This is the abstract of seminar presentation, which took place at North Korean Law Society on September 30, 2004. The Korean full text is contained in the 7th Issue of North Korean Law Journal.

In the centrally planned economies, rail freight transport and electric power were abundantly supplied to industry with little regard for their costs of production and environmental impacts. Urban transportation and electricity were provided to households for a nominal charge. In contrast, with an ideological bias against free movement of people and information, there were relatively little investment in roads and telecommunications. During the course of transition to the market economy, the former socialist countries tried to provide electricity, transport and telecommunications services in line with market needs, and set their tariffs based upon the costs of production.

In the initial stage of transition, substantial restructuring of infrastructure is required among the abundant sectors and relatively scarce sectors. Another issue is to select the strategic sector to stimulate nation-wide economic growth. A more commercial approach to infrastructure is an effective means for facilitating tariff reform and expanding access to private finance for investment. Greater private participation or privatisation of public utilities calls for fair competition in the market and effective regulation though the transition economies are unexperienced with such a mechanism.

In North Korea, recovery and renovation of SOC facilities are in great need because the foreign exchange shortage and successive famine in the late 1980s and 1990s hampered the investment in infrastructure at large. The priority in the investment, feasible financing schemes, the extent of restructuring and possible private participation are on the national agenda of infrastructure.

Against these backdrops, the first and foremost thing is to establish an appropriate legal framework for more foreign direct investment in infrastructure. For example, modern private law is strongly suggested for free contract, protection of creditors, enforcement of secured interests and corporate governance. Project financing is believed to be an effective tool to mobilize huge amount of foreign capital if several conditions are satisfied.