North Korea facing severe economic deadlock is adopting limited market economy system partially so as to solve economic problem.
It is not expected that the way of reform and opening of economic system such progressive and partial reform and opening ...
North Korea facing severe economic deadlock is adopting limited market economy system partially so as to solve economic problem.
It is not expected that the way of reform and opening of economic system such progressive and partial reform and opening as in China will happen in North Korea considering the collapse of system in USSR and Eastern Europe in the early of 1990.
But it is expected that North Korea would reform economy and economic reform will be carried out continuously.
For this reason, the necessity and interest of industrial district in North Korea in which the direct investment can be made has been increased for the purpose of enlargement of exchange between North and South Korea and economy restoration through economic cooperation, strengthening of industry competitiveness for North and South Korea, balanced development of Korean Peninsula, and realization of economic hub of Korean Peninsula as a center of Northeastern Asia.
The Gaesung Industrial Complex project commenced on August 22, 2000 when Hyundai Asan and the North's Asia-Pacific Committee and the National Economic Cooperation Federation signed an agreement on the development.
The two Koreas have adopted agreements on customs, communications and quarantine relevant to the Gaesung Industrial Complex.
In 2005, Geaseong Industrial Complex is faced with not only having a sound system but also building up a market for products. It has merits such as a favorable location, cheap and skilled labor, and a tax favor. In the same time, it would be limited to produce and export because it is an industrial complex in North Korea.
Especially in the case of Geaseong Industrial Complex products being considered as a North Korean product, it would be limited to export. There is no international criterion of origin. Thus it is necessary to check a criterion of origin of major countries. Concerning that countries have different criteria of origin, the majority of Geaseong Industrial Complex products would be considered as a North Korean product. The reason is that companies in the Industrial Complex import raw materials from South Korea or third countries and produce goods in the site. If its products are considered as a North Korean product, it should be imposed higher tariffs than competing countries. North Korea is not a member of WTO, so cannot be granted MFN(Most Favored nation treatment).
It is also considered bilateral economic regulations. Particularly US is imposing the highest tariff rate of 'Column 2' on North Korean products and establishing import permission system.
Thus, North Korea should make efforts to improve tangled relation with U.S. not to lose biggest market in the world, and South Korea should lead North Korea to keep transition to an open society and market economy. and companies in Gaesung Industrial Complex have to find a favorable market for North Korean goods and have to develop marketing strategies for each product to fit for each market conditions.