Korean Peninsula - North Korea aims to expand Special Economic Zones

The North Korean regime will aim to attract foreign investors to help in its depleting economy
NASA/Satellite Images 

North Korea's ambition of establishing new special economic zones in order to facilitate foreign investment highlights subtle desperation of Pyongyang.




Analysis 

On Oct. 17, AP reported citing North Korean state media and organizers of an international conference in Pyongyang that North Korea plans to set up Special Economic Zones. The conference encompassed academics and experts from 13 countries, including India, China and the United States along with 70 other North Korean participants.

This follows the line that Pyongyang set forth last year in July 2012, by experimenting with agricultural and economic reforms. North Korea is one of the poorest nations where it is ranked 125th in terms of nominal GNP. Economic activity in North Korea is scarce whereby China is the nation's most significant economic partner. The strategy, in Beijing's perspective, is that a stabilized North Korea is better than a destabilized North Korea. It is also key to understand that North Korea's continuous strategy  

The move by Pyongyang to open Special Economic Zones is that the country's dire economic sustainability is contention. In May 2013, Pyongyang demanded the renegotiation of contracts after the closure of the Kaesong industrial complex to increase the flow of hard currency into the regime.

The Kaesong industrial complex, however, is different. For one, the Kaesong industrial complex with the economic benefits it brings to North Korea, remains for the regime a political measure. Kaesong industrial complex began operations in 2004 as a result of the 2000 inter-Korean summit.

The purposes of the summit was of softening tensions and interdependence between North and South Korea. The complex employs over 39,000 North Korean workers which is hosted by 100 South Korean companies. South Korean companies pay the wages directly to the government.

This, however, is different. This is Pyongyang's initiative and whilst the increased currency flow will benefit, greater transparency undermines the North Korean strategy of being unpredictable and veracious. It is also not clear as to where Pyongyang will gear external, foreign investment from. Predominately, the regime's legitimacy is based upon the anti-Western resistance and isolationist position to distance itself from Western influence.

Pyongyang knows this and while economic incentives and concessions are necessary, flirting with capitalist practices and foreign businesses present risks. The regime will approach the Special Economic Zone pragmatically and that any decision henceforth will always have the regime preservation as priority as it negotiates itself through its economic balancing act.