Seoul to Unveil Investment Plan in NK Infrastructure

» Unification minister Lee Jae-jung(far right) chairs preparatory meeting for the second inter-Korea summits scheduled for Aug. 28-30 on Aug. 9 at the conference hall of Office of Inter-Korea Talks


Seoul to Unveil Investment Plan in NK Infrastructure

By Ryu Jin
Staff Reporter
Korea Times

South Korea is expected to propose a large-scale investment plan in social overhead capital (SOC) in North Korea in the inter-Korean summit late this month to help the impoverished state revive its economy, according to officials on Thursday.
Officials in Seoul said that the package proposal will likely include the provision of electricity, renovation of the Pyongyang-Gaeseong highway, improvement of facilities in Nampo port and establishment of a fertilizer factory.
President Roh Moo-hyun and North Korean leader Kim Jong-il are set to meet in Pyongyang Aug. 28-30, seven years after Roh’s predecessor, Kim Dae-jung, met with the reclusive North Korean leader.
While the Roh administration finds itself in a difficult position to give direct assistance to the North, such as provisions of rice and fertilizer -- not to mention cash -- it appears to have opted for ``indirect’’ SOC investment, according to the sources.
Former President Kim Dae-jung won the Nobel Peace Prize for the first-ever summit in June 2000, but his achievement was partly tainted by later revelation that Seoul had secretly transferred $500 million to Pyongyang to foster the historic summit.
Roh, who has put more weight on transparency in North Korea affairs, often stressed the need to help North Korea repair its devastated economy with its own hand and get out of its economic slump.
In February, the Unification Ministry drew up a roadmap for a large-scale economic cooperation, focusing on ``what the North really wants.’’ Seoul will likely make some offers to Pyongyang in the upcoming summit, according to government sources.
Dubbed ``Roadmap to Hope,’’ the ministry plan includes as many as 16 items such as the provision of 2 million-kilowatt electricity, worth some $900 million every year, and renovation of the 170-kilometer Pyongyang-Gaeseong highway ($307.7 billion).
Other items include the improvement of facilities in Nampo port, the construction of a 330,000-ton fertilizer plant and installation of tree nurseries in Pyongyang, Gaeseong and Hamheung.
``We are sorting out items that could be offered,’’ a high-profile government official said on condition of anonymity. ``I think our proposal for the SOC investment could be discussed in the working-level preparatory talks in Gaeseong next week.’’
Experts estimated that the aid package could reach 9 trillion won to 13 trillion won ($9.7 billion to $14 billion) in the coming several years, if major items such as the highway renovation are included on top of the ongoing supply of heavy fuel oil.
Seoul is expected to demand the establishment of liaison offices across the border and the regularization of military talks headed by the defense ministers from the two sides in return for the economic incentives, according to the sources.
But the large-scale economic assistance is expected to trigger fiery debate in the South, as conservatives, represented by the opposition Grand National Party (GNP), have often lashed out at the government’s ``single-handed’’ assistance amid the nuclear standoff.
Deputy Prime Minister and Minister of Finance and Economy Kwon O-kyu, who is to accompany Roh to Pyongyang, stressed on Thursday that the aid package would be offered ``transparently’’ in close coordination with the international community.
``South-North Cooperation Fund, operated under the endorsement of the National Assembly, could be used first,’’ he told reporters. ``I think we should also try to create a favorable environment for the inter-Korean economic projects in close cooperation with the World Bank and the Asian Development Bank.’’

jinryu@koreatimes.co.kr



Seoul considers comprehensive economic package for Pyongyang


Along with Wednesday’s announcement of the second-ever summit between President Roh Moo-hyun and North Korean leader Kim Jong-il later this month, the government said that the summit would aim for a “new Korean peninsular plan” that will make progress in inter-Korean economic cooperation projects in terms of quality and quantity. In fact, the government seemed as though it wanted to make it clear that it considers inter-Korean economic cooperation as its top priority in the upcoming summit. Before the Aug. 28-30 meeting, the government is expected to draw up a set agenda on inter-Korean economic cooperation, based on pending economic issues.
While the government’s agenda will be publicized throughout the preparatory meetings with the North and the summit, you can guess some of the agenda. Major issues about inter-Korean economic cooperation expected to be on the summit table include: regular cross-border train service in return for energy aid, development of an industrial zone that matches the Kaesong industrial complex and infrastructure investment as well as industrial cooperation.
To begin, the regular service of cross-border trains is directly linked with the government’s plan for a north-bound economy. President Roh, in a speech on July 19, said, “The stage for our economy will be extended to the Eurasian continent and it will provide all economic sectors, including trade and finance, with a new turning point.”
Reconnecting with North Korean roads and rail lines is essential for South Korea, so that it can easily make inroads into the country. However, analysts say it is highly unlikely that the two leaders would agree on regular service for a cross-border railway that would run from Busan to Seoul to Shinuiju during the summit. North Korea considers railways to be military facilities. In addition, there is another problem for North Korean roads and rails: aging. A possible scenario is that the two leaders may agree on regular service for a shorter railway between Munsan and Kaesong, which was recently reconnected on a trial basis. And then, the two sides may gradually expand the coverage after the summit.
If North Korea agrees to use South Korea’s power plant for regular service of cross-border railways, South Korea is likely to offer energy aid. Because North Korea’s industrial sectors have been crippled by a lack of electricity, South Korea might also revive a plan to transfer electricity to the North. North Korea could also ask South Korea to upgrade or fix its thermal power plants. What’s more, South Korea may consider providing coal to the North, a plan once explored by the South in 2000. At that time, South Korea had pushed a plan to help failing coal mines in the South stay afloat, while offering coal to the energy-hungry North.
If you focused on the words “new plan,” you would guess that the two leaders might agree on the development of a new industrial zone modeled after the Kaesong industrial complex. Some analysts say Wonsan or Shinuiju may emerge as potential sites for the new industrial zone, instead of Nampo, which had previously been proposed but is a concern for North Korea because of its politically sensitive location.
Investment in the ports, roads and rails that make up the North’s infrastructure is another potential item for the agenda. After the two Koreas issued a joint statement on Sept. 19, 2005, the Ministry of Unification and the Ministry of Finance and Economy co-authored a report in November of that year, titled “Economic plan for the Korean peninsula,” by order of President Roh. The plan is believed to contain comprehensive schemes to revive the North Korean economy. However, with President Roh’s single, five-year term set to end next February, it may be difficult for Roh to make an agreement with the North Korean leader about the plan because it will require a huge budget that he will not be around to oversee.