October 28, 2005

Koreas open first joint office in North amid row

By Lee Jin-joo

SEOUL (Reuters) - North and South Korea opened their first
joint office on Friday to promote trade across the heavily
militarized border -- just as Pyongyang is feuding with a South
Korean company about business in the North.

The new office, in an industrial park near the city of
Kaesong, is the first permanent South Korean government
presence in the North since the 1950-53 Korean War divided the

"This is a symbolic moment showing the transformed
relationship between South and North Korea," said Lee Kwan-sae,
head of the Unification Policy Department at the South Korean
Unification Ministry.

Lee and other officials from both Koreas attended the
televised opening ceremony and toured the modest three-storey
building in the park the South is building near Kaesong, an
ancient city just across the 1953 ceasefire line.

"The North-South joint office opens up the prospect of
activating links between the two countries and will become a
meaningful contribution to our economic development," said Kim
Sung-il, a North Korean economic official.

After the opening, the two Koreas held economic cooperation
talks at the office, but failed to reach meaningful agreement.

"The two sides will continue discussing ways to accelerate
proposed economic cooperation projects," a joint statement

The South Korean ministry provided copies of the speeches
and statements. Foreign reporters were barred from the event.

"South and North Korea agreed to set up the office to
support direct trade, boost investment and to build a permanent
consultation channel," Seoul's vice unification minister, Rhee
Bong-ju, told reporters on Thursday.

A handful of South Korean manufacturers have begun
operations in the Kaesong industrial park, just minutes north
of the Demilitarized Zone (DMZ), to take advantage of cheap

The office will be staffed by 14 South Korean and 12 North
Korean officials -- each country on a separate floor. It aims
to help firms reach deals directly rather than through others
or in third countries, such as China.

But overshadowing the event was a row between North Korea
and the Hyundai Asan company that has sunk about $1 billion in
projects in the North, including the Kaesong industrial park
that is just a fraction of the size envisaged for later.


North Korea said last week it had been forced to review all
its business ties with Hyundai Asan because the firm had sacked
an executive with close ties to North Korean leader Kim

Pyongyang agreed this week to meet Hyundai Asan, part of
the Hyundai Group conglomerate, but has not said when or where.

Overall ties have improved in recent months. The two sides
have reached numerous agreements on agricultural cooperation,
business development and economic assistance, for example.

South Korea has also urged the North to agree to set up
liaison offices in each other's capital for political
confidence-building. Pyongyang has yet to respond.

West and East Germany exchanged missions -- but not
embassies -- long before unification. North and South Korea are
technically still at war, having never signed a peace treaty.

Officials from the two Koreas held talks in Kaesong on
Friday to try to decide when to run a test train along a track
built across the frontier to Kaesong. It was still unclear when
the first train would run.

Eventually, the two sides hope that rail line and another
one running up the east coast of the peninsula could link up
with the trans-Siberian route and another through China,
reducing freight times to Europe and earning the North transit

In Seoul, the head of Russia's state railways and chairman
of an international committee on the Trans-Siberian Railway
said Russia had checked the state of North Korea's railway

Technically, it would take some 7 years to build a
trans-Korea line to link with the trans-Siberian, Vladimir
Yakunin told reporters. The committee met for two days in

"This is a rather serious project and needs serious
financial input," he said, noting that the South and Russia had
agreed that a wider international consortium was needed to
attract investors.

"We are both well aware how important the political impact
of establishing and linking the trans-Korean route would be for
the whole situation in this region."

(Additional reporting by Jack Kim, Kim Do-gyun and Rhee