flag North Korea North Korea: Investing

FDI in Figures

Although foreign investment has increased somewhat recently, overall North Korea still attracts very little FDI. International sanctions continue to discourage investors. In addition, foreigners are banned from establishing enterprises that can pose a threat to the country's national security. Hence, investment is forbidden in the publishing, press, broadcasting and telecommunications sectors. Businesses that do not conform to the country's ideology are also prohibited and international sanctions make it hard to repatriate profits. According to latest available data from UNCTAD (World Investment Report 2021), FDI inflows increased from USD 30 million in 2019 to USD 6 million in 2020. FDI stocks were estimated at USD 2 million in 2020. The sectors that attract the most investment are infrastructure development, hospitality, telecommunications and mining. The main investor countries are China, South Korea, Japan and Russia.

The lingering tension with the U.S. hinders the flow of foreign investment to North Korea significantly, coupled with more restrictive sanctions from the United Nations Security Council that ban joint ventures with North Korean firms. North Korea's economic ties with its southern neighbour have remained tense over the years, revolving primarily around a dispute over the Kaesong Industrial Zone. North Korea is seeking foreign investment, particularly in the area of infrastructure, and has grown interest in joining China's Belt and Road Initiative. The country announced in December 2018 that it was seeking USD 7.7 million in FDI to revitalise domestic industry.
Orascom, an Egyptian investor, owns part of Koryolink, a North Korean telecommunications company. The conglomerate also launched Ora Bank with the State Bank for Foreign Trade. The joint-venture invested USD 200 million in a hotel in Pyongyang. However, since 2015 Orascom has experienced difficulties in carrying out its operations in North Korea due to international sanctions imposed on the country, and the company was unable to repatriate profits. Furthermore, North Korea's large mining potential is under-exploited.

North Korea struggles to maintain economic stability and attracts minimal levels of foreign direct investment (FDI). FDI into North Korea primarily takes the form of joint ventures with local companies, but even then the country has received criticism for a lack of business clarity. Two international companies, Egypt-based communications company Orascom and Chinese mining company Xiyang Group, had invested significantly in North Korea in a move to gain a foothold in a country with almost 26 million potential customers. China is North Korea’s largest trade partner, with bilateral trade between the two countries increasing tenfold between 2000 and 2015, according to data from Seoul-based Korea Trade-Investment Promotion Agency. Ongoing sanctions since 2006 have made trading with North Korea increasingly challenging for most Western countries, and on the other hand have resulted in heightening the country's reliance on China. Russian companies also did not adhere to the strongly enforced UN Security Council resolutions and re-exported coal, petroleum and transhipped oil from North Korea to other countries. Despite these political and geographical ties, the current relationship between Russia and North Korea appears to be stagnant and unproductive (Investment Monitor, 2022). Only a few Chinese and Russian companies are present in the area, but a number of foreign companies have expressed interest in investing the sector. Finally, Russia has strengthened its economic cooperation and investment in the country. Russia invested USD 300 million to develop a railway line between North Korea and Khasan, in Russia.

 

Country Comparison For the Protection of Investors

  North Korea United States Germany
 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 30618
FDI Stock (million USD) 914.8921.2939.3
Number of Greenfield Investments* 0.00.00.0
Value of Greenfield Investments (million USD) 000

Source: UNCTAD - Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 

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Tax Rates

Turnover tax
Sales tax: 15% (standard rate)
Commercial sector: 2% of sales revenue
Service sector: between 2% and 4% of service revenue
Production sector: between 1.5% and 20% of sales revenue and between 12% and 60% on restricted goods such as cigarettes and alcohol.
Company Tax
Withholding Taxes
Dividends: 20%, Interests: 20%, Royalties: 20%.
Social Security Contributions Paid By Employers
N/A
 
 

Individual Taxes

Progressive rates from 0% to 20%
From KPW 0 - KPW 2,000 0%
Above KPW 2,000 Between 4% - 20%
 
 

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Investment Opportunities

Tenders, Projects and Public Procurement
Asian Developement Bank, Proposed Projects in Asia
DgMarket, Tenders Worldwide
 
 
 

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Latest Update: October 2022