North Korea's state-run Korean Central Television shows demolition of the joint liaison office in Kaesong on June 16. (KCTV via Yonhap)
Nearly two years ago, South Korean financial groups hurriedly launched special teams to pursue inter-Korean businesses on the back of a reconciliatory mood between Seoul and Pyongyang.
But the mood quickly soured with the collapse of the second summit between US President Donald Trump and North Korean leader Kim Jong-un in February last year. Now, with North Korea blowing up an inter-Korean liaison office in the border town of Kaesong, the hostile mood has cast one of the darkest clouds yet on their projects.
Woori Bank, which was the only Korean lender that operated a branch in the inter-Korean industrial complex in Kaesong, has wrapped up its task force launched in May 2018. It looking forward to restarting its Kaesong branch -- which opened in 2004 but was abruptly closed in 2016 in line with the shutdown of the complex -- and expanding currency-related services related to cross-border tourism.
“The task force meetings have been halted for the time being,” a Woori Bank official told The Korea Herald on Friday.
“The members are now focusing on other projects,” the spokesman said, adding that lenders don’t have the authority to make decisions due to the current diplomatic and political circumstances.
Woori Bank`s now-shuttered Kaesong branch (Woori Bank)
NH NongHyup, which checked on reopening its Kumgangsan branch, says the matter has not come up for discussion recently. The branch opened in 2006, but has been abandoned for more than a decade, after tourism to the Kumgangsan resort area was suspended in 2008.
“We have been unable to receive reports on the current state of our Kumgangsan branch,” an NH bank official said.
Other banks -- both state-run and private -- have also established committees and task forces consisting of employees and outside experts, eyeing to launch financial services for South Korean firms seeking to build infrastructure in the North. They, however, have also been either disbanded or put on hold since end-2018 or 2019.
Layers of strict US sanctions that ban financial transactions with the reclusive nation, has also worked as major obstacles for their cross-border projects.
Despite darkened prospects for all inter-Korean projects, banks have yet to fully give up on expanding their businesses in the North’s largely unchartered financial territory.
“We are still operating a temporary branch in Kaesong in the basement of our headquarters,” the Woori official said.
According to Woori last year, its precursors Commercial Bank of Korea and Hanil Bank each operated 27 and 24 branches in North Korea before the 1950-53 Korean War. They had both opened in 1899 and 1932 respectively under different names and were later merged in 1999 to become Woori.
North Korea remains an unchartered territory and a potential market for local lenders as its financial system is centered around its central bank with only few “commercial” financial institutions, Kim Young-hee, team head of the North Korean Economy Department at the Korea Development Bank said at a forum in 2018.
Employees of the Kim Jong Thae Electric Locomotive Complex in Pyongyang read a copy of the Rodong Sinmun newspaper showing coverage of North Korea`s demolition of the north-south joint liaison office, on June 17, 2020. - North Korea`s spectacular destruction of its liaison office with the South is part of a series of staged provocations aimed at forcing concessions from Seoul and Washington, analysts say. (AFP-Yonhap)
Most North Koreans seek private lenders for loans -- as the Central Bank of the Democratic People’s Republic of Korea doesn’t provide such services -- and lending rates stood at 10 percent, while mortgages came to 4 to 7 percent.
North Korea on Tuesday blew up a liaison office in Kaesong that was set up as joint inter-Korean economic project in 2018, in the latest signs of deteriorating ties.
By Jung Min-kyung (firstname.lastname@example.org