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2016 July 6

Consul General of the Republic of Korea in Vladivostok Lee Sok Bae: “It’s not a good time for Korean shipbuilders to invest in Primorye”

The Republic of Korea has historically been one of the key investors and newsmakers in the Primorsky Territory though Primorye is among the last regions in Russia when it comes to investment attractiveness (67th in 2015). Korea seems to account for the highest share of unsuccessful projects, from SEZ Nakhodka to Zvezda-DSME and Hyundai plant built in Vladivostok a couple of years ago and still not operational. What are the prospects of cooperation in logistics and sea transport amid new economic regimes? Consul General of the Republic of Korea in Vladivostok Lee Sok Bae answers the questions of IAA PortNews.  

— Mr. Lee, after a historical maximum of $2.2 bln achieved in 2013 the trade turnover between the Primorye and the Republic of Korea has reduces by more than a half to $1 bln. Moreover, the share of Primorye in relatively low Russia-Korea turnover is just several percents, less than that of the western regions. What can change the situation? 

— We are optimistic about the Second Eastern Economic Forum in Vladivostok. As it is known, at the summit talks held in Seoul in November 2013 the leaders of the Russian Federation and the Republic of Korea agreed on the active in the development of the Far East region. As of today, the most active development of cooperation between the two countries is seen in the Primorsky Territory – 12 Korean agricultural companies operate there. 

Investment activities in the Primorye started in late 1990 with the appearance of Hyundai Heavy Industries. Despite different problems many Korean enterprises look into carrying on their business in fishery, infrastructure construction, recycling, medicine, etc. A special role in attracting Korean investors to the Primorsky Territory is played by the benefits and privileges provided to the residents of the Priority Development Areas and the Free Port of Vladivostok. 

— PDAs and FPV feature joint projects with China and Japan, but not with the Republic of Korea. Why?

— PDAs and the Free Port of Vladivostok have not yet shown the results of joint projects. I think it is because of the time – they are not two years yet. At the same time we see positive trends. The Eastern Economic Forum held last year made a splash in the financial and economic community of the Republic of Korea. It featured a large Korean delegation headed by the Minister of Industry and Trade. Despite certain administrative problems, the Forum participants were satisfied. They learned about the projects and heard the position of Russia President. Now they are looking into investments in the economy of the Far East. I hope, we will see the progress after the 2nd EEF.

In October 2015 the Consulate General of the Republic of Korea issued special booklets in Korean to provide the companies with an insight into PDA and FPV projects, their basic concept. Some Korean companies are already involved in active talks with the interested authorities of Russia the projects on construction of refrigerated storage facilities and fish meal plants муки. 

— Tell about the “Made with Russia” project.

— The project “Made with Russia” was initiated by the Commercial Section of the Consulate General of the Republic of Korea (KOTRA). It was first presented on June 8, 2016 at the Far East Russian-Korean Forum in Vladivostok. About 60 companies from Russia and Korea took part in the event to exchange information, hold negotiations on export/import possibilities and on joint investment projects. The project’s main purpose was to find partners for establishment of joint fishing/shipbuilding/agricultural and other companies. We consider the initiative to be a success.

—  Korean experts participating in the Forum highlighted some factors that keep the Korean business back from fast investments into the Russian Federation: bad experience of the past, lack of information on new regulations, insufficient guarantees, unclear concept of new economic zones, low qualification of the population etc. Having repeated the same reasons in its report, Russia’s Ministry of Foreign Affairs also characterizes the position of Korean businessmen as a ‘wait-and-see attitude’. Can you agree with it? 

— It should be noted that the Republic of Korea has been closely cooperating with Russia for 26 years. In fact, the 90-ies saw many joint headline-making initiatives like an oil & gas project in Irkutsk or an industry complex in Nakhodka. Nothing came out of them. But there are many examples of success. As I have told, nobody has any doubts in a huge potential for the development of cooperation between our countries, between the Republic of Korea   and the Far East. We welcome initiatives focused on boosting of this cooperation. 

— The Republic of Korea boasts excellent examples of free port projects, like those of Busan and Incheon. Do these ports’ operators have any projects or plans for joint work with ports of FPV zone (something that Dalian and Singapore are trying to do)?

— As of today, there are no joint projects between the ports of the Primorsky Territory and the ports of Busan or Incheon. Last year, the Ministry of Oceans and Fisheries of the Republic of Korea held a feasibility study of the project on modernization of the Far East ports. The highest interest was focused on modernization of port Zarubino developed by Summa Group. Large companies of S. Korea are eyeing the cooperation. We hope that in the nearest future our countries fill completely agree on the port modernization within the framework of the FPV project. 

— Joint project of the Zvezda and Daewoo Shipbuilding and Engineering was under lively discussion not so long ago ... What are the prospects of cooperation in shipbuilding and ship repair?

— There is no cooperation between Zvezda and Daewoo Shipbuilding and Engineering as it is. They are only implementing an exchange programme: DSME invites Zvezda engineers to the Republic of Korea for an insight into technologies. 

The cooldown of the interest to shipbuilding in the Primorye and in Russia was mainly caused by local problems of Korean shipbuilding. This issue is among the key ones in local media. Oil prices have dropped. There are few orders if any. The industry is in difficulties. Therefore, shipyards including DSME introduce financial and structural reforms. I hope, close cooperation between the Republic of Korea and the Russian Federation will be revived upon completion of those reforms.

— Last autumn saw the opening of a transit line Republic of Korea – Zarubino – China with a capacity of 500 containers per week. What hinders the growth? 

— Indeed, international transport corridor Primorye-2 linking Sokcho, Zarubino, Kraskino and Hunchun is among the most interesting projects for us in the Far East region. Primorye enjoys the central place in the route connecting three north-east provinces of China with the Republic of Korea. Cargo potential is very large. Today, the main factor influencing the intensity of its operation is the customs infrastructure. I would like to emphasize that Korean companies ask for streamlining of the customs procedure. As far as I know, Russian Customs is doing its best to solve this problem, so in the nearest future we expect an increased traffic at this route. 

— The Primorye is proud of the growing number of tourists from the Republic of Korea. The recent call of the Cost Victoria chartered by Lotte raised much hope. What is needed attract your citizens to the region more efficiently?

— Advertizing of Vladivostok and the Primorye, their sights and unique opportunities which, unfortunately, are not widely known in Korea. I also mean the cultural sites like the Primorsky Stage of the Mariinsky Theatre, an opportunity to travel by the Transsib, outdoor activities. A network of hobby clubs – fishing, photo, climbing - is widespread in Korea. I’m sure Primory has something to share. Vladivostok is the closest Russian city for Korea. With the last year’s slogan of Korean Air “Two-hour flight to see Europe!” the Primorye was visited by 24,000 tourists form the Republic of Korea. If tourism is promoted in the Primorsky Territory, the number of tourists will be much higher.  

Interviewed by Yevgeny Pankratyev.