South Korean banks ramp up preparations for possible inter-Korean cooperation

People holding the Korean unification flag as they watch a news report on the inter-Korean summit on April 27, 2018.
People holding the Korean unification flag as they watch a news report on the inter-Korean summit on April 27, 2018.PHOTO: REUTERS

SEOUL - South Korean banks and financial institutions are redoubling efforts to tap into possible business opportunities in North Korea in the wake of a recent thaw in inter-Korean relations, sources told Yonhap news agency.

A US-North Korea summit, slated for Singapore on June 12, has also raised hopes that Washington may ease sanctions on Pyongyang, which may open the way for South Korean banks to enter the communist North, reported Yonhap.

Sources told Yonhap that one of the banks, KEB Hana Bank, is seeking to establish a task force as early as this month (May), which will be tasked with preparing for potential inter-Korean financial business.

The task force will study North Korea's politics, economy and society, while reviewing possible business opportunities for the lender and its parent holding company.

Shinhan Financial Group Co., one of South Korea's major financial holding firms, is also seeking to set up a consultative body comprising of officials from its subsidiaries in a bid to deal systematically with possible changes in inter-Korean ties and economic cooperation between the Koreas.

Leaders of the two Koreas have pledged in a joint declaration adopted at their historic summit in late April to work towards a complete denuclearisation of the Korean Peninsula.

The two Koreas have also agreed to fully implement all existing agreements and declarations that have been adopted thus far. That include economic projects agreed upon in 2007, including an expansion of a joint industrial complex in the North Korean city of Kaesong and the launch of cross-border cargo railway service.

 
 
 

An inter-Korea joint liaison office will also be established in the border region of Kaesong to ensure the smooth exchange and cooperation between both sides. Although there is no word on the possible re-opening of a joint industrial park in Kaesong, which was shuttered by the South Korean government in 2016 in protest of North Korea's nuclear and missile tests, the South Korean businessmen with properties there are hopeful it would re-open soon.

More than 120 South Korean businessmen to leave behind their properties, including key facilities and raw materials.

Companies at the complex said the closure resulted in 1.5 trillion won (US$1.3 billion) in losses, but the South Korean government estimated their losses to be 786 billion won.

The industrial park, which opened in 2004, had been hailed as a key symbol of economic cooperation between the two Koreas as it combined South Korean capital and technology with cheap labour from North Korea.

South Korea's major lender Woori Bank had to close its branch in Kaesong when Seoul suspended operation at the factory park.

Yonhap reported that a newly-appointed task force at Woori Bank is reportedly discussing ways to reopen its branch in the now shuttered inter-Korean industrial complex,

The special team, comprising of officials from eight departments and the Woori Finance Research Institute, was launched early this month (May) will be in operation till the end of July.

KB Financial Group is known to be considering whether to form a task force on possible business in North Korea, reported Yonhap.

The Export-Import Bank of Korea and other state lenders are focusing their efforts on boosting research on North Korea by expanding think tanks and forming a new research body, according to the sources.