THE LAW OF THE DEMOCRATIC PEOPLE’S
REPUBLIC OF KOREA ON THE RASON ECONOMIC AND TRADE ZONE
Adopted by Resolution No. 28 of the Standing Committee of the Supreme People’s
Assembly on January 31, 1993,
amended by Decree No. 484 of the Presidium of the Supreme People’s Assembly
on February 26, 1999, and
amended by Decree No. 3400 of the Presidium of the Supreme People’s Assembly
on November 7, 2002
Chapter 1. Fundamentals
Article 1. The purpose of this law is to provide provisions
for efficient administration and operation of the Rason economic and trade zone
in the Democratic People’s Republic of Korea, and for the further expansion
and promotion of economic cooperation and exchange with foreign countries.
Article 2. The Rason economic and trade zone is a certain part
of the DPRK designated as a preferential area for transit transport and trade,
processing of export goods, financing and services.
Economic and trade activities in the Rason economic and trade zone shall be
conducted in accordance with the system and order specially established by the
Article 3. The Cabinet shall direct in a unified way trade,
foreign investment and development and administration activities in the Rason
economic and trade zone.
Article 4. The State shall protect by law the capital invested
and the incomes earned, as well as the vested rights of foreign investors in
the Rason economic and trade zone.
Article 5. A foreign investor shall have free choice of forms
of business management and operation in the Rason economic and trade zone.
Article 6. Economic and trade activities in the Rason economic
and trade zone shall be governed by this Law and the other laws and regulations
of the DPRK applying to the Zone.
Article 7. A foreign investor may conduct economic and trade
activities in the form of contractual or equity joint venture or wholly foreign-owned
enterprise in the Rason economic and trade zone.
Chapter 2. Duties and Powers of Management Organs
Article 8. The administrative and management organs for the
Rason economic and trade zone shall include the central trade guidance organ,
relevant central organs and the Rason City People’s Committee.
The central trade guidance organ and relevant central organs are organs guiding
trade, foreign investment and development, administration and management of
the Zone in accordance with their duties and powers, and the Rason City People’s
Committee is the local executive organ for implementing all matters related
to the development of the Zone.
Article 9. The duties and powers of the central trade guidance
organ in connection with the Rason economic and trade zone shall be:
1. To adopt State measures in connection with trade and foreign investment,
2. To direct on a regular basis economic and trade affairs in contact with relevant
central organs, and
3. To receive, screen and settle the applications for foreign investment.
Article 10. The relevant central organs may carry out, in accordance
with their own duties and powers, such activities as planning for development
of the Rason economic and trade zone, preparation and execution of budget, financial
and banking services, land lease, and urban development, issuing of licences
of building lots and so forth.
Article 11. The Rason City People’s Committee may have an external
economic department that shall be responsible for promoting trade, foreign investment
and the development of the Zone, and for organizing and implementing their administration
and management in a rational manner.
Article 12. The duties and powers of the Rason City People’s
Committee related to trade, foreign investment and Zone development shall be:
1. To prepare, advertise and implement the plans for trade and Zone development,
2. To receive on the spot an application for foreign investment and present
it to the central trade guidance organ, for screening,
3. To register enterprises and issue business licences,
4. To assist foreign-invested businesses in employing workers,
5. To examine transfer of the right to use land or buildings and present it
to the relevant central organ for screening,
6. To render direct or indirect services for the construction or reconstruction
of buildings, structures and work places, and
7. To conduct other activities for the improvement of management and operation
of the Zone.
Article 13. The central trade guidance organ shall reach a
decision on the approval or refusal of the establishment of an enterprise, within
50 days of receiving an application for investment in contractual or equity
joint ventures, and within 80 days of receiving an application for investment
in wholly foreign-owned enterprises, and inform the relevant organization of
Investments may be prohibited or restricted for projects that may endanger the
national security or do a harm to the health of inhabitants or the growth of
animals and plants, projects that go beyond the environmental standards set
by the State, projects that are obsolete in economic and technical terms or
projects lacking in economic feasibility.
Article 14. The central trade guidance organ and the Rason
City People’s Committee may cancel their approval for the establishment or the
business licence, or suspend the operations, of a foreign-invested business
in the following cases:
1. When there is a failure to comply with the conditions for investment, or
2. When there is a serious breach of a law of the DPRK.
Article 15. The Rason City People’s Committee may establish
a technical training fund and operate a training centre for the purpose of improving
technical skills of the workers to be employed in foreign-invested businesses.
Article 16. The Rason City People’s Committee may form and
operate a consultative committee, which shall be composed of the representatives
of the People’s Committee, the relevant organs and enterprises and of the foreign
investors, and which shall consult about and assist in the trade and the development,
administration and operation of the Zone.
Chapter 3. Provision of Conditions for Economic Activities
Article 17. Goods may be brought into the Rason economic
and trade zone and may be stored, processed, assembled, disassembled, sorted,
packed, or repaired in the Zone or may be taken out of the Zone to a foreign
Any goods that endanger the security and social and moral life of the country,
the health of people and the growth of animals and plants shall not be allowed
to be brought into the Zone.
Article 18. A foreign investor may establish and operate an
enterprise or undertake transit transport in the Rason economic and trade zone.
Organs, enterprises and entities of the DPRK may also invest, for the purpose
of economic and trade activities, in the Zone either solely or in the form of
equity or contractual joint venture enterprises with the approval of the Cabinet.
Article 19. An equity or contractual joint venture enterprise
and a domestic organ, enterprise or entity of the DPRK may not open a branch,
agency or representative office in the Rason economic and trade zone without
the approval of the Cabinet.
Article 20. A foreign-invested business or a foreign individual
may acquire on lease land it needs in the Rason economic and trade zone, and
the period of the lease may be extended with the consent of the lessor.
Article 21. A foreign-invested business may employ domestic
labour force or dismiss them in accordance with a contract concluded with the
labour exchange in the Rason economic and trade zone.
Where necessary, some management personnel, technicians and skilled workers
for special jobs may be employed from foreign countries by agreement with the
Rason City People’s Committee.
Article 22. Prices for goods manufactured by a foreign-invested
business in the Rason economic and trade zone shall be determined by agreement
between buyer and seller.
Prices of important raw and other materials, and essential mass consumption
goods may be determined by the Rason City People’s Committee.
Article 23. The trade ports in the Rason economic and trade
zone are open to any cargo ships and crewmen for free movement in and out according
to the entry/ exit order for the ports, regardless of their nationality.
Article 24. A foreign-invested business in the Rason economic
and trade zone may consign the processing of raw and other materials or parts
to an enterprise or entity of the DPRK outside the Zone.
When the value of processing performed outside the Zone is not greater than
40 per cent of the total value of production of the enterprise concerned, such
processing on consignment shall be treated in the same manner as production
activities conducted within the Zone.
Chapter 4. Customs Duties
Article 25. The State shall apply a system of preferential
customs duties in the Rason economic and trade zone.
Article 26. No customs duties shall be levied on the following
goods in the Rason economic and trade zone:
1. Goods brought into the Zone for the purpose of processing for export,
2. Materials needed for production and operation of enterprises, and export
3. Certain quantities of office supplies and personal articles for the needs
of foreign investors,
4. Materials needed for the construction of the Zone, and
5. Trade cargoes of foreign countries passing through the Zone.
Article 27. Article 26 of this Law shall not be applicable
in the following cases:
1. When goods are imported from foreign countries for sale in the Rason economic
and trade zone, and
2. When goods produced in the Zone or imported into the Zone are sent to other
parts of the country for sale.
Article 28. When a foreign-invested business sells its products
in the Zone instead of exporting them, customs duties on the imported raw materials
and parts used in the production of goods shall be paid.
Article 29. A foreign-invested business in the Rason economic
and trade zone shall keep documents concerning the import and export of goods
such as the records of customs inspection and invoices for goods for a period
of 5 years.
Chapter 5. Currency and Finance
Article 30. The currency in circulation in the Rason economic
and trade zone shall be Korean won, and payment for all transactions may be
made either in Korean won or in a convertible foreign currency.
The rate of exchange of foreign currencies against the Korean won shall be the
rate published by the foreign exchange control organ.
Article 31. A foreign-invested business may keep an account
at a bank of the DPRK or a foreign bank, upon agreement with the foreign exchange
Article 32. A foreign-invested business or foreign individual
may secure loans to meet financial needs for business operation from a DPRK
or foreign financial institution.
Korean won secured either by loan or by purchasing shall be deposited in a bank
of the DPRK.
Article 33. Banks in the Rason economic and trade zone may,
with the consent of the foreign exchange control organ, engage in offshore banking
Article 34. A foreign-invested business or a foreign individual
may transact securities denominated in foreign currency at a fixed place established
in the Rason economic and trade zone.
Chapter 6. Guarantees and Privileges
Article 35. A foreign investor may remit abroad profits,
interests, dividends, rentals, service charges, proceeds from the sale of assets
and other incomes earned from business activities in the Rason economic and
trade zone, and may take out of the Zone all the assets that have been brought
into it when the duration of operation expires.
Article 36. The enterprise income tax rate in the Rason economic
and trade zone shall be 14 per cent of net profit.
Article 37. A foreign-invested business in the production sector
may be entitled to full exemption from enterprise income tax for 3 years from
the first profit-making year and reduction of up to 50 per cent for the following
2 years, provided that it is to be operated for a duration of more than 10 years.
A foreign-invested business engaged in infrastructure development projects with
a total investment of more than 4,500,000,000 won may be given full exemption
from enterprise income tax for 4 years from the first profit-making year and
reduction of up to 50 per cent for the following 3 years.
Article 38. Foreign investors investing in the priority sectors
may be entitled to a lease of land in favorable locations at lower rates of
Article 39. Foreign investors investing in the priority sectors
may be given priority in granting of loans for business activities from the
financial institutions of the DPRK.
Article 40. If a foreign investor reinvests his profits for
the duration of 5 years or more, 50 per cent of the income tax paid on the reinvested
amount may be refunded. In case of reinvesting in an infrastructure development
project, all of the income tax paid on the reinvested amount may be refunded.
Article 41. A foreigner may enter the Rason economic and trade
zone directly without visa and stay or reside in the Zone according to the relevant
Chapter 7. Settlement of Disputes
Article 42. Any dispute arising in connection with economic
and trade activities in the Rason economic and trade zone shall be settled through
consultation between the parties concerned.
In case of a failure in consultation, it shall be settled by arbitration or
legal procedures provided by the DPRK, or may be taken to an arbitration agency
in a third country for settlement.