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As relations improve, South’s banks see profits

Funding the North’s infrastructure growth could be a bonanza
June 23,2018
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The country’s financial institutions believe that thawing relations with North Korea could lead into large-scale infrastructure projects, and are opening dedicated research and investment divisions to prepare for them.

Samsung Securities was among the first to take advantage of the friendly atmosphere surrounding the North as a series of summits between major powers raised hope for more joint economic activities between the two Koreas.

The brokerage created a division in charge of studying investment in the North earlier this month, marking the first case of a local securities company creating a unit that exclusively deals with North Korea investment.

Yoo Seung-min, a senior analyst in charge of the division, recently released the first report from the division. It advocated the establishment of a special development bank to manage the financing of a Wonsan tourism zone in the North. The analyst added that the region will receive a boost, since North Korean leader Kim Jong-un has a special attachment to Wonsan.

“We developed the team to explore a mid- to long-term investment strategy on North Korea and hoped to take a step further over just releasing stocks that will benefit from inter-Korean economic cooperation,” said a source at Samsung Securities.

The industry’s expectations are not just wishful thinking, as the inter-Korean summit outlined the possibility of reviving and expanding joint economic activities.

Possibilities include connecting Korean railways with the Trans-Siberian Railway, along with reopening the Kaesong Industrial Complex and the Mount Kumgang Tourist Region.

Shinhan Investment is also building a research team on North Korea’s economy.

The leader of the new team is Soh Hyun-chul, who has a doctorate from the University of North Korean Studies.

The Korea Institute of Finance, a state-run financial research institute, also created a similar research team back in May.

Major financial companies, like KB Financial Group and Woori Bank, are gearing up to study business opportunities in North Korea.

Woori Bank is taking the lead as its task force team looks at different business scenarios where sanctions against the North are lifted.

The bank has a competitive edge, as it has experience running a branch in the Kaesong Industrial Complex, a joint inter-Korean industrial complex was shut down by then-President Park Geun-hye over Pyongyang’s ballistic missile tests.

“We are preparing to reopen our branch in Kaesong,” the bank said in a statement. “We are ready to return to Kaesong once the government gives us its authorization, because we stored all the records and transactions in the headquarters.”

The bank also expressed interest in financing big infrastructure projects through different measures, such as syndicated loans.

The state-run Industrial Bank of Korea launched a committee to support funding of small and medium enterprises that will later operate at the Kaesong Industrial Complex.


BY PARK EUN-JEE [park.eunjee@joongang.co.kr]