| Author: |
Young Joon Kim;Joo Han Sung;Joon Hyuk Lee |
| Source: |
Journal of Korea Planning Association Journal of Korea Planning Association Journal of Korea Planning Association
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| Publication date: |
2020-04-30 |
| Subject terms: |
경제특구; 개성공단; 토지이용권; 토지임대; REITs; Special Economic Zone; Gaeseong Industrial District; Land Use Rights; Land Lease |
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Abstract:
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The shutdown of the Gaeseong Industrial District in February 2016 caused huge losses for Strategic Investment Companies(SICs) which invested in North Korea. SICs were forced to obey the sudden shutdown decision of the government. Even though they were not at fault, they didn"t get adequate compensation for damages. Hence, SICs have failed to trust the government. As a result, financial institutions, as well as SICs, perceive that the inter-Korean economic co-operation is an unreliable business. In this situation, an attempt has been made to find an appropriate investment structure in North Korea. Real estate investment trusts(REITs) can be an attractive financial vehicle to prevent investment loss. Also, REITs can be a readily acceptable model because REITs do not require North Korea to greatly change its laws and institutions. The following steps can be undertaken: SICs invest loaned funds in REITs and provide financial institutions with stocks as the collateral. REITs make a lease agreement with the North Korean authorities, build factories, and rent those factories to local subsidiaries established by SICs. If the inter-Korean relationship worsens, SICs will ask the Inter-Korean Cooperation Fund to buy the stocks of the REITs of their own. SICs repay the loans with the stock sale price. Moreover, the investment structure using REITs will provide the creditors with a means of payback by auctioning off the stocks of the REITs. Therefore, it can be seen that REITs are reliable investment vehicles that promote investment activation and fund-raising from the investors’ point of view. |
| Database: |
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