A Chinese investment group has called for large-scale investment in North Korea, spanning 12 different infrastructure projects, according to a recent press release.
China Railways Investments Group, a state-affiliated investment group – working in collaboration with Singapore-registered Daegian Pte Limited – announced August 2 plans that cover the modernization of the country’s ports, construction of high speed train lanes, installation of broadband internet and even provision of cable television.
According to the press release, the DPRK is involved in the plan directly act through its Singapore based “window company” Daegian, set up in March last year.
While this is not the first time foreign investors have talked up North Korea’s potential, Daegian claims it sets itself apart with a “discrete, direct and exclusive conduit to the highest levels of decision making in the government of the DPRK.”
Speaking to NK News, Phill Hynes – media contact and risk management consultant for Daegian – said many of the smaller projects had already been agreed to and signed by the North Korean government.
The plan also includes revamping North Korea’s oil and gas sector and two refineries, a vast undertaking likely costing in the billions. While Mongolia’s HBOil is currently involved in numerous elements of the sector, Hynes claims their interests are on shaky legal ground.
In the below interview Hynes sheds further light on some of the plans, their scope and how close they are to becoming a reality.
Interview with Phill Hynes – Head of Political Risk and Analysis at Intelligent Security Solutions (ISS) Ltd and risk management consultant at Daegian
NK News: What’s your affiliation with this investment project?
Hynes: I’m basically risk management adviser to the board of directors at Daegian, which is the joint venture partner with China Railways. My company provides risk management services to them, and I directly advise the board.
Daegian are a Singaporean registered company with ties to North Korea.
NK News: What is the Chinese investment group’s association with China Railway Group?
Hynes: It is an entity of China Railway Group, it’s China Railway Investments Group.
NK News: So it’s state-backed?
NK News: How far along is the investment project?
Hynes: They (the projects) are grouped into a fund and the initial funding will come from the consortium venture that is behind the press release. Ideally, as the projects develop and other projects open up, the fund will become a vehicle drawing investment for infrastructure projects in the country.
NK News: The Hong Kong-based company mentioned in the press release was set up in early July, does this mean the project is still in the early stages?
Hynes: The wheels are still moving on that, actually the wheels are still moving on all of it. The joint venture company had to be established as a vehicle for delivery of the projects.
NK News: Do you have any further details on any of the twelve projects listed in the press release?
Hynes: Most of them have been nominated for the moment; the actual work will commence on them very shortly. Obviously there is going to be a longer lead in period for some of the larger projects.
The Rajin port is going to have a much longer lead-time, in terms of the scoping and the preparation for it. The high-speed rail line will have a longer lead. Some of the smaller projects will initiate much quicker.
NK News: Which of the projects are furthest along – and have any been signed off on?
Hynes: Most of them have been signed off on, in terms of the rights having been assigned by the North Korean government to the joint venture. The initiation of the projects will commence in the coming months. That’s being structured at the moment. But like I say it’s going to be a fairly lengthy lead in time for some of the larger projects.
The actual work will commence on them very shortly
I mean with Rajin Port, there’s three piers there at the moment, and again there’s probably 10 claims out there of who is doing what and who owns which piers. I can tell you there’s two common piers which are pretty much open for China, any country basically, to use.
There’s one pier which is being refurbished. That’s a (pier) that a Russian company paid for. They extended that, refitted all the trains and everything. I was there a few weeks ago and there’s about 200,000 tons of coal sitting on the pier and being processed at that point.
The idea is to expand the port to 11 piers. And introduce bonded warehousing technologies and everything and then the associated necessary infrastructure. Road, rail, connections. It’s a very big project.
NK News: Have these plans already been drawn up?
Hynes: There is an existing development plan which has been drafted by the Rajin Port Authority, which will have to be revised to take into consideration the scale of the development now. But there is a 10th of the plan in place at the moment from the North Korean side.
That will be developed in conjunction with them and the joint venture.
NK News: Are China and Russia involved in this, will they be putting money in, or is going to be private investment?
Hynes: At the moment China Railway Investment group is the principal front company for the consortium from the Chinese side, and I say Chinese, I don’t say China.
North Korea sits as peace of real estate in the middle of all that which is now extremely important
Russia has aspirations for North Korea, but they have yet to move tangibly on that, but they will do in time. It’s putting into context the globalized developments from China’s side, how the Russians react to their circumstances, what they wish to do with the far east and Siberia, and how North Korea sits as peace of real estate in the middle of all that which is now extremely important.
NK News: The press release mentions the Seungri oil refinery. However won’t Mongolia’s HBOil 20 percent stake in the refinery complicate things?
Hynes: We’ll just call that aspirational to be polite about it. There’s a number of entities over the years that have claimed ownership of that refinery. I can assure you, that’s not case. If that were the case I would like to know how HBOil are getting their funding to refurbish a project that’s probably several billion dollars.
NK News: HBOil have also secured exploration rights for oil exploration rights, will this affect the oil and gas part of the project?
Hynes: Well okay, let’s deal with the offshore ones. I’d be very interested to see what paperwork to support the acquisition of offshore oil exploration rights for North Korea. (Especially) given the maritime boundaries have never been signed since the armistice. Therefore Russia and Japan and China have objected to the allocation of exploration rights. And that’s a matter of fact, that’s on record.
So if you take out the starting point, whatever else is being claimed would have to be questioned.
If it’s real, then demonstrate it. If you have the rights you should most certainly have the necessary paperwork issued by the appropriate body at state level in North Korea. It shouldn’t be too difficult to produce the said papers.
NK News: Do you have a ballpark figure for the investment?
Hynes: To be frank with you the number of projects listed, there’s 12 key projects and there’s sub-projects within five. I mean the value, I couldn’t put a figure on it to be frank with you. It’s going to be evolving over time as well so, I don’t think anybody could really put a figure on it at the moment.
We certainly know that the fund will have “x amount” allocated to it to initiate the text on everything. And then it’s like any other fund that will grow over time.
NK News: On a project of this scale, isn’t there a chance investors are going to run into sanctioned North Korean companies and entities?
Hynes: We’ll have the responsibility for ensuring that any projects will not involve any sanctioned companies. That’s a given from the very beginning. There’s going to be compliance from the North Korean side on that as well.
We’re not coming at it blind, like many companies do trying to get into these countries
We’re not coming at it blind, like many companies do trying to get into these countries. They don’t necessarily know whom they are working with. We will know exactly whom we are working with. The sanctions issue is paramount, at the forefront of our minds, in terms of what we are doing.
NK News: How does Daegian have this conduit to North Korean authorities (as mentioned in the press release)?
Hynes: Essentially we are working directly with the government itself. So from that you can infer we are working at cabinet level – therefore the state is 100 percent behind (us), and committed to and involved in taking forward this initiative.
NK News: So they have North Korean partners in Singapore?
Hynes: No, we spend a lot of time in country on the ground working directly with North Koreans.
NK News: What does this project say about North Korea’s willingness to work with foreign investors?
Hynes: It actually substantiates that the country, the government, have been thinking about economic development for quite some time, because this has been quite some time in the making.
We spend a lot of time in country on the ground working directly with North Koreans
A lot of the coverage of Western media and experts out there, I have not heard a single one of them say something positive about the economic development aspirations of the country. To me this is the clearest unequivocal evidence that this is something that has been paramount in their minds for a long time.
NK News: Can you elaborate on what you mean by “quite some time”?
Hynes: On and off, for well over a decade. I mean it’s been waiting for the right circumstances and right conditions. That’s just not within North Korea, that’s a regional level, it’s on a geo-political level. There have been various developments internationally over the past number of years which have actually contributed to the creation of conditions for this to happen.
If you take examples, historically, of countries, which have suddenly, apparently opened economic programs like Burma, Myanmar. A lot of people felt that happened over night, were quite taken aback by that. That was many years in planning, obviously the discussions on the Iran nuclear deal and the sanctions have been a decade in the planning. How long was Cuba?
So these things just don’t happen over night. People work on these things in the background.
Main picture: R. Cunningham
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