South Korea’s sole securities exchange operator is set to commission research into the best way to support North Korea in setting up its own capital market, a document seen by NK News this week showed.
The proposal, unveiled by Korea Exchange (KRX) in a bid last Friday, seeks to commission a “study on plans to utilize the capital market for North Korean economic development.”
By outsourcing the project to a specialized research institute, the KRX aims to “present a roadmap to support the establishment of the capital market in North Korea,” the bid continues, and “devise concrete action plans” based on its outcome.
Sequencing plans for introducing a capital market in the North will be also investigated, it said, saying that the country’s special economic zones (SEZs) could be in a position to implement the new system first.
The KRX plans to “prepare a model for establishing a North Korean-style capital market, taking account of the country’s economic situation,” stressing that researchers would need to come up with a model to be proposed to Pyongyang when it requests assistance.
Researchers are also required to establish this roadmap based on analysis of several overseas cases and the North’s current situation, and “review issues that may arise in the course of pushing forward with the plan.”
Among the overseas cases to be studied include China, Vietnam, Singapore, Laos, Cambodia, and Myanmar.
KRX has in the past worked with countries seeking to liberalize their economy, a database provided by its official website showed, having assisted in the 2000 establishment of the Ho Chi Minh City Stock Exchange (HOSE).
The Lao Securities Exchange (LSX) and Cambodia Securities Exchange (CSX) were also launched in November 2011 and April 2012, respectively, in the form of a joint venture with the KRX, which also provided technical support.
A total of KRW170,000,000 ($143,085) will be allocated to the research project, which must be completed within four to five months. The bidding process is underway, and bidders must submit their proposals by June 4.
The announcement comes just a few days after the KRX held the first meeting of its new “Advisory Committee on Inter-Korean Financial Cooperation” on May 21.
That eight-member committee is led by vice chairman Lee Eun-tae and composed of North Korea experts in the fields of politics, economy, regulations, and other issues, local media reported.
The advisory committee, an official consultative body to the KRX, is being set up to research ways to cooperate with the DPRK in developing its economy and financial infrastructure in preparation for an expected stepping-up of inter-Korean economic cooperation.
KRX Chairman and CEO Jung Ji-won said in a new year message his organization would “prepare in advance so that it can respond swiftly when conditions reach a mature level regarding the establishment of capital market in North Korea.”
In its proposal Friday, the KRX also highlighted the importance of the project to the development of the North Korean economy.
“Research pertinent to North Korea’s finances are limited to some areas such as banks — research on North Korea’s economic development through capital markets is insufficient,” the proposal explained.
The KRX said the project could serve as a “win-win” for the two Koreas: “the establishment of the capital market is an essential process for North Korea’s economic growth and South Korea can also create new opportunities through infrastructure support.”
The South Korean stock market operator also stressed the possibility that neighboring countries including China, Russia, and Japan might make an early intervention in setting up a North Korean capital market and, as a result, gain the upper hand.
Seoul should be cautious of “vague optimism that North Korea will introduce a South Korean model,” it said.
“Proactive preparations to support the establishment of a capital market in North Korea are needed.”
Edited by Oliver Hotham
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Featured Image: CPC_9050 by nknews_hq on 2016-10-05 14:34:14