Korean companies’ interest in the Russian Far East is likely to be rekindled as Russian President Vladimir Putin and his economic delegation are expected to proactively invite them to the easternmost part of Russia during their visit to Korea this week, market analysts said.

“Despite the growth potential of Russia’s Far East, Korean companies have been slow to make inroads into the energy affluent and geographically attractive, but less developed Russian region.

Mainly due to its weak infrastructure,” said Kim Hak-ki, a researcher at the state-run Korea Institute for Industrial Economics & Trade.

However, things are changing with the start of the third term in May last year of President Putin, who has been enthusiastic in developing Russia’s Far East.

“More Korean companies will turn to the easternmost part of Russia if the Russian state head presents a clearer picture of the improvements in the trade and investment environment of the region during his visit to Korea,” Kim added.

President Putin, who created the Ministry for Development of Russian Far East last year, is slated to make a two-day visit to Korea on Tuesday.

“In the private sector, Korean companies’ interest in joining infrastructure and energy development projects in the Russian Far East is growing more than other sectors,’’ Kim said. 

For now, Hyundai Heavy Industries, POSCO and state-run Korea Electric Power Corp. are leading Korean investment in the Russian Far East.

Hyundai Heavy Industries, which builds not only ships but also provides electric and electro systems, completed a gas insulated switchgear plant in Vladivostok, a city in the Far Eastern maritime province of Russia, under the corporate name of Hyundai Electrosystems on Jan. 25. Hyundai invested $50 million as part of efforts to tap into the Russian power grid market. Hyundai Electrosystems is the first GIS plant in Russia.

The world’s biggest shipyard also has expanded its farm business in Siberia since 2009.

POSCO, the nation’s top steelmaker, has spurred business development activities in Russia in such areas as the steel mill-related business, infrastructure construction and natural resource development sectors.

On Sept. 9, POSCO signed an agreement with the Bank of Development and Foreign Economic Affairs in Russia for the operation of steelmaker Amurmetal, which is the only steel mill in the Russian Far East’s Khabarovsk with an annual steel production level of 2.15 million tons.

Following the deal, the steel maker, which has sought business diversification into the energy and infrastructure construction sectors beyond its core steel business, signed a memorandum of understanding with the Ministry for the Development of the Russian Far East to develop the Khabarovsk region on Sept. 26. Both sides agreed to cooperate on the construction of infrastructure such as housing and ports in the region, as well as the development of energy, resources, and innovative technology.

In Siberia, POSCO is engaged in a modular home construction and supply project.

“Despite growing Korean investment in the Russian Far East, weak infrastructure of the region and a lack of policy support still remains key stumbling blocks ahead of Korean companies,’’ Kim said.

By Seo Jee-yeon (jyseo@heraldcorp.com)