North and South Korean officials, meeting in Pyongyang, have agreed to build a joint industrial park in North Korea. Seoul is pushing ahead with its policy of engaging North Korea, despite new concerns over Pyongyang's refusal to give up its drive to have nuclear weapons.
The giant industrial complex will be built in Kaesong, which lies just north of the border separating the two Koreas.
The two countries agreed at a meeting in Pyongyang Saturday that construction will begin next month after communist North Korea issues laws to allow foreign business to operate in Kaesong without restrictions. The project will be financed by the South Korean conglomerate, Hyundai Asan.
The company will develop more than three million square meters of land for the industrial complex by the end of next year. The final industrial park is expected to cover 66 million square meters.
South Korean firms are hoping to relocate labor-intensive factories to the area, to take advantage of low labor costs. If the plans go ahead as scheduled, South Korean firms could move into Kaesong by the end of 2003.
The agreement comes less than a month after U.S. reports that North Korea admitted to having a nuclear weapons program, in violation of international agreements. The revelation sparked intensive diplomatic activity, with the United States, South Korea and Japan calling on the North to immediately and visibly dismantle its covert nuclear program.
Pyongyang has rejected those calls, insisting it has a right to have nuclear arms for defense in light of what it calls the United States "hostile policy" toward the North. The United States has ruled out any further talks with North Korea. Japan held talks in the past week with officials from the North but said it will reconsider its approach given Pyongyang's nuclear stance.
But South Korean President Kim Dae-jung says he will pursue his Nobel Peace-Prize winning engagement strategy, known as the "Sunshine Policy."
President Kim hopes that joint projects, such as the planned industrial park, will promote reconciliation between the two Koreas, pressure North Korea to give up its nuclear aspirations and bring it into the fold of the international community.
The two Koreas remain technically at war, because their three-year conflict ended in 1953 without a peace treaty.
However, since a landmark summit in 2000, when the leaders of the two Koreas promised to promote reconciliation between their two countries, relations between the two states have improved at an uneven but steady rate.
In other talks, taking place in the North's Diamond Mountain resort, Red Cross officials from the two Koreas failed to agree on a further round of reunions for separated Korean families. Pool reports from the meeting site say the two sides could not agree when to start construction on a permanent meeting venue for families to get together after being kept apart by the division of the Korean Peninsula.