By Jun Ji-hye
The government is considering providing a maximum of 100 billion won ($88 million) in low-interest loans to firms involved in a joint logistics project between the two Koreas and Russia, according to the Ministry of Unification, Thursday.
The so-called Rajin-Khasan project is aimed at transporting bituminous coal produced in Western Siberia to South Korean firms through North Korea.
An official from the ministry said on condition of anonymity, “The ministry is considering providing the loans to POSCO, Hyundai Merchant Marine and the Korea Railroad Corporation, which are planning to take part in the project.”
The envisioned support is drawing attention about how it will affect inter-Korean relations.
The Park Geun-hye government has said the Rajin-Khasan project is an integral part of its Eurasia initiative aimed at connecting roads and railways for the construction of a multi-purpose logistics networks among Eurasian nations.
Embarked on in 2008, Pyongyang and Moscow have been refurbishing a railway between the Russian border town of Khasan and the North’s port city of Rajin.
The three South Korean enterprises formed a consortium to take part in the project by purchasing 49 percent of shares from the Russian side, which holds a 70-percent stake. The whole scale of the project is estimated at about 380 billion won.
The three firms need funds to buy the shares and to invest in infrastructure such as the development of railroads and ports.
If the loans are extended, the money will be used for infrastructure investment, officials said, noting that the support fund would be 60 to 100 billion won.
The timing of the support would depend on when the South Korean consortium signs a formal contract with a Pyongyang and Moscow’s joint company. Observers say that the signing would occur early next year.
The two sides signed memorandum of understanding (MOU) in November in 2013, and have carried out two trial runs in November last year and April this year to examine the project feasibility.
During the second trial run, a total of 140,000 tons of bituminous coal produced from Siberia were transported from Khasan to Rajin. Then, two ships transported the coal from Rajin to South Korea’s three port cities ― Dangjin and Boryeong in South Chungcheong Province and Gwangyang in South Jeolla Province.
Follow Jun Ji-hye on Twitter @TheKopJihye