Korean firms building distribution complex on North Korea’s doorstep

Posted on : 2012-09-11 14:15 KST Modified on : 2019-10-19 20:29 KST
The hope is that NK could become involved as inter-Korean relations improve
 China. Representatives from Hyundai and POSCO and Chinese officials attended the ceremony. (by Park Min-hee
China. Representatives from Hyundai and POSCO and Chinese officials attended the ceremony. (by Park Min-hee

By Park Min-hee, Beijing correspondent in Hunchun

POSCO and the Hyundai Group began construction on Sept. 10 on an international distribution complex in Hunchun, a Chinese city bordering the Rason Special Economic Zone in North Korea.

The two companies held a groundbreaking ceremony at the site with around 200 South Korean and Chinese officials in attendance, including POSCO chairman Chung Joon-yang and Hyundai chairwoman Hyun Jung-eun. Also present were Jilin provincial party secretary Sun Zhengcai, Yanbian Prefecture party secretary Zhang Anshun, South Korean ambassador to China Lee Kyu-hyung, and Yanbian University of Science & Technology president Kim Jin-kyung.

The city of Hunchun is located in Yanbian, the Korean autonomous prefecture in the province of Jilin.

Chung Joon-yang said the complex would “contribute greatly to promoting the economy and trade as a distribution hub for China’s three Northeast Provinces.” The provinces in question are Jilin, Heilongjiang, and Liaoning.

Occupying a 1.5㎢ area in the heart of a pilot zone for international collaboration in Hunchun, the complex will include warehouses, container storage yards, and collection and delivery facilities. It will cost around 1.1 billion RMB (around US$173.5 million), with POSCO putting up 80% of the investment to the Hyundai Group’s 20%. The land rental period is fifty years.

The first stage of construction is set to finish in late 2013, with the resulting facilities going into operation from January 2014. The second and third stages are to be finished by 2019.

The aim of the project is distribution within Northeast China. One key factor will be access to the harbor at Rason on North Korea’s east coast, which will allow goods to be transported by sea. Hunchun is located at the border of China, Russia, and North Korea, 51km from Rason.

POSCO and Hyundai plan to profit from the complex by storing and reprocessing items from Jilin and Heilongjiang, including wood, grain, marine products, feed, and car parts, before shipping them to southeastern China. By using Rason Harbor and the access it provides to the East Sea, they can cut costs that run in the hundreds of dollars per container under the current distribution system, which relies on Dandong and Dalian Harbor.

The Beijing government is actively working to develop Rason with North Korea, which it is linking to its own so-called “Chang-Ji-Tu Development Programme,” named after the city of Changchun, Jilin, and the Tumen River. It has also designated a 90㎢ area around the complex as a pilot zone for international collaborations, where it is working on infrastructure development, with a number of tax breaks offered. It has already secured use of the first of Rason’s three wharfs, where it has begun transporting coal from the three Northeastern provinces and Inner Mongolia to China’s south.

A POSCO official said the company plans to start by transporting general items and grains from China’s northeast to its south via the Russian far east port of Zarubino.

“If inter-Korean relations improve in the long term and we are able to use the port at Rason, we’ll be able to transport resources like iron ore and coal to South Korea and other regions,” the official cautiously ventured.

Pyongyang’s active steps to develop the Rason zone since the Kim Jong-un regime took over are offering something of a green light. For one thing, it has been working overtime to attract investment. On Sept. 7, North Korea held an idea session with China in Changchun, looking at possibilities for a trade investment project. An investment briefing is scheduled for Sept. 26 and 27 in Beijing.

Major Chinese corporations are also investing actively in the region. The Yatai Group is pushing to build a cement factory, and the Transportation Group and Merchants’ Group are working on infrastructure development in Rason, the Oriental Daily reported on Sept. 9. The Yanbian Ribao newspaper also reported that North Korea had plans to open up Chonjin Harbor to China as well. The Yanbian Haihua Group signed a contract on Sept. 1 with the North Korea Harbor General Corporation to share use of the third and fourth wharfs at Chongjin Harbor for a period of 30 years.

 

Please direct questions or comments to [english@hani.co.kr]

 

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