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North, S. Korea Make Progress on Joint Manufacturing Area

North and South Korean officials say they have wrapped up their latest round of economic talks with progress on a joint manufacturing area. But the unresolved issue of North Korea's nuclear weapons program is hurting cooperation.

North and South Korean officials say they are a step closer to operating a joint industrial center in North Korea.

They say within months, South Korea may begin building factories in the city of Kaesong, just north of the Demilitarized Zone separating the two countries. The factories could start production by the end of the year.

The announcement came Friday in a joint statement at the end of four days of vice ministerial talks in Seoul. The two countries have spent months negotiating the Kaesong project. South Korean companies hope to eventually take advantage of inexpensive North Korean labor, while the influx of hard currency and jobs could help stabilize the communist North's traumatized economy.

Roger Barrett, managing director of Korea Business Consultants, which helps international clients seek business partnerships in North Korea, says deals such as the Kaesong venture pose unique logistical challenges.

"The first is actually physically going backwards and forwards across the DMZ," he said. "Movement of people, movement of freight, of building materials, cargo … Cross-DMZ approvals can slow down or speed up the progress."

Another concern is energy. For now, South Korea is delaying talks on supplying electricity to the Kaesong production area, as negotiations over North Korea's nuclear weapons efforts continue.

In recent six-party talks on the issue in Beijing, South Korea, China, and Russia said they would provide energy and economic aid to Pyongyang if it freezes its nuclear programs as the first step toward eliminating them.

The United States and Japan say they do not object to the three countries providing that aid - but do not plan to contribute any aid themselves until North Korea completely and verifiably eliminates its nuclear weapons capability.