North Korea tries to attract foreign investment
Even though North Korean regime is putting efforts to launch more foreign capital, the legal system seems to be the hurdle (Image: iStock.com/LUHUANFENG, KCNA)
The North Korean regime appears to be making an effort to induce foreign business but, given international sanctions over its rogue nuclear weapons program and the absence of any meaningful opening of the economy, is unlikely to succeed.
In what may have been a move to entice Russian companies following the recent warming of ties, the country’s official English-language business quarterly, Foreign Trade, last month reprinted the Foreign Investment Law in full. The previous edition this year featured the Foreign Investment Bank Law.
Experts say that featuring the investment-related laws in this way indicates an ambitious push to attract foreign investment. But they are highly doubtful that officials in North Korea understand what investors look for before making such decisions.
“There is some sense in investing in North Korea if you are anticipating some opening of the border,” said Chou Ye-seo, a North Korea expert in Seoul. “But investing while it remains closed is like betting when you know you can’t win.”
The North Koreans obviously want foreign investment, but the system remains unprepared to handle it, he said. This has, in fact, been the situation since the late 1980s and early ‘90s. The Foreign Investment Law dates back to May 1992 with amendments in 1999, 2004 and later in 2012.
Similarly, the Foreign Investment Bank Law was established in 1993, and has undergone several revisions. Its regulations cover the establishment and operation of foreign investment banks in the country. They provide a legal framework for expanding financial cooperation with other countries.
The law classifies joint venture banks as those that are jointly invested by North Korean and foreign investors, foreign banks as solely invested by foreign investors, and branches of foreign banks as those established and operated by the foreign bank headquarters. The law permits foreign investors to establish and operate foreign investment banks in North Korea, while joint venture banks can only be set up in specific areas approved by the government.
“This legislative framework is incomplete and the legal provisions are vague, creating uncertainty for investors,” Choi said. “Secondly, the standards for protecting the property and rights of foreign-invested enterprises are insufficient, raising doubts about the effectiveness of such protections.”
Choi added that the dispute resolution procedures are too vague. “The lack of systematic coherence in the legislation creates an unstable investment environment,” he said.
He added that a significant omission, given that South Korean companies are those most likely to take on the risks associated with North Korean business, is the absence of specific regulations concerning South Korean companies and business people.
Jia defected from North Korea in search of basic freedoms, including the right to travel and freely express herself. Her identity as a North Korean has given her a sense of responsibility to represent the voices of her family and hometown friends and is also the reason she has chosen to work as a journalist.
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