Banks plan to re-enter the North
South Korean cash may soon be flowing back into the Kaesong Industrial Complex in the North, and local banks are gearing up to become the ones to manage it.
It’s been two years since the Kaesong Industrial Complex branch of Woori Bank, a major South Korean commercial bank, closed its doors after the inter-Korean initiative was suspended in February 2016. But the branch didn’t shut down completely, and it is currently operating in the basement of Woori Bank’s headquarters in Jung District, central Seoul, where Choi Ho-yeol still works as the branch’s head.
The temporary office currently provides follow-up services to companies that operated in the complex and incurred losses after they were forced to leave.
“We are ready to return to Kaesong as soon as the government gives us the authorization,” said Choi. “It shouldn’t take long to resume business there after we re-install the server and network system we brought with us and reconnect the phone line.”
Woori Bank won permission to operate in the Kaesong complex in 2004 after it beat out five other bidders, including South Korean state-run banks. It provided money transfer and cash deposit and withdrawal services to 123 companies in the complex and their workers. All of the transactions were done in U.S. dollars. The branch had three South Korean employees and four workers from the North.
“North Korea is a unique place, and it’s important to have on-site experience,” explained Choi, who’s been working for the branch since 2013. “The branch may be incurring losses for now, but Woori Bank is making an investment by looking at the long run.”
“Once the second stage of development begins, we will be able to provide the necessary financial services [for the expansion,” Choi added, referring to the South’s plan to expand the Kaesong complex by 8.3 square kilometers (3.2 square miles). “If the [ban] on financial transactions between the North and the United States is lifted, it would even become possible to do financial transaction directly with the people of the North through our branch.”
Woori Bank is not the only major South Korean bank preparing to do business north of the DMZ.
KEB Hana Bank, for instance, is mulling how it can use the Bank of Jilin in China, which it has a 17 percent stake in, to enter the North Korean market.
Banks such as KB Kookmin Bank, the banking unit of KB Financial Group, the country’s top financial holding company by assets, are closely monitoring projects that require social overhead capital. These are the source of basic social services, such as railroads and ports, and the North is in dire need of them. These projects require a tremendous amount of capital.
The state-run Industrial Bank of Korea is set to launch what it calls a unification finance preparation committee, and plans to offer its own bid to open a branch in the Kaesong Industrial Complex if the government decides to allow another bank to operate there. NH Nonghyup Bank is counting on the resumption of tours to Mount Kumgang in the North.
The bank ran a branch from 2006 to 2008 in the Mount Kumgang tourist zone, a special administrative region in the North that South Korean tourists are allowed to visit. The branch had six employees and provided currency exchange services to tourists and employees of Hyundai Asan, the company that ran the tourist program.
BY JOO JUNG-WAN [firstname.lastname@example.org]