- The Washington Times - Tuesday, May 9, 2000

South Korea hopes a breakthrough at a summit meeting in Pyongyang, North Korea, next month will permit a "rush" of foreign direct investment into the isolated and underdeveloped North, South Korea's commerce minister said yesterday.

Such investment is expected to contribute to an easing of military tensions between the two Koreas, while enabling South Korean companies to take advantage of low-cost labor in the North, Kim Young-ho said during a two-day visit to Washington.

Mr. Kim, the minister of commerce, industry and energy, noted that next month's meeting between Presidents Kim Dae-jung of South Korea and Kim Jong-il of North Korea will be the first of its kind since the peninsula was divided 57 years ago.

"This will be the most important summit in the world," he said in an interview. "The summit can produce a breakthrough … a dramatic outcome."

Mr. Kim, a 59-year-old former professor at Beijing University, said the two presidents would talk at their summit about potential areas of exchange and cooperation.

"The core area will be assistance in the development of North Korea's infrastructure, including the delivery of energy and food," he said.

He said the South was already anticipating the need for government-backed investment guarantees and steps to prevent dual taxation because "there is expected to be a rush of direct investment from South Korea to North Korea."

Promising areas for investment include high-technology products, such as computer games that have no military applications, he said. "The development of software and information technology is an area of potential growth in North Korea."

South Korea is also poised to help the North improve its energy system, Mr. Kim said. At present, the country suffers from regular blackouts that have shut factories and left even public buildings without heat last winter.

Trade between the two Koreas last year amounted to just $330 million, but Hyundai Corp. has plans for a huge industrial park in the North, and South Korean investors connected to the Unification Church have begun work on a $300 million auto plant at Nampho, North Korea's main port.

Other signs that North Korea may be seeking to break out of its isolation include the establishment of diplomatic relations with Australia yesterday and with Italy earlier this year. Talks are under way with Japan.

"The South Korean government supports efforts by North Korea to establish diplomatic ties with other countries and to become a member of the Asia Development Bank. I believe North Korea wants investment from South Korea," Mr. Kim said.

The minister said the limited investment to date has been possible because of a "hiatus" in the military confrontation and threats from North Korea that have long characterized the relationship.

"North Korea knows that only if tension is relieved can there be investment of the right kind from the United States, South Korea and Japan. In this respect, North Korea is watching the American presidential election very closely," he said without elaborating.

Apart from the hope of security benefits, South Korea finds investment in the North attractive at a time when its solid recovery from the Asian economic crisis with growth of 10.7 percent last year and better than 11 percent so far this year is beginning to put upward pressure on wages.

"The prospect of economic exchange with North Korea opens the possibility of using North Korean low-cost labor, which will help with price competitiveness," Mr. Kim said.

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