Seoul OKs $19.2-Million Investment in North

TOKYO — South Korea has offered an olive branch to the North’s Communist leaders by approving a $19.2-million investment package frozen since the fall, when peace talks between the two longtime enemies broke down.

The South Korean government’s approval over the weekend of three joint venture projects--its largest investment to date in the North’s battered economy--is apparently part of a stepped-up campaign to win support from the Communists for proposed four-way peace talks involving the two Koreas, the United States and China.

The idea of four-way talks was first unveiled April 16 in a meeting between President Clinton and South Korean President Kim Young Sam in Korea. China has said it opposes such negotiations unless an accord is first reached between North and South Korea.

In the past, the North has refused to negotiate the future of the divided peninsula with anyone but representatives of the United States.

In other signs of an economic thaw, South Korea’s deputy prime minister for economics, Na Ung Pae, who is visiting Manila for an annual Asian Development Bank meeting this week, was instructed to assist North Korea if it desires to join the organization.

And Hong Ji Son, the South Korean director at the Korea Trade-Investment Promotion Agency, is rumored to have met recently in Beijing with his North Korean counterpart to discuss resuming the South’s rice aid to the poverty-stricken North. Hong denies that meeting took place.

It is too soon to know whether Seoul’s peace overtures represent the start of a long-anticipated economic opening between the two countries or a calculated political gesture, according to professor Ra Jong Yil, an international relations expert at Seoul’s Kyung Hee University.

“It is only right that South Korea should initiate such a development, investing in North Korea and modernizing the North Korean infrastructure,” he said. “We hope the government won’t suddenly shift gears again.”

North Korea is also keeping its southern suitors guessing.

At a news conference last weekend in Washington, Kim Jong U, a senior North Korean economic official, said his government needs more information before it responds to the proposal for four-way talks.

During his visit, Kim also made an unsuccessful plea to the Clinton administration to increase its $2-million food aid package for the North and further relax restraints on trade and investment.

After the signing of a 1994 agreement designed to bring North Korea back into the nuclear-arms-control fold, the United States opened up limited economic channels that allowed for the establishment of telecommunications links, the import of magnesite and the processing of North Korean financial transactions.

But the U.S. government has resisted further relaxation of economic relations with its historic ideological enemy, citing the need to resolve tensions on the peninsula first.

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The South’s most recent overtures represent a badly needed boost for a northern economy still reeling from the collapse of the Soviet Union, its longtime benefactor, and the devastating floods last summer that destroyed much of the nation’s most fertile farmland, produced widespread food shortages and left at least 500,000 homeless.

North Korean leader Kim Jong Il needs hard currency to finance the restructuring of an economy burdened with aging roads, railroads and factories, Soviet-era machinery and a demoralized work force.

Ever since Seoul and Pyongyang first agreed to increase economic exchanges in December 1990, South Korean businesses have been eager to spread capitalism across the northern border and take advantage of the low-cost labor force and virtually untapped consumer market.

Until now, politics kept getting in the way.

The newly approved South Korean investment projects offer the North an infusion of capital, modern equipment and technological know-how.

Samsung Corp. is expected to invest about $7 million to set up a 10,000-line telephone switching system in the Rajin-Sonbong free-trade area. The giant Daewoo Corp. received government approval to invest as much as $6.4 million into North Korean ventures to produce color television sets, washing machines, microwave ovens and other consumer goods.

Over the weekend, Daewoo said it plans to establish a joint venture production facility in the Nampo industrial zone.

Previously, South Korea’s investment in each inter-Korean project has been limited to $5 million.

But further economic initiatives will not take place until Seoul gets positive feedback from the Communist leaders in Pyongyang, according to Kim Kyong Ung, a spokesman for South Korea’s Unification Ministry.

Chi Jung Nam of The Times’ Seoul Bureau contributed to this report.