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Hyundai confirms North Korea petrochemical complex plan

TOKYO�South Korea's largest industrial conglomerate, the Hyundai Group, says that it is still hoping to build a petrochemical complex in North Korea by 2008, although it adds that the original plan to build an oil refinery alongside is now looking doubtful. These raw materials facilities would be subsumed under the third phase of a larger project to establish a special economic zone at Kaesong, 8 km from the border with South Korea.

The zone, which is to be modeled on China's Special Economic Zones, will occupy some 56 million sq m of land in the first phase. Under a recent agreement reached between the Hyundai Group and North Korea, this would be then be doubled in the second phase.

Although Hyundai says the petrochemical complex is still in the very early stages of planning, "The idea is to eventually turn Kaesong into a world-scale light and heavy industrial complex, and we would expect the size of any petrochemical complex built to reflect this," a senior official at Hyundai Assan, the subsidiary in charge of the project, told OGJ Online.

She added that it is unlikely that Hyundai would build the petrochemical complex: "The idea would be to invite foreign companies to build and operate the petrochemical facilities."

A senior source at Hyundai Petrochemical, however, said it might look to get involved in any such project. "Clearly, if the petrochemical complex goes ahead, we would be interested."

As for the oil refinery, "originally, the industrial complex was to be located on the coast, which would have made it suitable for also hosting a refinery. But Kaesong is some 90 km inland, and given North Korea's poor transport infrastructure as well as Kaesong's proximity to South Korea, an oil refinery at Kaesong does not look a very viable proposition," she said.

She added, however, that there is a possibility that a second, smaller industrial complex will be built at Shinuiju, "and this might be a suitable location for a refinery, since this is a port town." There is also the possibility that the Kaesong site will be expanded towards the coast, which might also allow for the construction of a refinery. "However, at this stage, these two options are still very speculative."

Project plan
In the first phase of the project, set to begin in "the next couple of months," Hyundai will start work on the area's infrastructure and promote the establishment of light industry by inviting local and foreign investors to build facilities for the production of such light industrial products as automobile parts, electronics, and textiles. Hyundai Assan says it expects up to 850 companies to apply to build facilities during the first phase.

In Phase 2, the zone will be solidified as a major base for cost-competitive exports, and Phase 3 would see the complex turned into a world-scale heavy and light industry zone.

Analysts say that, even in the first phase of the project, companies producing plastic-intensive products such as electronics and consumer goods will require heavy purchases of commodity polymers such as polyolefins and styrenic resins. They note, however, that, during this stage, it makes far more economic sense simply to import raw materials from South Korea.

"If Hyundai really wants to turn the complex into a world-scale heavy and light industry complex, a petrochemical unit is virtual necessity, and an oil refinery would also be highly desirable," said the Hyundai Assan official.

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