Note on… North Korea’s pro-FDI policy

December 16, 2010

 Many papers have elaborated on the existence or inexistence of a Race to the Bottom doctrine. In short, the doctrine finds that investors, as greedy entities, have the ability to shop from one country to the other for the poorest regulations to cut-costs.

The counter-argument, in turn, is that investors rather need long-term stability and security in order to settle in a foreign country. The institutional environment of the host-state, as a result. appears to constitute a determinant factor of FDI.

This Note does not intend to provide an elaborated discussion on the Race to the Bottom theory, but simply highlights that the Official Webpage of The Democratic People’s Republic of Korea (DPRK) provides an interesting illustration of the debate as the following shows:

” Business in DPR Korea:

The DPR of Korea (North Korea) will become in the next years the most important hub for trading in North-East Asia.

Lowest labour cost in Asia.

Highly qualified, loyal and motivated personnel. Education, housing and health service is provided free to all citizens. As opposed to other Asian countries, worker’s will not abandon their positions for higher salaries once they are trained.

Lowest taxes scheme in Asia. Especially for high-tech factories. Typical tax exemption for the first two years.

No middle agents. All business made directly with the government, state-owned companies. No middle agents.

Stable. A government with solid security and very stable political system, without corruption.

Full diplomatic relations with most EU members and rest of countries.

New market. Many areas of business and exclusive distribution of products (sole-distribution).

Transparant legal work. Legal procedures, intellectual rights, patents and warranties for investors settled. “


Sursprisingly (or not?), one has no doubts as to why ‘worker’s will not abandon their positions for higher salaries once they are trained’ and why the authorities manage to advertise for ‘a government with solid security and very stable political system’.

Overall, there is no need to recall the situation in North Korea in this Note and the quote largelly speaks for itself. However, it remains interesting to wonder whether investors looking for long-term stability and guarantees would indeed bet on the regime, and whether the Country’s famous institutional framework will indeed help it become in the next years ‘the most important hub for trading’ in North-East Asia


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