[THE INVESTOR] Jung Ji-won, CEO of the Korea Exchange, on July 16 hinted that the South Korean bourse operator could play a role in launching a stock exchange in North Korea, the last untapped capital market in Southeast Asia, like it did for Vietnam decades ago.

“Amid prospects for inter-Korean reconciliation and the possible resumption of business exchanges, we need to consider a partnership with the North on capital market infrastructure,” he told reporters in a news conference in Seoul.

“It is crucial to set up a capital market in order to attract large investments in the planned development projects and for the communist country’s ultimate transfer to a market economy. We will start related studies to respond promptly at the right time.” 

Korea Exchange CEO Jung Ji-won

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Communist countries like China and Vietnam have gradually opened up their capital markets and operated their own stock exchanges for decades. With Myanmar launching the Yangon Stock Exchange in 2016, North Korea remains the only isolated capital market in the region.

As inter-Korean talks have started to carry out large-scale infrastructure projects in the North, several experts have claimed setting up a stock exchange in the North could pave the way to attract more foreign funds into the market.

Huge amounts of money should be invested in developing natural resources, railways and electricity in the country. According to government estimates, linking the cross-border railroad to a Eurasia railway alone could cost a whopping 38 trillion won (US$33.80 billion).

The so-called “Pyeongyang Exchange” will allow foreign investors to purchase shares and bonds in the locally listed firms that participate in infrastructure projects. Compared to using loans from banks, experts say it would be more effective and efficient for the investors to manage their funds.

Considering the centralized and underdeveloped financial system in the North, however, it will be a long, time-consuming process that also carries political and diplomatic uncertainties.

The KRX chief also admitted that his vision would not come true any time soon, saying, “Time should be ripe for any meaningful preparations.”

“We are still in the nascent phase of a feasibility study. But our experience with the Vietnamese exchange would be a great help for supporting the possible North Korean exchange,” he added.

KRX has supported several emerging markets like Vietnam, Cambodia, Laos and Uzbekistan to launch their own stock exchanges on building IT systems, regulatory and legal reforms and setting up joint ventures. Especially, the KOSPI and KOSDAQ operator participated in setting up the Ho Chi Minh Stock Exchange at the request of the Vietnamese government back in 2000.

By Lee Ji-yoon (jylee@heraldcorp.com)