With the start of the Kim Jong-un regime, North Korea (N. Korea) has actively begun opening its markets to the outside world via SEZs, in efforts to overcome economic issues facing the country. SEZ development has accelerated at the central government level while new EDZs are being established in large numbers at the provincial level, an all-out effort aimed at economic recovery through foreign investment. The South Korean government needs to seek ways to support Pyongyang’s SEZ and EDZ policies to advance inter-Korean relations through the “Trustbuilding process on the Korean Peninsula” and lay the groundwork for national reunification.
This study aims to explore and recommend various measures for support from SouthKorea toward North Korean SEZs and EDZs, to help them achieve their desired outcomes. By doing so, it will provide the basis for North Korea policy of the South Korean government.
The SEZs of the Kim Jong-un regime suggest new possibilities. First, the recently designated SEZs are more open compared to existing SEZs, which may point to greater openness in the future. Second, the North Korean government is promoting diversification and specialization of SEZs and EDZs. Diversification with respect to size (from large SEZs on the national level to smaller SEZs on the provincial level); and specialization in terms of types of SEZ (economic, export processing, industrial, tourism, and agricultural zones). Third, there will be attempts to diversify development methods and developers. On the other hand, limits and challenges still exist.
The measures for South Korean Support of North Korea’s SEZs & EDZs can be classified into ① Building capacity of N. Korean SEZs and EDZs, ② Improvement of conditions at North Korean SEZs and EDZs, and ③ promotion of participation in North Korean SEZs and EDZs.
First, in order to build capacity of North Korean SEZs and EDZs, it is necessary to provide training for the North Korean workforce and share knowledge and experience on attracting foreign investment and operation of SEZs, and facilitate formation of North Korean companies by supporting joint South-North ventures inside the SEZs. Second, in order to improve conditions in North Korean SEZs and EDZs, we must expand access to markets by designating outward processing zones, alleviate economic sanctions, combine infrastructure development cooperation with special zone development, and develop these special zones through international cooperation organizations. Third, it is required that we provide legal and institutional measures for investment in North Korea, expand financial support for S. Korean SMEs in SEZs and EDZs, and support participation in N. Korea’s SEZs and EDZs through multilateral and international cooperation; in order to promote participation in North Korean SEZs and EDZs.
Also, it is important to differentiate in terms of plans for South-North cooperation according to key features of SEZs & EDZs. The list of SEZs & EDZs of North Korea is as follows: Kaesong Industrial Complex (KIC), China-N. Korea Special Economic Zones, Sinuiju International Economic Zone, Agricultural Development Zones, Industrial Development Zones, Hi-Tech Development Zone, and Tourism Development Zones.
In short, it would not be efficient to apply uniformly the model for Kaesong Industrial Complex for different SEZs & EDZs. Of course, as large-scale Special Economic Zones require significant amount of funds for infrastructure development, in addition to extensive intergovernmental negotiations, it is inevitable that the KIC model be considered first. But as for small-scale Economic Development Zones, a variety of approaches are needed with consideration of the nature or area of EDZs.
However, they will require close coordination and cooperation, thus necessitating the participation of various entities such as local government, NGO, industry and business organizations and cooperative organizations, and private enterprises, as well as central government and public authority.