REGULATIONS ON CONTRACT CONSTRUCTION
IN THE RASON ECONOMIC AND TRADE ZONE
Adopted by Decision No. 59 of the Cabinet on October 27, 2000
Chapter 1. General
Article 1. These regulations are formulated to provide a
regime governing contract construction and facilitate contract construction
in the Rason economic and trade zone.
Article 2. Any foreign-invested enterprise, foreign individual
or Korean compatriot residing outside the territory of the DPRK (hereinafter
called the owner) may commission a construction project to a DPRK or foreign
building company (hereinafter called the contractor) in the Rason economic and
trade zone (hereinafter called the Zone).
Article 3. Contract construction is an undertaking, in which
the owner concludes a contract with the contractor to commission a construction
Article 4. Contract construction shall include main contract
construction and subcontract construction (including labour subcontract construction).
Main contract construction is an undertaking, in which the contractor takes
over the whole construction project under the contract with the owner.
Subcontract construction is an undertaking, in which the contractor concludes
a subcontract with another contractor to commission part or whole of the construction
project, subject to approval of the owner.
Labour subcontract construction is an undertaking, in which labour subcontractor
takes over the construction project under the condition that main contractor
or subcontractor provides equipment, tools, instruments, building materials
and others at its own expenses.
Article 5. Contract construction projects shall include construction
of new buildings and other structures, reconstruction, relocation, enlargement,
rehabilitation, improvement, expansion and repair.
Article 6. The contractor shall have such skilled labour and
modern equipment that it can carry out contract construction in the Zone, and
be self-supportive as an independent entity.
Article 7. Labour for contract construction shall be provided
through the labour exchange agency in the Zone. A foreign owner or contractor
shall employ more than 80 per cent of total labour needed for contract construction
with that of the DPRK.
In special cases, the percentage may be regulated subject to approval of the
central trade guidance organ.
Article 8. The Zone construction supervision organ shall exercise
a uniform control over contract construction, under the guidance of the central
trade guidance organ.
Article 9. The matters that are not covered by these regulations
shall be governed by other corresponding laws and regulations of the DPRK.
Chapter 2. Project Construction
Article 10. Where the owner wishes to be engaged in contract
construction, it shall submit an application for a contract construction project
to the State construction supervision organs for approval.
The State construction supervision organs include the central construction supervision
organ and the Zone construction supervision organ.
Article 11. The State construction supervision organs shall
review and decide whether to reject or approve the application for a contract
construction project within 10 days from its receipt.
Article 12. A contract construction project shall be designed
as indicated in the letter of approval.
The owner may place an order with a DPRK design institution or a foreign design
company to design the project.
Article 13. A contract construction shall be undertaken according
to the contract between the owner and the contractor.
Article 14. A contract may be entered into by means of tendering
Tendering shall be approved by the Zone construction supervision organ.
Article 15. When the owner has selected a contractor or subcontractor,
it shall obtain an approval of the Zone construction supervision organ.
Article 16. The contractor who intends to undertake a contract
construction project shall register the contract with the Zone construction
Article 17. Before groundbreaking, the owner shall apply to
the Zone construction supervision organ for construction licence, and hand over
to the contractor the letter of approval, design, construction licence and other
Article 18. Ground shall not be broken for an unlicenced construction
Article 19. The contractor, which has not been registered in
the Zone, shall submit an application to the zone business registrar for temporary
Article 20. The Zone business registrar shall, within 20 days
from the receipt of application, review it and decide whether to register the
applicant or reject it.
When the temporary registration has been approved, a certificate of temporary
business registration shall be issued.
Article 21. A business registration certificate shall be valid
for the period specified in the contract.
Article 22. The contractor shall be a corporate body of the
DPRK from the day on which it has made temporary business registration.
Article 23. Where a contract is not implemented within the
valid period of temporary business registration, the contractor shall apply
to the business registrar for its extension within the ranges of 6 months.
Article 24. The contractor shall, within 10 days from its temporary
business registration, go through necessary procedures required by the taxation
institution and customs office.
Article 25. The owner and contractor shall open accounts with
a relevant bank in the Zone.
Article 26. The contractor shall, on a monthly basis, have
a progress report confirmed by the owner and submit it to the Zone construction
supervision organ. Upon completion of the project, the contractor shall submit
the final financial report to the Zone taxation institution.
Article 27. The owner and constructor shall make a set amount
of payment due to the State.
Article 28. Employment of foreign superintendent, technicians
and skilled workers for special jobs in contract construction shall be approved,
through the Zone construction supervision organ by the central trade guidance
Article 29. Any foreign individual coming into the Zone for
contract construction shall go through formalities for stay and residing therein,
according to the law and regulations related to entry and stay of foreign nationals.
Article 30. Where underground installments, historical relics
or remains are discovered in the course of contract construction, the work shall
be suspended, pending for the instruction of the Zone construction supervision
Article 31. The contractor shall take necessary measures for
the protection of the people and environment surrounding the construction site.
Article 32. The contractor shall take out an insurance policy
from a DPRK insurance company.
Chapter 3. Inspection and Takeover of the Completed Contract Construction
Article 33. The contractor shall, upon completion of any contract
construction project, conduct a comprehensive inspection over the building and
send to the owner a notice of completion of the project concerned.
Article 34. The owner, upon receipt of the said notice, shall
submit a written request to a relevant State construction supervision organ
for final inspection over the building.
Article 35. The State construction supervision organs shall,
within 15 days from receipt of such request, shall inspect the building and
issue a certificate of final inspection, or otherwise, order a correction.
Article 36. The building structure shall be taken over, in
principle, at a time upon completion of the project, or stage by stage, depending
on the scope and characteristics of the project, as may be specified in the
Article 37. The guarantee period for any structure built under
contract shall be 1 year.
Compensation for any accident that occurs before expiry of the guarantee period
shall be made by a party which has been proved to be responsible for it.
Article 38. The structure that has been built under contract
shall be used from the day of take-over, after the final inspection.
Article 39. The owner shall clear all payments for the contract
construction project within 30 days from take-over.
Chapter 4. Supervision over Contract Construction and Settlement of
Article 40. The State construction supervision organs shall
exercise strict supervision and control over contract construction so as to
prevent any possible deviation.
Article 41. In case of any breach of these regulations, such
administrative punishment as fine, suspension of project and deportation shall
be imposed depending on the severity of violation. Criminal charges shall be
applicable to serious offenses.
Article 42. Any dispute in connection with contract construction
shall be settled through consultation, or otherwise, through arbitration or
civil proceedings effective in the DPRK.