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KAESONG INDUSTRIAL ZONE SUPPORT ACT

Act No. 8484,1

May 25, 2007

Chapter I General Provisions

Article1 (Purpose)

The purpose of this Act is to enhance the inter-Korean exchanges and cooperation and further to contribute to the balanced development of the economy of the Korean nation by providing the necessary matters to support the development and operation of the Kaesong Industrial Zone (the "KIZ") and the protection and support of the South Korean residents (including juristic persons, hereinafter the same shall apply) making investments in, entering, exiting from, or staying in the KIZ. Article 2 (Definitions)

As used in this Act:

1. The term "KIZ" means any industrial zone developed and established in the area of Kaesong located in the North, in accordance with the agreement between the South and North Korea;

2. The term "KIZ developer" means any South Korean resident designated as a developer pursuant to the Kaesong Industrial Zone Act of North Korea, with the approval for a cooperative project under the Inter-Korea Exchange and Cooperation Act;

3. The term "KIZ management organ" means any juristic person established under the Kaesong Industrial Zone Act of North Korea for the purpose of management and operation of the KIZ;

4. The term "local enterprise of the KIZ" means any enterprise established by a South Korean resident in the KIZ with the approval for a cooperative project under the Inter-Korea Exchange and Cooperation Act, including its branch offices, 1

Translator's Note: This Act is a South Korean Act and therefore the government entities, laws referred to herein are those of South Korea except as otherwise provided herein. places of business, and offices;

5. The term "Entry and Exit" or "Stay" shall have the same meaning as in the Agreement on Entry into, Exit from and Stay in the KIZ and the Kumgangsan Tourist Zone; and

6. Other terms and expressions not defined separately herein shall have the meanings assigned to them in the Inter-Korea Exchange and Cooperation Act and the Inter- Korea Relations Promotion Act.

Article 3 (Government Policy, etc.)

The Government shall establish and implement its policies for fostering and developing the KIZ into an international-level industrial zone and further shall put in place necessary support measures for the same.

The Government shall create the conditi ons necessary to ensure that the development of the KIZ and the business operations of the enterprises in the KIZ can be carried out in a consistent manner on the basis of the economic principles and the autonomy of such enterprises and shall also endeavor to support such development and business operations.

In developing the KIZ, the Government shall establish and establish its policies for enhancing the welfare and industrial safety of the South and North Korean residents and shall also provide support so that it can be created as an environment-friendly industrial zone.

The Government shall endeavor to ensure that inter -Korean economic exchanges and cooperation in the KIZ can be established and grow on the basis of the principle and practice of inter-Korean domestic transaction and that such inter-Korean economic exchanges and cooperation can be widely recognized by the international society. Where it is deemed necessary for the development of the KIZ, the Minister of Unification may request necessary support from the heads of the central government agencies, local governments and related agencies and other concerned organizations. Article 4 (Composition of Council for Development and Support of KIZ) In order to discuss and coordinate the matters related to the development and support of the KIZ, a Council for the Development and Support of the KIZ (hereinafter referred to as the "Council") shall be established in the Ministry of Unification. The members of the Council shall be composed of public officials from the concerned government agencies and civilian experts from agencies and organizations concerned.

The Council shall be chaired by the Deputy Minister of Unification and the total number of membership shall not exceed 20 persons, including the chairman. Any matters relating to the duties, organization and operation of the Council shall be set forth in the Presidential Decree.

Article 5 (Relations to Other Acts)

This Act shall apply with priority over other laws with respect to matters concerning the support for, the entry into and exit from, and the trade with the KIZ. Chapter II Support of Development and Investment

Article 6 (Support for Development of KIZ)

The Government may take any measures necessary for granting financial support for the smooth establishment and operation of the KIZ. The Government or the providers of relevant facilities pursuant to Article 29, Paragraph 1 of the Industrial Sites and Development Act shall have priority over other providers in providing supports for infrastructure such as roads, water supply, railways, telecommunications and electricity necessary for the smooth establishment of the KIZ; provided, however, that, regarding such infrastructure provided by the Government, the Government may commission KIZ developer to provide such infrastructure.

In relation to the support as prescribed in Paragraphs 1 and 2 above, the Government may bear any and all expenses, provide facilities and financial support in accordance with the proviso to Article 28, Paragraph 1, Articles 29 and 46 of the Industrial Sites and Development Act. In such case, the KIZ shall be deemed to be a state-run industrial complex as prescribed in Article 2, Sub-paragraph 5, Item (a) of the Industrial Sites and Development Act.

The Minister of Unification may cause a person engaging in a business other than that of developing industrial complexes as provided in Article 2, Paragraph 6 of the Industrial Sites and Development Act to pay, as a contribution to public facilities, the expenses that have been paid by the Government for the construction of the infrastructure referred to in Paragraph 2 above.

The Minister of Unification shall determine major issues regarding the content of the development projects, the size and method of support, etc. mentioned in Paragraphs 1 through 3 above, through deliberation and resolution by the Inter-Korea Exchange and Cooperation Promotion Council (hereinafter referred to as the "IKECPC") as prescribed in Article 4 of the Inter-Korea Exchange and Cooperation Act. Any matters necessary for the provision of support, payment of the facility contribution charges, and deliberation and resolution by the IKECPC pursuant to Paragraphs 1 through 5 above shall be set forth in the Presidential Decree. Article 7 (Support for Small & Medium Enterprises Structural Sophistication Funds) The Government may provide local enterprises of the KIZ with the "small & medium enterprises structural sophistication funds" for projects prescribed in Article 67, Paragraph 2 of the Promotion of Small and Medium Enterprises and Encouragement of Purchase of Their Products Act.

Any matters nece ssary for the use of funds pursuant to Paragraph 1 above shall be set forth in the Presidential Decree.

Article 8 (Support for Industrial Safety and Prevention of Industrial Accidents) The Government may provide local enterprises of the KIZ with various supports for industrial safety and prevention of industrial accidents pursuant to Article 6 of the Korea Occupational Safety & Health Agency Act.

In providing the support indicated in Paragraph 1 above, part of the powers and duties of the Korea Occupational Safety & Health Agency may be entrusted to the KIZ management organ.

Article 9 (Support for Environmental Protection)

For the purpose of environmental protection of the KIZ, the Government may provide local enterprises of the KIZ with administrative and financial support under Articles 34 and 35 of the Framework Act on Environmental Policy. In such case, local enterprises of the KIZ shall be deemed to be business operators under Article 34 of the Framework Act on Environmental Policy.

For t he purpose of providing such support as mentioned in Paragraph 1 above, the Government may have the Environmental Management Corporation or other organizations carry out any of such projects as prescribed in Article 16, Paragraph 1 of the Environmental Management Corporation Act.

Article 10 (Support for Energy Rationalization)

The Government may provide local enterprises of the KIZ with the support under Article 21 of the Energy Rationalization Act, Article 8 of the Integrated Energy Supply Act and Article 28 of the New & Renewable Energy Development Promotion Act.

Any matt ers necessary for the provision of the support described in Paragraph 1 above shall be set forth in the Presidential Decree. Article 11 (Support or Lending of Inter-Korean Cooperation Fund) The Government may grant or lend to local enterprises of the KIZ the Inter-Korean Cooperation Funds under the Inter-Korean Cooperation Fund Act. Article 12 (Application of Other Governmental Support Systems) In addition to the business support under this Act, other business support systems designed for development of workforce and technology, educational training, management innovation and stabilization, export promotion, etc. under other laws may be applied to the KIZ as prescribed in the Presidential Decree. Chapter III Protection of Those Entering, Exiting and Staying in the KIZ Article 13 (Application of Acts Regarding Social Insurance) The following acts shall apply to local enterprises of the KIZ and South Korean residents employed by them (excluding any juristic persons; hereinafter referred to as "Workers from the South Korea"):

1. National Pension Act;

2. National Health Insurance Act;

3. Employment Insurance Act;

4. Industrial Accident Compensation Insurance Act; and

5. Act on Collection of Employment Insurance and Industrial Accident Compensation Insurance Premiums.

Local enterprises of the KIZ and Workers from the South Korea shall be deemed to be employers (business proprietors) and workers respectively under each of the acts in Paragraph 1 above.

In applying the acts listed in Paragraph 1 above, Workers from the South Korea working or staying in the KIZ shall be deemed to be working or staying in the South Korea.

In applying the acts listed in Paragraph 1 above, part of the powers or duties of the Minister of Labor, National Pension Service, National Health Insurance Corporation, Korea Labor Welfare Corporation, etc. may be entrusted to the KIZ management organ in accordance with the provisions of the Presidential Decree. Any other matters necessary for applying the acts listed in Paragraph 1 above shall be provided in the Presidential Decree.

Article 14 (Medical Care Institutions, etc.)

In the event that a person falling within any of the categories set forth in Article 33, Paragraph 2 of the Medical Service Act has established a medical care facility mainly for the South Koreans in the KIZ with the approval of a cooperative project under the Inter-Korea Exchange and Cooperation Act, such medical care facility shall be deemed to be a medical care institution defined in Article 3 of the Medical Service Act and also a nursing care institution under Article 40 of the National Health Insurance Act.

In the event that a resident of the South Korea entering, exiting from or staying in the KIZ receives any medical service from a medical care facility under Paragraph 1 above, such South Korean resident shall receive medical care benefits as prescribed in Article 39 of the National Health Insurance Act. Any medical care institution established pursuant to Paragraph 1 above shall pay medical care benefits under Article 7 of the Medical Care Assistance Act to those entitled to such medical care benefits under Article 3 of the Medical Care Assistance Act among the South Koreans who enter, exit from or stay in the KIZ. Any matters necessary for the approval of cooperative projects, recognition of medical care institutions and nursing care institutions, and payment of nursing care medical care benefits pursuant to Paragraphs 1 through 3 above shall be provided in the Presidential Decree.

Article 15 (Application of Acts related to Working Conditions) The following acts shall apply to local enterprises of the KIZ and their Workers from the South:

1. Labor Standards Act;

2. Minimum Wages Act;

3. Employees' Retirement Benefit Guarantee Act;

4. Wage Claim Guarantee Act; and

5. Trade Union and Labor Relations Adjustment Act. In applying the acts listed in Paragraph 1 above, part of the powers or duties of the Minister of Labor and/or labor supervisors may be entrusted to the KIZ management organ in accordance with the provisions of the Presidential Decree. Any other matters necessary for applying the acts listed in Paragraph 1 above shall be provided in the Presidential Decree.

Chapter IV Special Cases concerning Taxes, Travel and Trade Article 16 (Reduction and Exemption of Taxes)

Where deemed necessary in order to encourage investment in the KIZ, the Government may grant the South Korean residents making investments in the KIZ a reduction or exemption of taxes in accordance with the relevant provisions of the Restriction of Special Taxation Act.

Article 17 (Special Cases concerning Travel and Trade) Section 3 of Chapter VI and Sections 1 and 2 of Chapter IX of the Customs Act shall apply mutatis mutandis to the goods being traded in the KIZ and the vehicles entering to and exiting from the KIZ. Notwithstanding the foregoing, however, the Government may provide for special cases to simplify the procedures for such travel and trade based on the principle of inter-Korean domestic transaction. In applying the provisions of Article 9, Paragraph 3 of the Inter-Korea Exchange and Cooperation Act to a person who has obtained a certificate of multiple visits as prescribed in Article 9, Paragraph 2 of the Inter-Korea Exchange and Cooperation Act for visits to and from the KIZ, the Government may provide for special cases where exemption from visit reporting requirements may be granted. In order to simplify the procedures for entering and exiting inspection on the South Korean residents entering into and exiting from the KIZ, the Government may provide for special cases concerning Article 11 of the Inter-Korea Exchange and Cooperation Act.

The scope and criteria for the application of special cases for the simplification of the regulations mentioned in Paragraphs 1 through 3 above shall be provided in the Presidential Decree.

Any detailed matters relating to implementation of the spe cial cases concerning simplification pursuant to Paragraph 1 or 3 above shall be set forth by the Minister of Justice or the Commissioner of the Korea Customs Service through deliberation and resolution by the IKECPC.

Chapter V KIZ Management Organ, etc.

Article 18 (KIZ Management Organ)

The KIZ management organ shall have the corporate power and authority to act to the extent necessary for the management and operation of the KIZ. The Government may provide the KIZ management organ with funds, personnel, materials, etc. whenever necessary for the operation and management of the KIZ. The KIZ management organ may establish and maintain an office in the South. Article 19 (KIZ Support Foundation)

The Government shall establish a KIZ Support Foundation (hereinafter referred to as the "Foundation") in order to support the development and operation of the KIZ. The Foundation shall be a juristic person and shall be duly established when its establishment has been registered with the registry having jurisdiction over the address of its main place of business.

The Foundation shall engage in the following business:

1. Establishment and implementation of support measures for the development of the KIZ;

2. Provision of support, guidance and supervision to the KIZ management organ;

3. Establishment and implementation of support measures for local enterprises of the KIZ;

4. Issuance of various certificates and dealing with civil petitions on behalf of the KIZ management organ; and

5. Carrying out other works designated by the Minister of Unification The operation of the Foundation shall be financed by the funds listed below. Notwithstanding the provisions of the State Properties Act, the Government may gratuitously transfer or lease state-owned properties in accordance with the relevant provisions of the Presidential Decree if necessary to conduct the business activities enumerated in Paragraph 3 above.

1. The Government's contributions or subsidies;

2. Borrowings;

3. Profits generated from business operations; and

4. Other income. If the Foundati on is dissolved, its remaining property shall revert to the Government in accordance with the provisions of its articles of incorporation. Except as otherwise provided in this Act, the provisions of the Civil Code pertaining to incorporated foundations shall apply mutatis mutandis to the Foundation. Any other matters necessary for the establishment, composition and operation of the Foundation shall be provided in the Presidential Decree. Article 20 (Dispatch of Public Officials, etc.)

If deemed ne cessary in order to support the development, management and operation of the KIZ and to promote the inter-Korean economic cooperation, the Government may dispatch public officials or other persons to the North Korea for a given period so as to serve in the KIZ management organ or otherwise. The Government may provide financial support necessary for Paragraph 1 above. The dispatch of public officials under Paragraph 1 above shall be in accordance with the Inter-Korea Relations Promotion Act, while the required matters in relation to the dispatch of other persons shall be provided in the Presidential Decree. Addenda

(E nforcement Date) This Act shall enter into force three months after the date of its promulgation.

(Liquidation of the KIZ Support Associatio n) The KIZ Support Association, established as a corporation prior to the enforcement date of this Act, shall be liquidated upon enforcement of this Act and the rights and obligations of the liquidated entity shall be comprehensively succeeded by the KIZ Support Foundation under Article 19 hereof.