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Financial industry getting ready to embrace North Korea

South Korean financial institutions are getting ready to embrace the future economic ties with North Korea amid cooperative atmosphere following the inter-Korean summit in April and a week ahead of the US-North Korea summit. 

Samsung Securities said Thursday it set up a research team on investment in North Korea for the first time among the nation’s financial companies.

The firm said the team was set up to “provide systematic analysis on North Korea from a long-term perspective as the nation’s geopolitical situation with the North is now seen as new growth momentum for Korean companies.”

Other financial firms including KEB Hana Bank, Woori Bank and Shinhan Financial Group, also began to prepare for the possible cooperation. 

This file photo shows North Korea`s central bank. (Yonhap)
This file photo shows North Korea`s central bank. (Yonhap)

KEB Hana Bank and Woori Bank set up a task force to make preparations for financial businesses in North Korea. 

Shinhan Financial Group plans to make a consultative body related to economic cooperation between the two Koreas. Through the body, it plans to make a concrete plan on financial supports for the economic cooperation and infrastructure to reform North Korea’s financial sector.

Last month, the non-profit Korea Institute of Finance also set up a research center designed to assess and monitor North Korea’s financial situation. The institute said the center was created to prepare for the possible economic cooperation of the two Koreas as the state of affairs of the Korean Peninsula has taken a sudden turn.

Apart from the financial sector, Korea Hydro & Nuclear Power and Korea Electric Power Corporation, the two largest energy related public organizations under the Ministry of Trade, Industry and Energy, are also busy to embrace the possible ties.

On Wednesday, Korea Hydro & Nuclear Power that operates large nuclear and hydroelectric plants in the nation, said it set up a team under its green energy division for the preparation for possible businesses with North Korea. This team plans to prepare for cooperation in waterpower generation such as the modernization of obsolete waterpower facilities.

Currently, North Korea relying more than half of its electricity on waterpower generation, is facing difficulties due to its obsolete facilities.

Korea Electric Power Corporation is also preparing for the cooperation in energy with North Korea.

“Although it is unofficial, the preparations to supply energy to the North are actively undergoing within KEPCO for the nation having difficulties to supply enough electricity to its citizens,” said an unanimous senior official from the Ministry of Trade, Industry and Energy.

Still, some industry watchers said companies need to take a cautious approach as there are risk factors that the geopolitical situation of the Korean Peninsula can see a sudden change. Two years ago, resident companies saw around 1.5 trillion won ($1.4 billion) in losses due to the sudden closure of the Gaesong Industrial Complex.

“Even if sanctions on the North are lifted, it may take some time for private funds to be invested as full verification process needs to take place first,” said Sung Tae-yoon, an economics professor at Yonsei University.

By Shin Ji-hye (