Although the concept of conducting business in North Korea may be novel to Western companies, there are already a variety of instances of international companies doing so. Additionally, recent indications that North Korea is opening up suggest that there are more prospects for investing in one of the world’s most isolated nations.
Many international companies have been able to establish a foothold in Korea by leveraging their authorities’ strategic alliances with that country. To conduct business in Korea, each company must have a unique strategy and objective, but they all have one thing in common: transactions are conducted as joint ventures with the North Korean government. We’ll discover how, per local legislation, you can launch your own company in North Korea in this article.
Establishing a firm
The following actions need to be considered if you want to start a business in North Korea.
- Learn about the corporate laws
North Korea has acknowledged the necessity of foreign technology and finance in the growth of its struggling economy. Korea has enacted numerous laws and regulations intended to encourage international investment, while yet upholding its dedication to the isolationist, fiercely self-sufficient “unsatisfactory” mentality.
Foreign investment is allowed in several industries including manufacturing, farming, architecture, transportation, communications, science, leisure, business, and banking sectors under the nation’s foreign capital law. The fundamental basis for establishing entities with 100% foreign ownership is provided by the foreign enterprise statute. Only in Free Economic and Trade Zones are foreign companies allowed for work requiring the manufacture of high-tech and globally competitive commodities.
- Decide the legal framework
Kim Il Sung University recently released a set of rules for foreign businesses keen on doing business there. It makes the needs more obvious. There are the following three alternatives for international businesses wishing to enter North Korea, under the university’s regulations.
- Equity Joint Venture
The favored method of the North Korean administration for high-tech and construction initiatives is equity joint ventures, or “EJVs”. EJVs are created by the use of a joint venture agreement among international and North Korean firms, which must be approved by the zone’s officials of the DPRK’s external trade authority. According to law, EJVs are legal entities with limited responsibility, with each party’s liability being capped at the value of their contribution.
Funds, assets in kind, commercial property ownership, technological know-how, estates, or other types of capital may be provided to the EJV. By consensual understanding, the non-cash contributions from each party are to be valued according to the current international market pricing at the time of commitment.
- Contractual Joint Venture
The chosen method by the authorities for the industries of basic goods, recreation, and communications is contractual joint ventures (CJVs). A CJV is described in legislation as business operations in which shareholders from the DPRK and an international region collectively invest, with yield and governance being claimed by the host companion.
It is acceptable for the alien participant to a CJV to hire its staff. Additionally, the CJV agreement may outline the steps for venture administration, such as the creation of a joint committee for making crucial decisions.
- Foreign Company
A “foreign company” is the name given to the third business possibility. This choice enables international corporations to fully own their North Korean company entity. In this scenario, the foreign company would have complete control over the enterprise and the North Korean authorities would have “no powers” to impose administrative control. Only special regional economies across the nation are permitted to host these businesses.
- Register the company
You must register the firm with Korean officials after agreeing on its structure. A company must be registered by drafting its governing legal files in conformity with the laws and prerequisites of authority. The business must file the overall set to the government agency in charge of maintaining the register’s centralized database and receive approval from the relevant public authority. Every investor and entrepreneur must go through the process of registering a legal corporation to expand their business.
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