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(LEAD) S. Korea poised to support firms wanting to enter Iran

All News 16:12 January 21, 2016

(ATTN: UPDATES with more details in paras 6, 9)

SEOUL, Jan. 21 (Yonhap) -- South Korea will provide financial and production-related support to local companies wanting to enter the Iranian market that has considerable growth potential, the government said Thursday.

At the meeting of economy-related ministers in Seoul, the Ministry of Trade, Industry and Energy said that it has come up with a plan to help South Korean companies do business in the oil-rich country following the landmark nuclear accord that lifted international sanctions.

On Sunday, Seoul announced that it will step up "reciprocal cooperation" with Iran as other countries around the world take steps to lift economic and financial sanctions slapped on Tehran for its nuclear weapons development program.

The ministry said such active measures are necessary because foreign companies are all scrambling to enter the vast market as soon as possible to tap its considerable growth capabilities.

International sanctions that have been in effect for years should translate into a sharp rise in the demand for goods and services.

Iran with a population of 80 million has the world's fourth-largest known crude oil deposit and ranks No. 1 in terms of natural gas reserves. The country has traditionally been a large market for South Korean cars, electronics, consumer appliances and cosmetics.

Market watchers have said local builders could also find considerable work in upgrading the Middle Eastern country's industrial and social infrastructure.

The ministry said foremost on its list is to provide financial support to small and medium exporters and builders.

The Export-Import Bank of Korea is seeking a 5 billion euro basic loan agreement with Iran's central bank, while the state-run Korea Trade Insurance Corporation (K-sure) is moving to set up a US$2 billion "Framework Arrangement" with the country's finance ministry, it said. The corporation said it plans to provide a total of $4.5 billion in trade insurance coverage this year.

Such ties are crucial for South Korean companies wanting to engage in medium- to long-term transactions in the country.

The ministry added K-sure plans to lower insurance coverage rates for companies entering Iran, which can reduce the burden for firms.

With international sanctions being lifted, Seoul will move to set up a system where the settlement of accounts can be carried out using the U.S. dollar, it added.

At present, transactions are only possible using Korean won, which effectively limits the size of goods and services that can be traded.

The ministry in charge of trade promotion and industrial policymaking also said efforts are underway to set up a car assembly line that can use complete knock-down (CKD) shipped from South Korea. It said this kind of CKD cooperation can be expanded in the manufacturing of farm and medical equipment.

On the construction front, it said that assistance will be provided to South Korean builders that have expressed interest in upgrading Iran's various port facilities and Tehran's main medical school. The medical school project, in particular, is appealing because it can lay the foundation for the export of South Korean-type hospitals down the road.

The ministry said that it will, moreover, provide help to companies in the information technology and food sectors, and push for greater cultural exchange.

A joint economic committee meeting will be held in the Iranian capital next month with a large-scale economic delegation being sent to the country to forge stronger bilateral ties, it said.

yonngong@yna.co.kr
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