From: Reuters
Published November 16, 2007 04:27 AM

Two Koreas agree on aid projects for North

By Jack Kim

SEOUL (Reuters) - North and South Korea on Friday agreed more massive projects to help rebuild the North's broken economy, including freight train services over their heavily armed border that had been severed since the 1950-53 Korea War.

The agreements, which came during the first talks in 15 years between prime ministers of two countries technically at war, also envision South Korea building shipyards along North Korea's west coast, the scene of naval clashes in recent years.

But the three days of talks between the prime ministers resulted in little immediate or tangible change to an economic relationship long marked by the hermit North's preference for aid from its prosperous neighbor without the risk of actually opening itself up to a flood of outside investors.

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"The agreements set the stage for our companies to expand investment in the North and substantially contribute to its economic development," South Korean Prime Minister Han Duck-soo's office said in a statement.

The meeting focused on how to implement pledges made at only the second summit of their leaders last month and comes as impoverished and isolated North Korea begins to roll back its nuclear arms program under a deal with regional powers.

Trade between Asia's fourth-largest economy and one of its poorest is barely $1 billion a year, most of it tied to aid from the South and two enclaves it operates -- one industrial and the other for tourism -- just inside the North.

That could get a boost after freight services across the Demilitarized Zone begins on December 11, more than half a century after the tracks were severed.

South Korea will help repair the 170-km (105-mile) stretch of highway between Pyongyang and the North's border city of Kaesong, about 70 km (45 miles) northwest of Seoul, as well as rail tracks between Kaesong and the North's border with China.

SHIPPING DISTRICT

South Korea will also help create a special shipping district in the North's port city of Haeju on the west coast and begin the construction of a shipbuilding plant in Anbyon.

The two will also try to create a joint fishing and shipping zone next year off their west coast.

"You have come with great gifts and will be going back with a big bundle of gifts, too," South Korean President Roh Moo-hyun told the visiting North Koreans on Friday, without elaborating on what the North was giving in return for the South's promised largesse.

Analysts say Seoul, mindful of the continuing massive cost of Germany's unification, is ready to pump in large sums to develop its communist neighbor's economy to keep it from collapse and soften the trauma of eventual reunification.

But they say it is proving tough to tempt the North's autocratic rulers to agree to closer economic ties, fearful these might spark reforms that undermine their grip on power.

"North Korea is definitely reluctant about South Koreans entering their country," said Kim Young-yoon, a North Korea economic expert at the South's Korea Institute for National Unification.

"(It) isn't actually ready to change, but it has the desire to acquire skills and make money from its labor force," he said.

South Korean Unification Minister Lee Jae-joung tried to dispel doubts that the secretive North was really willing to allow the projects to go ahead and so open up the reclusive state to the prying eyes of outsiders.

"The commitments of the two leaders are strong, so the environment and conditions for implementing the agreement in full are there," Lee said

(Additional reporting by Jon Herskovitz and Jessica Kim; Editing by Bill Tarrant)

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