SEOUL, South Korea—South Korea's leaders told Secretary of State Condoleezza Rice on Thursday that they'll continue cross-border economic cooperation that provides millions of dollars to North Korea, despite its underground nuclear test 10 days before.
South Korean Foreign Minister Ban Ki-moon said he told Rice that there were "positive aspects" to a huge, South Korean-sponsored industrial zone just across the demilitarized zone in North Korea. A second major project, the Diamond Mountain tourist resort in North Korea, "is a very symbolic project for Korea," Ban said.
The South Korean stance, delivered to Rice as she toured East Asia to gather support for isolating North Korea, underscores frictions over how best to deal with the unpredictable regime in Pyongyang.
Under its "sunshine policy," South Korea has advocated engagement with the North.
While Rice said she made no demands over the projects, U.S. officials have looked askance at them, particularly the resort.
Rice's talks here coincided with the visit of a high-level Chinese envoy to Pyongyang, where he's reportedly meeting with North Korean leader Kim Jong Il.
The visit by the envoy, Tang Jiaxuan, a former foreign minister who's now in a more senior job as a state councilor, is thought to be the first outside contact with isolated North Korea's leaders since it exploded a nuclear device underground, provoking worldwide condemnation.
Two of China's most senior Foreign Ministry officials accompanied Tang on the two-day trip to Pyongyang. President Bush and Rice met with Tang in Washington last week, days after North Korea's nuclear test.
Rice is to confer with Tang in Beijing on Friday.
A senior State Department official accompanying her said the United States didn't yet know the results of Tang's mission to Pyongyang. But the official, speaking on condition of anonymity because of the delicate diplomacy, said he expected Tang had delivered a "strong message" to North Korea that it should refrain from further nuclear tests.
In Seoul, Rice went out of her way to try to calm South Korea's fears that U.S. actions since North Korea's underground nuclear test could ratchet up tensions or even lead to a military confrontation.
"We want to leave open the path to negotiation. We don't want the crisis to escalate," said Rice after meeting with Ban, who's been selected to be the next U.N. secretary general, and with South Korean President Roh Moo-hyun.
Reports of U.S. proposals to inspect cargo to and from North Korea under new U.N. sanctions "have been a little exaggerated," she said. "Some people seem to be imagining (a) quarantine or a blockade. That is not the intention."
U.S. officials have said that ships headed to or from North Korea would be stopped and searched on the high seas only when there was intelligence suggesting that they were carrying banned cargo.
The U.N. sanctions, approved last Saturday in response to North Korea's nuclear test, prohibit the country from exporting or importing nuclear- and missile-related materials, advanced conventional weapons such as tanks and artillery, and luxury goods.
South Korea's two major investment projects in North Korea don't appear to fall under the sanctions. Seoul has argued that they're a way to promote engagement and economic change in North Korea.
But U.S. Assistant Secretary of State Christopher Hill said this week that the Diamond Mountain project "seems to be designed to give money to the North Korean authorities."
About 40,000 South Koreans go to the resort each month, where they enjoy the scenic granite peaks, interact with hundreds of North Korean employees and buy trinkets and snake wine—with a dead snake pickled in the bottle.
A branch of South Korea's Hyundai Group paid $900 million in a long-term lease to rent the resort area. North Korea cleared the local population away and created an enclave with hotels, a just-finished golf course, wharfs and meeting rooms.
Some 1.35 million South Koreans have visited the resort since 1998, giving average citizens some slight contact with the north after half a century of isolation.
Tourists who go pay $30 to $80 in fees, depending on the lengths of their visits, said spokesman Roh Jee-hwan of Hyundai Asan, the conglomerate branch that runs the resort. U.S. officials say the remittances to North Korea total more than $12 million per year. Overall, Hyundai Asan has pumped $1 billion in investment into the resort.
"Without firing a single bullet, we have improved our relations in a historic leap," Roh said.
The senior State Department official said South Korean authorities agreed to review the project, with particular focus on a $3 million to $5 million annual subsidy that the Seoul government pays Hyundai Asan.
The second project, the Kaesong Industrial Zone, is hugely ambitious in its design. South Korea has provided the technology and financing. Practically abutting the demilitarized zone across the border from the South Korean capital, Kaesong's South Korean factories employ 9,000 North Koreans and are expected to employ 600,000 as soon as 2011, spokesman Roh said. A South Korean government Web site said the industrial complex "will bring new dynamism to the stagnant North Korean economy."
The 14 factories produce watches, cosmetics kits, auto parts, shoes, clothes and kitchenware, among other items that are being sold in South Korea.
North Korea workers make about 25 cents an hour, averaging $67 per month. Their wages are paid to the North Korean government, which retains 30 percent.
Some South Koreans said international pressure might stall the projects.
"These two projects are in deep trouble . . . If U.N. sanctions gain steam, these projects will come to a standstill," said Lee Dong-bok, a former intelligence official who's now at Myongji University in Seoul.
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SOUTH KOREA'S TWO PROJECTS AT A GLANCE:
_Diamond Mountain Resort: A scenic resort in North Korea visited by about 40,000 South Koreans each month. North Korea received $900 million from a branch of South Korea's Hyundai Group for a long-term lease on the area, and it receives about $12 million each year from remittances paid by South Korean tourists.
_Kaesong Industrial Zone: In North Korea just across the Demilitarized Zone. South Korea has provided financing and technology. It employs about 9,000 North Koreans and is expected to grow to employ 600,000 by 2011. Wages of an average $67 per worker per month are paid to the North Korean government, which retains 30 percent.
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(c) 2006, McClatchy-Tribune Information Services.
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