
E-mail: yandemi@yandex.com
Abstract. The author analyzes economic development zones (EDZs) in the DPRK as a part of
the trilateral economic cooperation between Russia, the Republic of Korea and the DPRK. The
study overviews EDZs created in the DPRK before and after 2013 when the new law was
passed. There are 25 zones of various types (industrial, agricultural, high-tech and tourism
development zones, export processing zones and comprehensive zones) that have been created
since 1991; however, only 23 zones are currently functioning. Policy situation in the region
and the DPRK’s denuclearization fully determine the future of these projects and prospects of
the trilateral economic cooperation.
1. Introduction
In December 2011, Kim Jong Un became the DPRK’s leader and he started carrying out economic
reforms in the country, similar to the Chinese policy of "reforms and openness" [1]. As a part of this
policy a network of economic development zones (EDZs) has been established to attract foreign
investment, promote external economic cooperation and exchange, develop national economy and
improve living standards. The DPRK Law on Economic Development Zones was adopted on May 29,
2013 (with amendments and additions in August 2016 and September 2017).
In November 2013, 13 territories in 8 provinces were announced for accelerated development with
the help of foreign investment. Most of these EDZs occupy a small area (2 to 4 square kilometers) and
are located in different parts of the country: 5 of them are on the border with China, 3 on the West
coast and 5 on the East coast [2]. In June 2014, an international tourist zone in Wonsan was created.
The EDZ’s plan considers it as a part of a single tourist area of Wonsan Mt. Kumgang (Wonsan,
Tongchon, Sokwang Temple, Masikryong Ski Resort and Ullim Falls) [1; 3]. In July 2014, six more
economic development zones were set up [2; 3]. In April 2015, Mubong Special Zone for International
Tourism was also added [4].
In accordance with the DPRK Law on Economic Development Zones, EDZs are created in order to
promote external economic cooperation and exchange, develop national economy and improve living
standards of the population (Art. 1). Economic development zones are special economic areas where
preferential treatment is accorded to economic activities pursuant to the laws and regulations specially
enacted by the state. EDZs shall include industrial development zones, agricultural development
zones, tourism development zones, export-oriented processing zones, high-tech development zones
and others in the fields of economy, science and technology (Art. 2). Depending on the management
body EDZs shall be classified into local-level and central-level zones (Art. 3). Creation of economic
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development zones is carried out under the control of the Ministry of Foreign Economic Relations of
the DPRK. EDZs shall be developed on the principle of (Art. 19):
1. Making development stage by stage in accordance with a plan;
2. Diversifying investments;
3. Conserving the natural ecological environment of EDZs and the surrounding areas;
4. Making rational use of the land and resources;
5. Raising international competitiveness of production and service;
6. Ensuring both the convenience of economic activities and public interest; and
7. Ensuring sustainable and balanced development of the EDZs concerned.
A foreign investor may, subject to approval, undertake development of an EDZ either jointly or
severally. Institutions and enterprises of the DPRK may, subject to approval, also undertake
development (Art. 20). In the field of land lease, employment and taxation the state promises
investors’ preferential conditions for doing business. The term of land lease in EDZs shall be 50 years
at maximum, which shall run from the date of issuance of a certificate of land use to the enterprise
concerned. An enterprise may, upon expiry of the term of lease, re-enter into a contract for the
continued use of the leased land (Art. 25). Enterprises may buy, sell, re-lease, donate or inherit the
land use right and ownership of buildings. The price of buying, selling or re-leasing the right to use
developed land and buildings shall be set by the developer (Art. 29).
Enterprises in EDZs shall primarily employ the labour of the DPRK. In this case an application for
employment of labour shall be submitted to the labour administration institution concerned. Where
foreign labour is to be employed as circumstances so require, concurrence of the management body
shall be obtained (Art. 41). Goods and services traded between the enterprises in EDZs and the goods
traded between an enterprise in EDZ and the institutions, enterprises and organizations of the DPRK
outside it shall be priced by reference to the international market price (Art. 43). The rate of corporate
income tax in EDZs shall be 14% of the net profit and 10% for the enterprises in the priority sectors
(infrastructure construction, high technologies and production of goods competitive on the world
market) (Art. 45). In the rest of the DPRK, the rate of corporate income tax is 25 % [5; 6].
Enterprises operating in EDZs for more than 10 years shall be entitled to reduction or exemption of
corporate income tax. The term and rate of reduction or exemption from corporate income tax and the
starting point of counting the said term shall be prescribed by the regulations (Art. 53). Preferential
tariff system shall be enforced in EDZs. Customs duties shall not be levied on the goods and materials
necessary for the construction in EDZs, brought in for processing, transit trade and barter trade, and
for the production or operation of the enterprises, as well as on goods produced to be exported, daily
necessities of investors and others designated by the state (Art. 56). It should be pointed out that the
Law shall not be applicable to the Rason Economic and Trade Zone, Hwanggumphyong and Wihwado
Economic Zone, Kaesong Industrial Zone and Mt. Kumgang Special Zone for International Tourism.
Mentioned zones were established before the Law adoption.
2. Pre-existing special economic zones
Before the adoption of the DPRK Law on Economic Development Zones, there were five zones in the
country (Table 1), however, one of them Sinuiju Special Administrative Region was not developed
until 2014 [5; 7]. The first ever special economic zone established in the DPRK is Rajin-Sonbong Free
Economic and Trade Zone (currently Rason Economic and Trade Zone). It was set up in December
1991 [1; 6]. Three more zones were created in 2002: Sinuiju Special Administrative Region, Kaesong
Industrial Zone (KIZ) and Mt. Kumgang Special Zone for International Tourism [8; 9]. And
Hwanggumphyong and Wihwado Economic Zone was established in 2011 [1; 10].
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Table 1. Pre-Existing Special Economic Zones.
Name
Category
Established
Rason Economic and Trade Zone
Comprehensive
December
1991
Sinuiju Special Administrative Region
Comprehensive
September
2002
Mt. Kumgang Special Zone for
International Tourism
Tourist
October 2002
Kaesong Industrial Zone
Industrial
November
2002
Hwanggumphyong and Wihwado
Economic Zone
Comprehensive
December
2011
Rason Economic and Trade Zone is situated in the northeastern part of the DPRK, bordering on
Hunchun, Jilin Province, China and Khasan, Russia. The infrastructure includes ports, roads, railway,
communication, etc. The Zone has the Rajin Port, the Sonbong Port and the Ungsang Port, all of
which are ice-free ports in winter, making it possible to be operational in all seasons. Nearby railways
are the Rajin-Tumangang Railway, which is linked to the Trans-Siberian Railway of Russia through
Khasan, and the Hongyi-Nanyang Railway connecting this routine with Tumen, Jilin Province, China.
The Rason City is linked to China via the border bridge between Wonjong of the DPRK and Quanhe,
Hunchun, China on one hand, and to Russia via the Tumangang Bridge and the Khasan Bridge on the
other hand. The envisaged goal of the project is to develop the Zone into the hub of advanced
manufacturing industry, logistics and tourism in the Northeast Asia by laying stress on co-
development and construction of basic establishments, industrial districts, logistic network, tourism in
order to develop 6 major industries, including raw material industry, equipment industry, hi-tech
industry, light industry, services and modern high efficiency agriculture. It’s planned to develop the
Zone into an integrated transit processing trade zone with 4 pillars, namely entrepot trade, export
processing, finance and service. The master plan is to build up a coastal industry zone covering Rajin,
Sonbong, Ungsang and Gulpho which are closely linked to each other in the principle of proper
distribution, industrial intensification and concentration on the project [3; 11].
Kaesong Industrial Zone and Mt. Kumgang Special Zone for International Tourism were set up as
inter-Korean joint ventures [2; 12]. KIZ was the largest and most effective zone. The Republic of
Korea provided capital and technology, and the DPRK provided labour and land resources. At its peak
in early 2013, Kaesong Industrial Zone had attracted 123 South Korean companies employing over
50,000 North Koreans and about 800 South Korean staff [3; 13]. The KIZ mainly produced textiles,
electrical goods and equipment; 90 per cent of the products were exported to and consumed in the
Republic of Korea. The remaining 10% were exported to third countries, including China, Russia, the
Middle East and Europe [2; 3; 13].
The complex was shut down in April 2013 during a period of high tension between the two Koreas,
but reopened in September of that year with most South Korean investors returning, and an agreement
between the two Koreas to seek international investment in the zone [6]. On February 10, 2016
Kaesong Industrial Zone was completely closed on the initiative of the South Korean side after the
North Korea tested a long-range missile [13; 14].
Thanks to the investments of Hyundai Corporation, Mt. Kumgang Special Zone for International
Tourism was developed very successfully. During its operation, the zone was visited by more than 2
million tourists from the Republic of Korea (84727 people in 2002; 345006 people in 2007 the all-
time high) [1; 15]. However, in 2008, the zone was suspended due to the death of a South Korean
tourist who entered the prohibited area [2]. In 2011, the North confiscated South Korean assets and
tried to manage the zone on its own, but the project failed [1; 16].
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Currently, the Ministry of Unification is considering the resumption of suspended inter-Korean
projects (in particular, Kaesong Industrial Zone and Mt. Kumgang Special Zone for International
Tourism) [17]. The leader of the DPRK Kim Jong Un called for the resumption of these projects
without preconditions in his new year's speech. However, in the Republic of Korea, such a call was
taken with caution, saying that it was first necessary to agree on such an opportunity with the world
community in order to create "suitable conditions" [6; 18]. Currently, the DPRK is subject to a wide
range of sanctions imposed by the Security Council of the United Nations (UNSC), the United States
and the Republic of Korea itself. In fact, sanctions make impossible any form of bilateral or
multilateral cooperation except humanitarian [5; 6; 17; 19; 20]. The sanctions can be lifted only in the
case if the DPRK will carry out a complete nuclear disarmament this is the position of the United
States, a permanent member of the UN Security Council with veto power [17].
In November 2017 Institute of Economic Research of Hyundai Corporation presented a report on
the Mt. Kumgang Special Zone for International Tourism. It states that 86.8 per cent of experts hold
the view to renew the project [13; 17].
A survey among the owners of companies operated in Kaesong Industrial Zone shows that 27
companies will return to the complex as soon as it will be reopened, another 70 companies will wait
for some time and only 4 companies will not return under any circumstances [17]. Low wages were
called the main attractiveness reason of the KIZ by 80% of respondents [13].
However, the US State Department warned that South Korean companies including Hyundai,
KORAIL and KT, should moderate their enthusiasm in trying to develop cooperation with the DPRK
[17]. On July 31, 2018 the Department representative declared on air of the radio station "Voice of
America" that the decision to close the Kaesong complex in 2016 was taken as a response to the
growing threat from the DPRK and its disregard of the UNSC resolutions [13].
Hwanggumphyong and Wihwado Economic Zone is an integrated development zone majoring in
IT, light industry, agriculture, commerce and tourism sectors. Hwanggumphyong-ri, being an island
located at the mouth of the Amnok River, face Ryongchon County to the east and the Pidan Island to
the south with the Amnok River in-between, and Xindan-dong, China to the west with a dry brook in-
between. It is planned to establish a residential area in the center of the Zone, where 15~25 storied
apartments are to be built in various styles and appearances so that one section can accommodate
around 10 000 residents. In the public area, buildings for finance, commerce, hotels, sports and
cultural recreation, tourism, public health, education, etc. are expected to be built at the both sides of
the principle road and auxiliary trunk roads. In addition to above, the pleasure parks furnished with
varieties of recreation facilities are to be established on the topside of the island, where foreigners
enjoy tourism and amusements. It is also planned to construct warehouse, logistic area and wharf in
accordance with the characters of the Zone [11].
3. Newly created EDZs
Currently, there are 23 economic development zones in the DPRK, 21 of which were created after the
Law adoption. As noted above, EDZs can be of central and local subordination. Among newly created
EDZs there are only five central-level zones [6; 11] (Table 2).
Table2. Newly Created EDZs of central subordination.
Name
Category
Sinuiju International Economic Zone
Comprehensive
Kangryong Model International Green Zone
Comprehensive
Unjong Hi-Tech Development Zone
Comprehensive
Jindo Export Processing Zone
Export Processing Zone
Mubong Special Zone for International Tourism
Tourist
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Sinuiju International Economic Zone is a revised project Sinuiju Special Administrative Region. It
was established in September 2002 (but has not been put into de facto operation as of 2014)1 in an area
including parts of Sinuiju and the surrounding area, in an attempt to introduce market economics, and
is directly governed as in the case of "Directly Governed Cities". The special administrative region
was modeled after China's Special Administrative Regions (SARs), Hong Kong and Macau, and, like
them, has a "Basic Law" [1; 3; 11]. This project is to build a combined economic development zone
that involves ultra-modern technical industry, trade, tourism, finance and bonded processing. The
project offers enormous potentials for development of an international metropolis for its geographic
advantages as a littoral city. About over 10 million tourists visit here from Dandong, which means
huge tourist revenue there from if fun fair and sightseeing tour courses are created along the River
Amnok. The Korea-China Amnok River Bridge that was built in 2014 besides to the existing Korea-
China Friendship Bridge will be connected the international airport, trade port, road and railway
networks to be constructed newly. Later on, the zone will become a comprehensive economic zone
with advanced IT industrial zone, competitive production industrial zone and combined economic
zone that houses trading center, trading and financial area, public service center, tourist zone and
bonded port.
Kangryong Model International Green Zone is located in southwest area of township of Kangryong
County in Kangryong peninsula of southern part of South Hwanghae Province. The green industrial
park will be created to the production base of green goods and their trade. The Kangryong County has
rich marine resources and ecological conditions and thus, it can be developed into the zone with
natural energy and environmental conservation technical center, green industrial technical research,
dissemination center, fish breeding and seafood processing hub. As Kangryong Township has right
soil for various farm crops like sweet potatoes, it can be developed into an experimental base for chain
cycle production system of stockbreeding, the production and processing base of organic farm
products and tourist service base [3; 11].
The aim of Unjong Hi-Tech Development Zone is to develop the EDZ into an ultra-modern
technology development zone, the pivot of which is to set up ultra-modern industry in the fields of
information industry, nano- and new material and bioengineering and a base for manufacturing ultra-
modern industrial equipment, accompanied with some processing trade and commercial service
activities. It is planned to be developed Section No.1 and Section No. 2. The pivotal infrastructure
projects such as traffic network, power grid, water supply and sewage system and communication
system will be planned as demanded by the zone, while the first section will cover management and
service district, information industry district, bio-industry district, material and equipment industry
district and technical engineering district. The second section will be developed in such a way as
establishing enterprises based on latest technology in the fields of agriculture, stockbreeding,
pomiculture, fish farming, industrial crops farming and biofuel energy production. Hillocks around the
zone will be rearranged and developed into the generating area by installing the solar panels [11].
Jindo Export Processing Zone is located in the water area of the Yellow Sea Barrage where the
Yellow Sea and the River Taedong join together. It is also some part of area of Ryongnam-Ri, Waudo
District on left and right highway directing from downstream of River Taedong to the Yellow Sea
Barrage. This project is to import raw materials by duty-free and produce and export a variety of light
industrial goods and chemical products by taking the advantages of the favorable conditions of
Nampho City with the industrial foundation. EDZ has Nampho Port, international trade port from
which one can directly go to China and Northeast Asia. By utilizing the regional advantages of
Pyongyang and Nampho with decades of development history of machinery, electronics and light
industry and rich labor force, it will process and produce export goods with imported raw materials.
By transferring the technique from other countries environment-friendly and energy-effective
1Chinese-Dutch businessman Yang Bin was appointed to be the first governor by the SPA Presidium in 2002. Before he
formally assumed his post, he was arrested by Chinese authorities and sentenced to 18 years in prison for tax evasion and
other economic crimes [1; 3].
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businesses will be introduced and new products and industrial fields be explored for the expansion of
domestic markets [3; 11].
Mubong Special Zone for International Tourism is planned to import wooden houses (fabricated
houses) from Russia to set them up around Lake Mubong. Villas and hotels will be built along shore
of Sokul Streamlet (or Lake Mubong) and Sinchon Water. The blueberry garden will be remained
intact, enabling travelers to pick and process blueberries by themselves as part of experimental tour.
Loft villas will be built on upper part of blueberry garden. Water Park, an integrated service center and
other relevant service facilities are to be built along shore of Sokul Streamlet (or Lake Mubong). A
horse riding area, a folk village, sports and entertainment facilities and in-door shooting range will
also to be established in the zone [4; 6; 11].
EDZs of local subordination, created after the adoption of the Law, include 16 zones: 4
comprehensive, 4 industrial, 3 agricultural, 2 export processing and 3 tourist ones (Table 3).
Table 3. Newly Created EDZs of local subordination.
Name
Category
Estimated
investment,
USD million
Manpho Economic Development Zone
Comprehensive
120
Chongjin Economic Development Zone
Comprehensive
200
Hyesan Economic Development Zone
Comprehensive
100
Amnokgang Economic Development
Zone
Comprehensive
240
Hyondong Industrial Development
Zone
Industrial
100
Hungnam Industrial Development Zone
Industrial
100
Wiwon Industrial Development Zone
Industrial
150
Chongnam Industrial Development
Zone
Industrial
n/a
Pukchong Agricultural Development
Zone
Agricultural
100
Orang Agricultural Development Zone
Agricultural
70
Sukchon Agricultural Development
Zone
Agricultural
n/a
Waudo Export Processing Zone
Export
Processing
100
Songnim Export-processing Zone
Export
Processing
80
Sinpyong Tourist Economic
Development Zone
Tourist
40
Chongsu Tourism Development Zone
Tourist
n/a
Onsong Island Tourist Development
Zone
Tourist
90
Manpho Economic Development Zone covers some areas of Mitari, Manpho City in Jagang
Province facing with Jian City and Tonghua City, Jilin Province, China. It is designated and planned
to establish EDZ majoring in modern agriculture, tourism and trade. The international service center of
tourism and trade is planned to be established in Mitari area. In Posangri area, it is also planned to
establish the modern agricultural base majoring in farming and stock-breeding and herb-cultivating
based on the modern circular system. Recreational activities and tourism could be enjoyed by many
people visiting some famous places and Amnok River. It is planned to develop the bonded processing
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of the foreign enterprises in the EDZ and to extend out processing industry of abundant resources in
Jagang Province [11].
Chongjin Economic Development Zone has a plan to be developed majoring in technical compact
processing industry depending on abundant labor sources and science and technical resources. This
zone has also plans to be expanded and developed into multiple economic development zone
combining high-tech zone and modern goods servicing zone (metal processing, machine
manufacturing, building materials industry, electric products and light industry products and export
processing in combination with marine transportation via Chongjin Port) [6; 11].
The purpose of Hyesan EDZ’s is to establish an economic development zone intensifying the
economic development that mainly relies on export processing, modern farming, tourism and trade,
etc. (international service center including tourism, recreation, modern light industry base of clothing,
weaving, hop and linen processing, construct mining-machine product base or lumber industry
machine base, wood-processing base). It covers some areas of Sinjang-Ri, Hyesan County, Ryangkang
Province facing Jilin, Jangbaek County, China, with Tuman River between both sides of it. The large
areas around Lake Samsu enable to build modern Koryo traditional medicine base, relying on
cultivating or processing medical plant. Mt. Chilbo, Bochon hot well and Lake Samsu will attract a lot
of tourists [3; 11].
Amnokgang Economic Development Zone is designated and planned to establish EDZ majoring in
modern agriculture, tourism and trade. It is planned to establish circular production system combining
farming with stock-breeding, the research centers for seed selection and breeding and the facilities for
vegetables and houseplants. Middle-scale factories producing equipment and materials including
complex organic fertilizer and assorted feed, and the basic processing line for the products from
agriculture and stockbreeding are going to be established. Excursion and yacht tour are going to be
widely enjoyed around the Guri Island [11].
It is planned to establish Hyondong Industrial Development Zone by using its favorable geographic
condition near Wonsan port, the main seaport in the Korean East Coast. Its main industry includes
information and light industry combining with tourist souvenir industry [3; 11].
Hungnam Industrial Development Zone mainly includes processing-on-commission, production of
chemical products, building materials and manufacturing of machine equipment. This area is near to
Hungnam Seaport and it has been a main chemicals industry and large-scale machine manufacturing
zone for a long time. There are large-scale factories and enterprises such as Ryongsong Machine
Complex, 2.8 Vinalon Complex, Hamhung Woods Processing Factory and Hamhung Silicate Brick
Factory located around the EDZ which could produce and supply necessary equipment, resources and
bonded products [11].
Wiwon Industrial Development Zone’s purpose is to establish the EDZ combined with science
research base for sericulture or freshwater fish breeding, majoring the mineral material processing,
wood material processing, machinery-making, agricultural products [1; 11].
Chongnam Industrial Development Zone is to introduce the advanced technology and ultra-modern
equipment in some areas of Ryongbuk-Ri, Chongnam District, South Phyongan Province which has
huge deposit of brown coal and a lot of local industrial factories and thus, it is to establish the EDZ
which produces, sells and exports the chemical products by coal as well as equipment, accessories and
tools for mining industry [3; 11].
Pukchong Agricultural Development Zone is planned to be a modern EDZ with a chain-circulation
system majoring on fruit-farming, fruit processing and stock breeding. The zone has a suitable
condition for fruit cultivation. Processing industry using medical herbs and mountain resources
growing in the area and sea resources will be encouraged as well [1; 11].
Orang Agricultural Development Zone is planned to build a modern and intensified EDZ majoring
in agricultural scientific research development base (using greenhouses with water saving and non-soil
vegetables) including stock breeding, seed-selection, breeding introduced by chain circulation
production system [11].
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Sukchon Agricultural Development Zone has planned to establish the center of research,
development, production and processing for modern agriculture with the chain cycle production
system together with base for seed-selection, breeding and processing of rice, corn, fruit and silkworm
and base for organic farming, an organic fertilizer and organic agro-chemical production. Processing
industry will be developed by use of apatite mine and factories nearby the zone. Processing base will
be set up by use of medicinal herbs resources which is rich in the province [1; 3; 11].
Waudo Export Processing Zone is nearby to Nampho Port which links directly to China and
Southeast Asia and it is also located close to Pyongyang and Nampho, equipped with advanced
industry. Due to its geographic advantages and abundant labor sources the zone is also favorable to
establish a model of export processing zone majoring in the export orientated processing industry by
using enough manpower and import materials. After completing the construction on the first stage, this
zone could be expanded to Jindo, Waudo District. Prospectively, it shall be built the EDZ majoring
financing, tourism, real estate, and food processing [1; 6; 11].
Songnim Export-processing Zone is laid on hill area along downstream of Taedong River. It is
planned to establish the EDZ majoring in export- processing by using the factories and enterprises of
the nearby cities, Songnim and Sariwon, and facilities of Songnim and Nampho ports. It is also
planned to develop storage and transportation services [11].
Sinpyong Tourist Economic Development Zone covers some areas of Pyonghua-Ri, Sinpyong
County, North Hwanghae Province situated at the foot of Mt. Mannyon, the Kubiryong Mountain
Chain and along the basin of Doha stream, which flows into River Nam. It is planned to establish the
zone providing services such as the circulation tourism which includes climbing, sight-seeing,
enjoying wonderful scenery of mountain peaks, cliffs, waterfalls, tourist service on Mt. Talhae and
Munsongjin, well-known as historic relics. It is also planned to develop complex tourist services
including all kinds of sports and entertainment, physical training, accommodation and so on [1; 3; 11].
Chongsu Tourism Development Zone is opposite to Zhenan District, Dandong City, Liaoning
Province, China and Kuandianmanzu, Dandong City with the Amnok River in-between. It is planned
to build up infrastructure and public facilities needed for tourist services in a modern style and to
construct various bases for specialty processing, stock breeding, fruit farming and fish farming, thus
developing the zone into the world-famous tourist development zone furnished with up-to-date tourist
service facilities in Korean style [11].
Onsong Island Tourist Development Zone covers some areas in Onsong County, North Hamgyong
Province adjacent to Daomen City, Jilin, China with Tuman River in between those two places. It is
planned to establish tourist resort with service facilities such as hostels and relaxation stops and golf
course. The restaurants serving Korean special food shall be set up in several places. A number of
facilities for sight-seeing including boating shall be installed along the area of the island to provide
sight-seeing services on the Tuman [3; 11].
4. Concluding remarks
Five economic development zones were established in the country prior to the Law adoption, however,
currently only two of them are functioning Rason Economic and Trade Zone and Hwanggumphyong
and Wihwado Economic Zone. The inter-Korean zones Kaesong Industrial Zone and Mt. Kumgang
Special Zone for International Tourism were suspended in 2016, and the Sinuiju project was frozen
until 2014, when it was revised under the Law. The newly established zones require significant
investments ranging US$ 40-240 million (see Table 3) and their development, as well as the
functioning of the previously created EDZs, is impossible without the lifting of international sanctions
against the DPRK.
The UN Security Council has passed a number of resolutions since the DPRK’s first nuclear test in
2006. Resolution 1718, passed in 2006, demanded that the DPRK cease nuclear testing and prohibited
the export of some military supplies and luxury goods to the country. Since the testing of nuclear
weapons did not stop, in subsequent years the UNSC expanded and tightened sanctions against the
DPRK.
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In accordance with Resolution 2094, sanctions were imposed on remittances to the DPRK from the
international financial system. Resolution 2270 prohibited the export of gold, vanadium, titanium, rare
and rare earth metals, as well as coal and iron from the DPRK for profit. Resolution 2321, adopted in
November 2016, restricted the export of coal and banned the export of copper, nickel, zinc and silver.
Subsequent Resolutions 2345, 2356, 2371, 2375, 2397, 2407 and 2464 suggest a complete ban on the
establishment of joint ventures with the participation of North Korean capital, the export from the
DPRK of its main export goods, restrictions on the import of oil products and the use of North Korean
labor abroad. The imposed sanctions are valid until April 24, 2020. In addition, the USA and its allies
imposed "secondary" sanctions aimed at the complete financial isolation of the DPRK, the
organization of its trade and naval blockade.
Thus, the prospects for the functioning of EDZs in the DPRK and the possibility of participation of
Russian and South Korean companies into these projects are fully determined by the foreign policy
situation in the region and the process of denuclearization of the country.
5. Acknowledgments
The study was supported by the grant of the President of the Russian Federation for young Russian
scientists, project MK-1111.2019.6 "Trilateral Economic Cooperation of Russia, the Republic of
Korea and the DPRK: Prospects and Obstacles".
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Article
The last decade and a half we saw the gradual forming of a sanctions regime against the DPRK in connection with Pyongyang’s nuclear and missile programs. United Nations Security Council resolutions have disconnected North Korea from the global financial system, cut all foreign military ties with the country, introduced considerable sectoral sanctions on imports and exports, blocked major channels Pyongyang used to acquire foreign currency. Besides, the United States, South Korea and Japan have simultaneously enforced unilateral restrictions. Early 2018 offers an opportunity to solve the Korean Peninsula nuclear problem, and now is the time to assess the sanctions’ efficiency. We analyze the problems with their implementation and describe the means North Korea employs to circumvent the regime. Such measures include building an autarkic economy, ignoring the directives of the United Nations Security Council, deceiving international partners, exploiting the global market and engaging in espionage and diplomacy. These strategies allow the DPRK to support and develop the economy, as well as missile and nuclear programs. Whatever the outcome of the negotiations may be, it is already evident that sanctions cannot efficiently solve the nuclear issue and must give way to dialogue.
Article
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.
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  • M Mimura
Mimura M 2015 The Newly Created Economic Development Zones in the Democratic People's Republic of Korea: in Relation to the New Economic Policy under the Kim Jong Un Government The Northeast Asian Economic Review 1 27-37
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The ABCs of North Korea's SEZs US-Korea Institute at SAIS Report
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Foreign Economic Relations of DPRK in XXI Century and Prospects of Their Development under Kim Jong-un The Far Eastern Affairs
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