North Korea has enacted a law allowing foreign companies to invest in industry, construction, technology and tourism, according to a broadcast by the official Radio Pyongyang today.
The law appears to mark a significant departure from the strict "self-reliance" normally practiced in North Korea, one of the world's most tightly planned and policed societies.
It comes at a time when China, its neighbor and ally, is using foreign technology and investment to pursue modernization. But due to an uncertain market, continuing mistrust of the North Korean government in the West and its failure to service its foreign debt in the 1970s, the law is not expected to generate a rush of applications.
"I don't expect any direct action to result," said a Japanese analyst who is involved in trade with North Korea. "But we will watch this new change with great interest."
The law comes four years after North Korean leader Kim Il Sung called publicly for development of economic ties with western countries. In January, the North Korean Supreme People's Assembly reiterated that proposal.
"This could be a political gesture," the analyst said, referring to the investment law, "but we think it is more out of economic necessity."
The rival government in South Korea has used a strategy of foreign investment. Last year it sold more than $20 billion in goods abroad. Industry in the North, in contrast, uses older technology and is aimed largely at the internal market.
The 26-article law described by Radio Pyongyang today may be patterned on an investment law adopted by China in 1979. It has led foreign companies to establish automobile, electronics and other manufacturing operations there.
Vietnam's Communist government also has an investment law, but it has attracted virtually no attention from foreign companies.
Enacted by the standing committee of the North Korean assembly, the Korean law provides for formation of joint ventures between foreign and North Korean concerns.
Foreign-owned property and profits will be strictly protected, the broadcast said. Profits and foreign employes' salaries will be taxed, but the concerns will be allowed to send money out of the country, it said. These are standard provisions in many noncommunist countries' investment laws.
Most of North Korea's foreign trade is with the Communist Bloc, primarily the Soviet Union. But despite the absence of diplomatic relations, it also has significant commercial relations with Japan and other western countries.
Two-way trade with Japan has totaled about $500 million annually in recent years. North Korea's purchases from Japan center on machinery, textiles, steel and chemicals. Its exports have stressed lead, zinc and other ores and fish products.
Economic planning in North Korea is founded on President Kim's concept of juche, usually translated as self-reliance. It has led the North to manufacture a vast array of goods, ranging from locomotives to toys, many of which might be cheaper if imported.
Thirty years after the Korean War devastated its cities and industries, the North has built a standard of living that some foreign visitors have likened to Eastern Europe's.
The 1970s saw a relaxation of isolation as North Korea went on a buying spree in the West, importing entire factories. But it then failed to meet payments on the debt. About $350 million in debt to Japan was rescheduled in 1978 over a 10-year period.