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May 10, 2018

Peace in Korea, closer now than for decades, could open a transportation route through the peninsula that would change the way a raft of goods are shipped between China and the rest of the world.

The border between North Korea and South Korea has been cut off from trade for nearly seven decades.

But peace has rarely felt closer, after North Korean leader Kim Jong Un and South Korea’s President Moon Jae-in last week shook hands over the Military Demarcation Line that divides their countries.

While any truce is still some way from meaningful manifestation, industries around the world have started to explore the potential impacts. One area that stands out: Logistics.

Shipping cargo that would otherwise have had to access China via the congested ports of Shanghai, Shenzhen and Hong Kong would be able to stop at a Korean port before being transported across the peninsula directly into China.

The resulting impact on international maritime trade could rival the Panama and Suez Canals, says Pelham Higgins, from JLL’s Industrial team in Japan and Korea.

This would make it one of “the most important logistics corridors in the world,” says Higgins.

China is clearly a major beneficiary, he says, as a new land-based logistics corridor would serve to extend the government’s Belt and Road Initiative. Announced in 2013, the aim is to improve China’s global connectivity, open up international investment opportunities, boost exports and fuel the country’s economy.

The initiative features a US$900 billion programme of infrastructure projects, along with efforts to enhance economic cooperation along key international trade routes.

Kim was the first North Korean leader to set foot in the South since the Korean War ended 65 years ago. The meeting has led many to entertain the possibility of peace between the two nations.

“I came here determined to send a starting signal at the threshold of a new history,” said Kim, while Moon spoke of his desire to “give a big gift to the whole Korean people and the people who want peace.”

The meeting precedes a much anticipated meeting between U.S. President Donald Trump and the North, which is expected to take place in late May or early June. Of the meeting last week, the White House said in a statement that it hoped the summit would “achieve progress toward a future of peace and prosperity for the entire Korean Peninsula.”

Click to read about how South Korea has ramped up its investment in real estate debt.

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Pelham Higgins

Head of Industrial & Alternatives Capital Markets - Japan & Korea

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