Chapter 1  Fundamentals

Article 1 (Objective)

This Law is enacted for the purpose of providing strict guidelines for the establishment, development and management of Economic Development Zones(EDZs), thereby contributing to the promotion of external economic cooperation and exchange, developing national economy and improving people’s living. 

Article 2 (Definition and types of EDZs)

 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. 

Article 3 (Classification of EDZs according to management body)

EDZs shall be classified into local-level and central-level zones depending on the management body.

The names and affiliation of EDZs shall be decided by the non-standing State review committee. 

Article 4 (Authority in charge of establishment of EDZs)

Work relating to the establishment of EDZs in the DPRK shall be placed under the unified administration of the central guidance organ of special economic zones.

The State shall ensure that all matters arising at home and abroad in connection with the establishment of EDZs are handled exclusively by the central guidance organ of special economic zones.  

Article 5 (Preferential treatment to investors)

EDZs shall be open for investment by corporate bodies, individuals and economic organizations of foreign countries, and overseas Koreans, who/which may set up enterprises, branches and offices therein and freely conduct economic activities.

The State shall ensure that investors are provided with preferential conditions for economic activities in such areas as land use, employment and tax payment. 

Article 6 (Sectors of priority, prohibition and restriction)

The State particularly encourages investment in EDZs for the construction of infrastructure facilities, introduction of advanced science and technology and production of internationally competitive goods.

Projects that are detrimental to national security, public health, sound social and moral life and environmental conservation and those that are outdated from the viewpoint of economy and technology shall be prohibited or restricted. 

Article 7 (Protection of investors’ rights and interests)

The vested rights, invested property and legitimate income of the investors in EDZs shall be protected by the law.

The State shall not nationalize or expropriate the property of the investors. Where an investor’s property is, under unavoidable circumstances, to be expropriated or used temporarily for public interest, notification thereof shall be made in advance and sufficient compensation commensurate with its value shall be made in good time. 

Article 8 (Protection of personal safety)

Personal safety in EDZs shall be protected by the law of the DPRK.

No one shall be detained or arrested, nor his place of residence searched without a legal warrant.

Treaties concluded between the DPRK and a foreign country in respect of personal safety shall take precedence. 

Article 9 (Applicable laws and regulations)

Applicable to the development and management of EDZs, business operation and other economic activities therein are this Law, and its implementing regulations and rules. 

Chapter 2 Establishment of Economic Development Zones  

Article 10 (Grounds for establishment of EDZs)

EDZs shall be established in accordance with the State economic development strategy. 

Article 11 (Principle of designating an area as an EDZ)

The following areas shall be designated as EDZs:

1. Areas advantageous to the external economic cooperation and exchange;

2. Areas conducive to the development of the national economy, science and technology;

3. Areas that are separated from residential quarters by certain distance; and 

4. Areas that do not belong to State-designated reserves. 

Article 12 (Handling of matters arising in connection with EDZs)

Where a foreign investor raises questions as to the establishment and development of an EDZ, the institution, enterprise and organization concerned shall prepare a written document thereof for submission to the central guidance organ of special economic zones.

The central guidance organ of special economic zones shall carefully review the submitted document and make a decision thereon. 

Article 13 (Approval of the government concerned, notification thereof)

A foreign investor who wishes to make investment in an EDZ shall obtain approval thereof from the government of his country, and the result thereof shall be notified in writing to the institution concerned of the DPRK. 

Such notification shall not be necessary where the law of the country concerned does not require obtaining such approval. 

Article 14 (Submission of application for establishment of local–level EDZs)

Application for the establishment of local-level EDZs shall be submitted by the people’s committee of the province (or municipality directly under central authority) concerned to the central guidance organ of special economic zones. In this case documents concerning agreement of the institutions concerned of the province (or municipality directly under central authority) shall also be filed. 

Article 15 (Submission of application for establishment of central–level EDZs)

Application for establishment of central–level EDZs shall, according to the prescribed procedures, be prepared by the institution concerned for submission to the central guidance organ of special economic zones. In this case document concerning agreement of the institutions concerned shall also be submitted. 

Article 16 (Consultation with related institutions)

The central guidance organ of special economic zones shall hold full consultations with the related central institutions before submitting the document of review of establishment of EDZs to the non-standing State review committee. 

Article 17 (Approval of establishment of EDZs)

Approval of establishment of EDZs shall be granted by the non-standing State review committee.

The central guidance organ of special economic zones shall, when submitting the document of review of the establishment of EDZs to the non-standing State review committee, also file the documents of agreement of related central institutions. 

Article 18 (Announcement of establishment of EDZs)

The decision of the State on the establishment of EDZs shall be announced by the Presidium of the Supreme People’s Assembly. 

Chapter 3 Development of Economic Development Zones 

Article 19 (Principle of development of EDZs)

EDZs shall be developed on the principle of:

1. Making development stage by stage in accordance with a plan;

2. Diversifying investment attraction; 

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. 

Article 20 (Developer)

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. 

Article 21 (Approval of developer)

Approval of a developer shall be granted by the central guidance organ of special economic zones.

The central guidance organ of special economic zones shall register the developer and issue a note of approval of development right. 

Article 22 (Formulation and approval of development plan)

The master plan or detailed plan of an EDZ shall be worked out by the institution concerned or the developer on the basis of the master plan of regional land development.

Approval of master plan shall be granted by the Cabinet and the detailed plan by the central guidance organ of special economic zones.

Approval of modified development plan shall be granted by the institution that approved the plan concerned. 

Article 23 (Mode of development)

The mode of development shall be determined in such a rational way as suitable to the features of the EDZ concerned and development conditions, and conducive to the national economic development.  

Article 24 (Land lease contract)

A developer who wishes to rent land shall enter into a contract with the land management institution concerned.

The contract shall specify the term of lease, area, compartment, purpose of use, term and method of rent payment, and other matters as may be required.

The land management institution concerned shall issue a certificate of land use to the enterprise upon the latter’s payment of rent as specified in the contract. 

Article 25 (Term of land lease, extension thereof)

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.

Article 26 (Contribution of land use right)

Where an institution, enterprise or organization wishes to set up a developer enterprise jointly with a foreign investor, land use right may be contributed according to prescribed rates. 

Article 27 (Bearing of expenses for removal and relocation of buildings and attachments)

Expenses for the removal and relocation of buildings, attachments and residents in EDZs shall be borne by the developer. 

Article 28 (Construction of infrastructure and public facilities)

 Construction of infrastructure and public facilities in EDZs shall be undertaken by the developer.

The developer may, according to the prescribed procedures, invite other enterprises to participate in the construction of infrastructure and public facilities.

Article 29 (Price of buying, selling or re-leasing land use right and buildings)

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. 

Article 30 (Registration of land use right and building ownership)

An enterprise shall, upon acquiring land use right or building ownership, have it registered with the management committee and have a certificate thereof issued.

In case of any change to the land use right or building ownership, the particulars of change shall be registered and a new certificate issued. 

Chapter 4 Management of Economic Development Zones 

Article 31 (Institution in charge of management)

Management of EDZs shall be undertaken by the EDZs management institution under the guidance and assistance of the central guidance organ of special economic zones and the people’s committee of the province (or municipality directly under central authority) concerned.

The management institution may, in consideration of the specific conditions of EDZ concerned, be named management committee, management office and the like.

Article 32 (Principle of management of EDZs)

EDZs shall be managed on the principle of:

1. Strictly observing and enforcing the laws and regulations;

2. Ensuring the independence of enterprises;

3. According preferential treatment to economic activities; and 

4. Referring to international practice. 

Article 33 (Functions of central guidance organ of special economic zones)

The central guidance organ of special economic zones shall perform the following functions:

1. To formulate the development strategy of  the State on EDZs;

2. To engage in cooperation with foreign governments and attraction of investment in EDZs;

3. To contact commissions, ministries and central institutions in connection with EDZs;

4. To render assistance in the work of the management institution;

5. To review and approve the screening criteria for the establishment of EDZs; and

6. To perform such other functions as are assigned to it by the State.

Article 34 (Functions of people’s committee of province or municipality directly under central authority)

 The people’s committee of province (or municipality directly under central authority) shall perform following functions in respect of EDZs under their control:

1. To organize management body;

2. To prepare and issue instruments of State administration concerning the work of EDZs such as the implementing regulations of the law and rules on EDZs;

3. To render assistance in the work of management body;

4. To provide labour needed for the management of and business in EDZs; and

5. To discharge such other functions as may be assigned to it by the State. 

Article 35 (Composition and chief of management body)

The management body shall consist of such members as are necessary to suit the actual conditions of EDZs concerned and to ensure the profitability thereof. The chief shall be the chairperson of the management committee or the head of the office.

The chief shall represent the management body and have charge of the work thereof. 

Article 36 (Functions of management body)

The management body shall:

1. Work out the rules for the development and management of EDZs;

2. Foster investment climate and attract investment;

3. Grant approval of establishment of enterprises, and undertake registration and licensing;

4. Grant permission of specially-ordered construction projects and conduct inspection of completion of construction work;

5. Take custody of design for ordered projects;

6. Register land use rights and building ownership;

7. Render cooperation in the management of enterprises;

8. Undertake construction of infrastructure and public facilities and supervision of and cooperation in management;

9. Take measures for environmental protection and fire-fighting;

10. Prepare articles of association of the management body; and 

11. Perform such other functions as are assigned to it by the central guidance organ of special economic Zones and people’s committee of the province (or municipality under direct central authority) concerned. 

Article 37 (Compilation and execution of budget by management body)

The management body shall independently compile and execute the budget. In this case documents concerning the compilation and execution of budget shall, through due procedures, be submitted to the people’s committee concerned or the central guidance organ of special economic zones.  

Chapter 5  Economic Activities in Economic Development Zones

Article 38 (Application for establishment of enterprise)

An investor who wishes to establish an enterprise in an EDZ shall submit an application to the management body.

Upon receipt of an application the management body shall, within 10 days, approve or reject it and notify the result to the applicant. 

Article 39 (Streamlining of formalities)

The central guidance organ of special economic zones, the people’s committee of the province (or municipality directly under central authority) and the management body shall streamline formalities for the establishment of enterprise such as application, screening, approval and registration. 

Article 40 (Registration, legal capacity)

Upon obtaining approval of establishment an enterprise shall, within the prescribed period, have its establishment and address registered. It shall also be registered for customs and tax purposes.   

The enterprise shall be a corporate body of the DPRK from the day of its registration with the management body. Branches and offices of foreign countries shall not be corporate bodies of the DPRK.

Article 41 (Employment of labour)

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.

Article 42 (Minimum monthly wage)

Minimum monthly wage of employees in EDZs shall be fixed by the central guidance organ of special economic zones. In this case the management body or the people’s committee of the province (or municipality directly under central authority) shall be consulted. 

Article 43 (Price of goods and services)

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. 

Article 44 (Accounting of enterprises)

Accounting and settlement of accounts of the enterprises in EDZs shall be conducted in accordance with the laws and regulations relating to fiscal and accounting matters applicable to EDZs.

Matters not covered in the laws and regulations relating to fiscal and accounting matters shall be dealt with pursuant to the internationally recognized accounting practice.

Article 45 (Corporate income tax rate)

The rate of corporate income tax in EDZs shall be 14% of the net profit, and 10% for the enterprises in the priority sectors. 

Article 46 (Circulating money, settlement currency)

Circulating money and settlement currency in EDZs shall be Korean Won or designated currency. 

Article 47 (Taking in or out foreign currency, profit, property)

Foreign currency may be freely taken in or out of EDZs and legitimate profits and other income may be remitted without any restrictions.

Property that was brought into EDZs and legitimately acquired property may be taken out. 

Article 48 (Protection of intellectual property rights)

Intellectual property rights shall be protected by law in EDZs.

Procedures for the registration, use and protection of intellectual property rights shall be prescribed by the laws and regulations concerned. 

Article 49 (Tourism)

International tourism shall be promoted in EDZs by  developing tourism resources in a manner suited to the natural scenery, environment and features of the area concerned.

Investors may conduct tourism business in accordance with prescribed regulations.

 Article 50 (Inward or outward movement of persons, vehicles and goods)

Institutions of immigration control, customs, quarantine and others concerned shall provide conditions for the inward or outward movement of persons, vehicles and goods so that development and management of EDZs and economic activities of the investors may progress smoothly. 

Article 51 (Transaction of securities)

Foreign-invested enterprises and foreigners in EDZs may transact securities in accordance with prescribed regulations. 

Chapter 6   Incentives and Preferential Treatment

Article 52 (Preferential treatment concerning land use)

Land required by enterprises in EDZs shall be provided in consideration of the actual demand, and different preferential treatment shall, depending on the sector and purpose of use of the land concerned, be accorded in respect of the term of lease, rent and method of payment.

Enterprises investing in the construction of infrastructure and public facilities, and priority sectors shall be given priority in the selection of the location of land and entitled to exemption from land rent for a prescribed period.

Article 53 (Reduction and exemption of corporate income tax)

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.

Article 54 (Refund of income tax on reinvested amount)

Where an investor reinvests dividends to increase the registered capital or to set up a new business for more than 5 years’ operation, 50% of the corporate income tax paid on the reinvested amount shall be refunded.

Reinvestment in the construction of infrastructure facilities shall benefit from refund of the whole amount of corporate income tax paid on the reinvested amount.

Article 55 (Preferential treatment to developer)

The developer shall have priority in obtaining the right of management of tourism business, hotel business and the like.

Tax shall not be levied on the property of the developer and the infrastructure and public facilities that he operates.

Article 56 (Preferential tariff system, exemption from customs duties)

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. 

Article 57 (Declaration of inward or outward materials)

Goods and materials shall be brought in or taken out of EDZs subject to declaration.

Where goods and materials are to be brought in or taken out, a declaration form shall be filled for submission to the customs concerned.

Article 58 (Communication service)

Facilities shall be provided for the use of communication means such as mail, telephone, fax and the like. 

Chapter 7 Complaints, Settlement of Disputes

Article 59 (Complaints, settlement thereof)

Individuals and enterprises in EDZs may lodge complaint with the management body, central guidance organ of special economic zones and the institution concerned.

The institutions shall conduct investigation and settle the complaints within 30 days of receipt and notify the complainant of the result.

Article 60 (Settlement of dispute by mediation)

Parties to disputes in EDZs may settle them by mediation.

The mediation plan shall be worked out on the basis of the intention of the parties concerned, and take effect upon their signature.  

Article 61 (Settlement of disputes by international arbitration)

Parties to a dispute may, on the basis of an arbitration agreement, refer a dispute to an arbitration body of the DPRK or a foreign country.

Arbitration procedures shall be pursuant to the arbitration rules of the international arbitration committee concerned.

Article 62 (Settlement of disputes by court)

Parties to a dispute may bring an action to the court of the province (or municipality directly under central authority) that has jurisdiction over EDZs concerned or to the Central Court. 

Appendix

Article 1 (Date of entry into force)

This Law shall enter into force as from the date of promulgation.

Article 2 (Limitation of application)

This 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.