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North Korea Thaws Ties With South as Gaeseong Talks Progress

By Sangwon Yoon
July 07, 2013 8:34 PM EDT 12 Comments
Protesters shout slogans during an anti-North Korea rally in Seoul, on July 6, 2013.
Photographer: Ed Jones/AFP via Getty Images
Protesters shout slogans during an anti-North Korea rally in Seoul, on July 6, 2013.

The two Koreas agreed to hold a second round of talks on July 10 on resuming operations at a factory park, the biggest progress yet toward mending relations that soured following the North’s February nuclear weapon test.

Negotiators ended more than 16 hours of meetings at the Panmunjom border village yesterday with an agreement to hold follow-up talks this week on normalizing operations at the jointly run Gaeseong industrial zone, North Korea’s official Korean Central News Agency reported.

North Korea shuttered Gaeseong in April to protest U.S.- South Korean military drills and United Nations sanctions targeting leader Kim Jong Un’s nuclear program. Kim, who had threatened strikes against the U.S. and South Korea, started softening his stance last month as the regime proposed dialogue with the two nations.

The Koreas will “restart Gaeseong when ready” and will discuss ways to normalize operations and prevent future closures at the follow-up meeting, according to the joint agreement carried by KCNA. South Korean businessmen will be allowed to retrieve completed goods and raw materials from the site and inspect facilities starting July 10, KCNA said.

While South Korea sees the agreement as the result of its efforts to resolve disputes through talks, it doesn’t mean it is “simply willing to go back to the way things have been,” its Unification Ministry said yesterday in an e-mailed statement. “Conditions have to be created for the complex to be run not only on a company-level but also on the government-level, through an expansive process of normalization.”

Worker Withdrawal

Shares of companies operating in Gaeseong gained in Seoul. Shinwon Corp. (009270), an apparel maker, rose 2.3 percent and watchmaker Romanson Co. (026040) gained 4.6 percent. Good People Co. (033340), an underwear maker, strengthened 3.1 percent. Leather goods producer Emerson Pacific Inc. (025980) rose 2.9 percent to the highest since July 4, 2008. The benchmark Kospi (KOSPI) index of stocks rose 0.3 percent as of 9:30 a.m. and the won fell 0.6 percent against the dollar.

Three officials from each side started talks at 11:45 a.m. July 6 and finished about 4:00 a.m. yesterday in Panmunjom, the site for the signing of the armistice that ended the 1950-1953 Korean War without a peace agreement, according to the ministry.

The North on April 3 started blocking South Korean businessmen from entering Gaeseong. Five days later it decided to withdraw its workers from the industrial zone.

Last month, the North requested talks with the South on opening Gaeseong, then scrapped the offer over a protocol dispute, and less than a week later suggested high-level talks with the U.S. on a peace treaty to formally end the Korean War.

Any talks between Kim’s regime and the U.S. would be the first since the North fired a long-range rocket in April 2012, breaking its pledge of a moratorium on weapons testing in exchange for 240,000 metric tons of food aid.

Diplomatic Isolation

North Korea faces increasing diplomatic isolation as China, its biggest trading partner, tightens enforcement of UN sanctions targeting financial transactions and joins the U.S., South Korea and Japan on no-tolerance for its nuclear ambitions.

Closing Gaeseong, about 10 kilometers (six miles) north of the demilitarized zone, deprived Kim’s regime of a key source of hard currency. Recalling nearly 54,000 of its workers employed by 123 South Korean companies has disrupted the $100 million that Yang Moo Jin, a professor at the University of North Korean Studies in Seoul, estimates the North earns in annual profits.

Panmunjom, about 60 kilometers northwest of South Korea’s capital Seoul, is used for diplomatic engagements and negotiations. It straddles the military demarcation line that runs through the four kilometer-wide demilitarized zone -- the world’s most fortified border.

To contact the reporter on this story: Sangwon Yoon in Seoul at syoon32@bloomberg.net

To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net

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