Prerequisites for Investment

If the Asian Infrastructure Investment Bank (AIIB) decides to participate in infrastructure investment in North Korea, a cross-border cooperation where South Korea, North Korea, China and Russia participate will be the most likely.

If the Asian Infrastructure Investment Bank (AIIB) decides to participate in infrastructure investment in North Korea, it is likely to invest in cross-border cooperation projects where South Korea, North Korea, China and Russia can share profits, a South Korean researcher said.

Lee Hyun-tae, a researcher at the Korea Institute for International Economic Policy, has written a report on the possibility and implications of AIIB’s investment in North Korea’s infrastructure. Lee said that the AIIB projects could also be linked to the trilateral transportation and energy infrastructure projects of both Koreas and China and of both Koreas and Russia.
 

Launched in January 2016, the AIIB is a multilateral development bank (MDB) that has 87 member countries. At present, the AIIB is engaged in 28 projects with a combined value of US$5.34 billion.
 

“If China decides to invest in infrastructure in the North, the AIIB may provide its Project Preparation Special Fund, join a government guarantee project as a financing provider with another MDB or financial institution, or attract capital by launching a North Korean infrastructure development fund,” the researcher explained.
 

He also said that there are some prerequisites for the AIIB’s infrastructure investment in the North, such as irreversible denuclearization, lifting of UN sanctions, and profitability check based on project risk assessment, cost analysis, etc. The prerequisites also include North Korea’s will to cooperate and approval by the board of the AIIB.


“With the North extremely short of money for infrastructure development, the South Korean government needs to encourage the AIIB to invest in the North,” he went on to say, adding, “At the same time, the government needs to help North Korea accede to international financial organizations such as the IMF and the World Bank so that it can attract more public and private capital for development.”

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