By Jung Sung-ki
Staff Reporter

North Korea changed a law regarding its northeastern Rason special economic zone last January in an apparent move to attract more foreign investment, including from South Korea, a government official said Sunday.

The Seoul government has confirmed the revision, which includes a clause that says the North will allow "Korean compatriots living outside the Democratic People's Republic of Korea (DPRK)" to be engaged in economic and trade activities in the communist state's first free trade zone, set up in 1991, the official said on condition of anonymity. The DPRK is North Korea's official name.

The North had banned South Korean investors from Rason in a 1999 revision.

Under the latest revision, the reclusive state will lower tax rates and simplify administrative procedures for foreign investors who want to establish branch and agent offices there, the official said.

The revision took effect Jan. 22 when Pyongyang upgraded the status of Rason to a special city, he said.

The official anticipated that South Korean firms would do business in the zone, saying the latest revision is a positive sign of North Korea opening its doors to outside world.

The North designated Rason and nearby Sonbong, located on the country's northernmost coast close to both China and Russia, as an economic free trade zone in 1991. The zone was renamed Rason later.

But efforts to attract foreign investment and capital have failed. North Korea aimed to attract $7 billion worth of foreign investment into Rason, but actual investment amounted to only $140 million.

There are an estimated 400 foreign businesses operating in North Korea, but most of them are small businesses run by Chinese or North Korean residents of Japan.

In recent years, the North has sought to revive the economic zone, signing an accord with Russia to rebuild railways and the port in the city. It granted Russia 50-year rights to Rajin port facilities earlier this year, reports said.

In addition, North Korea has recently agreed to extend China's lease on port facilities there for another decade, they said.

The North's opening of the port on its east coast has a significant meaning for China, observers say, because it will give the latter direct access to the Pacific. It also implicates millions of dollars in investment for the cash-strapped North.

gallantjung@koreatimes.co.kr