Domestic Economy

South Korea Prepares for Long-Range Partnership

Business & Markets Desk
South Korea Prepares for Long-Range Partnership South Korea Prepares for Long-Range Partnership

South Korea is ready to share its technology with Iran and help the country achieve its envisioned 8% economic growth, said the Korean Minister of Trade, Industry and Energy Joo Hyung-hwan on Monday.

Joo was speaking at a business forum attended by economic players of the two countries in Tehran.

The event, convened by more than 250 delegates from 100 South Korean companies, was the second of its kind coordinated by the Korea International Trade Association.

Referring to Iran’s rich natural resources, 80-million population, skilled workforce and its geographical position along with Korea’s advancements in information and communications technology as well as services, the visiting minister said, “The two need to direct their attention on each other’s capabilities and tap each other’s potential.”

He viewed cooperation in upstream industries as a good starting point for further joint ventures and said South Korea plans to forge a long-term partnership with Iran.

“Investment by internationally-acclaimed Korean companies to help make Iranian products is welcome here,” said Iran’s deputy industries minister and the head of Trade promotion Organization of Iran, Valiollah Afkhamirad.

He recommended Korean businesses to view Iran as more than a mere consumer of their products and called for setting up joint ventures and direct investment by the Asian country.

“Despite the never-ending skirmishes in the Middle East, Iran has managed to remain the safest, most secure country of the region. By applying constant reforms to its investment rules and regulations, Iran is trying to improve ease-of-doing-business in the country,” he said.

Also present at the meeting was Mohsen Jalalpour, the head of Iran Chamber of Commerce, Industries, Mines and Agriculture, who called for a solution to the challenges facing Iranian traders keen on making business trips to South Korea.

Jalalpour also put forth the idea of establishing a joint organization responsible for addressing trade disagreements between the two countries. “The two sides can cooperate in different fields, including technology, steel, shipbuilding, fisheries, banking and insurance," he added.

Three MoUs

Iran and South Korea signed three memorandums of understanding during the Monday forum.

Korea’s POSCO signed a memorandum of understanding with Iranian steelmaker, Pars Kohan Diar Parsian Steel (PKP), to jointly build a steel mill incorporating POSCO's proprietary technology, Reuters reported.

The world's fourth-largest steelmaker said it will cost about $1.6 billion to construct the plant, capable of producing 1.6 million tons of steel annually, in Iran's Chabahar Free Trade-Industrial Zone. POSCO Engineering and Construction will build the mill.

The plant uses FINEX steelmaking technology, which is the name of an iron-making technology developed by Siemens VAI and POSCO. Molten iron is produced directly using iron ore fines and non-coking coal rather than traditional blast furnace methods through sintering and reduction with coke. Such a plant is less expensive to build than a blast furnace facility of the same scale.

Also, production costs and time are cut using the technology while creating fewer pollutants.

During the forum, POSCO's electricity-generating affiliate POSCO Energy also signed a memorandum of understanding with PKP to construct a 500-megawatt power plant using excess gas generated by the envisioned steel mill.

In cooperation with Korea Electric Power Corp., the company will also construct a desalination facility nearby to desalinate 60,000 tons of seawater every day.

"Last September, we signed the MoU with our Iranian counterpart and today's agreement has all but finalized the $1.6 billion project," a POSCO spokesman said. "We will continue to work hard to complete the scheme as scheduled."

As soon as the United States and other western economies lifted sanctions on Iran in January, POSCO moved quickly to get the stalled FINEX plant project back on track.

Under the agreement, POSCO will shoulder 8% of the investment and transfer its POSCO innovative steelmaking technology to its Iranian partner. The technology is a combination of FINEX and compact endless cast and rolling mill technologies. PKP will pay for the remaining 92% of the project.

According to POSCO, FINEX technology allows the direct use of cheap iron ore fines and non-coking coal as feedstock, resulting in significantly lower operating costs and emissions than a blast furnace.

"First, we will build the 1.6-million-ton steel mill using FINEX and CEM technologies," the spokesman said. "We will then construct additional facilities to produce 600,000 tons of cold-rolled coils and galvanized steel sheets."

In cooperation with KEPCO, POSCO Energy will operate and manage the facilities, which will provide power and fresh water to the FINEX plant.

"We believe the planned power plant and desalination facilities will help POSCO operate its first steel mill in Iran," a POSCO Energy spokesman said. "Using them as a springboard, we will seek to secure more business opportunities in Iran and the region."

$5b Investment Deal

On Sunday, a finance deal was signed by Iran’s Minister of Economic Affairs and Finance Ali Tayyebnia and the visiting Korean minister. As per the agreement, Korean trade insurance corporation K-Sure will invest up to $5 billion in Iran’s development projects.

K-sure was established in 1992 under South Korean government’s Trade Insurance Act to promote trade and overseas investment of Korean enterprises.

It operates various trade insurance programs to cover risks arising from the export and import of goods and services, overseas construction projects and investments; management of foreign exchange and interest rate fluctuations, export of cultural contents and services, and other overseas transactions.

The company also provides credit-related services, such as credit research and credit information management, in addition to debt recovery services, including the collection of overseas receivables for Korean companies.

“The pact aims to build a framework to deepen economic ties between Iran and South Korea by providing finance for Iran’s infrastructure, construction and manufacturing projects by Korean banks, financial institutes and companies,” IRNA quoted Tayyebnia as saying during the meeting.

"Iran is fully prepared to receive Korean companies’ investments in manufacturing, automotive, oil, gas and tourism sectors."

In a separate meeting on Sunday between Joo and Valiollah Seif, the governor of Central Bank of Iran, Seif suggested that both countries open a joint bank account as a payment mechanism.

Seif added that enhancement of banking ties is a prerequisite to economic cooperation between the countries.

The Korean minister said industrial infrastructures, ICT technologies, shipbuilding, construction of hospital, vocational training and steel industry are among areas in which Seoul is keen to cooperate with Iran.

Joo noted that his country is also interested in joint investment in oil and gas industries and production and distribution of electricity.