Korea talks 'first step' before economic tie


South Korea says it expects its envoy to meet with North Korean leader Kim Jong Il

CNN's Alex Frew McMillan and wire reports

SEOUL, South Korea -- South Korea's decision to send a special envoy to Pyongyang early in April is the first step towards helping the economy of both Koreas, observers say.

"They have to come over the political hurdle first before they can talk about anything else," Frank Gong, northeast Asian economist for Bank of America, told CNN.

Gong said it was essential for North and South Korea to ease the tension between the two countries before the soccer World Cup tournament, which starts in late May. The politicians could then eventually shift their focus to economic issues.

The office of South Korean president Kim Dae-jung said Monday that it would send Lim Dong-won, Kim's advisor on security and relations between the Koreas, to the North Korean capital.

"We expect the talks to lay the groundwork for a resumption of stalled relations between South and North Korea," spokesman Park Sun-sook said in a brief statement read on live television from the presidential Blue House on Monday.

North Korea's official news source, the Korean Central News Agency, confirmed Monday the two sides would meet to talk over "the grave situation facing the nation and issues of mutual concern related to the inter-Korean ties."

Lim's main mission will be political. He once headed the National Intelligence Service, South Korea's chief spy agency.

Lim expected to meet Kim Jong Il

But a range of topics could be discussed, if as expected he meets North Korean President Kim Jong Il. South Korea says it expects Lim to meet the leader, though the north has yet to confirm that detail.


The two Koreas remain technically at war, having never signed a peace treaty after the Korean War broke out in 1950

North Korea's isolationist economy has faltered, with food supplies running dangerously low during a drought last year. The two Koreas have discussed ways they could encourage industries like tourism in both countries.

But both countries need to ease the political strain between them before they can talk tourism, experts say.

"Unless they can somehow sit down and talk on political issues and make some progress on that ... it's hard to see" progress on tourism, Gong explained.

North Korea's chief economic offer is a cheap supply of workers, he added.

"Cheap labor, that's the only one," Gong said, when asked the country's main advantage. "They don't have anything else."

South Korea meantime is continuing its push to emerge from the Asian financial crisis. That left many companies in the country with heavy debt loads they are still trying to shake.

Kim Dae-jung touched on the topic of relations with North Korea last Friday, when he met Japanese Prime Minister Junichiro Koizumi and signed a deal to encourage business investment between the two countries.

Japan applauds move

Japan stated Monday that it was pleased to see political links between the Koreas being forged. Dialog between the two countries has been stalled since November.

"We welcome the announcement," government spokesman Yasuo Fukuda said at a press conference. "We hope that the sending of the envoy will lead to better relations between the South and the North."

North Korea is expected to send an envoy to attend the opening of the soccer World Cup, which starts in South Korea on May 31.

South Korea and Japan are the first co-hosts in the tournament's history, as well as the first Asian hosts.

The South Korean leader also discussed his "sunshine policy" of greater openness with the North when he met U.S. President George W. Bush in February.

North Korea has bristled from the United States' tougher stance on what it calls an "axis of evil," comprised of North Korea, Iran and Iraq.

The South Korean stock market was down in afternoon trade Monday, with the Kospi index off about 1.85 percent at 879.41. But analysts said the political moves were having little effect. Stock watchers said Wall Street's fall on Friday was the main driver.

Also Monday, the monopoly power company, Korea Electric Power Corp., said it would fire more than 3,000 workers. KEPCO stock was weighing on the market, down 2.3 percent at 25,100 won in mid-afternoon.

The workers are protesting South Korea's privatization drive. The Finance Ministry said on Monday that South Korea spent 422 billion won ($320 million) on the finance sector in February.

That means that the country has now spent 155.8 trillion won ($117 billion) on the private sector since the 1997-98 Asian financial crisis, according to the government.

North and South Korea have remained technically at war since 1950, since neither country signed a peace treaty after the Korean War.

Reuters contributed to this report.