September 10, 2010 / 10:57 AM / 9 years ago

South Korea's Lee seeks to boost commercial ties with North

SEOUL (Reuters) - South Korea’s President Lee Myung-bak said on Friday he hoped to expand commercial ties with North Korea by building a second factory park when the two rivals defuse tensions.

The two Koreas have been in a tense standoff since Seoul accused Pyongyang of attacking one of its navy ships in March, killing 46 sailors. Pyongyang has denied the charge and said it would retaliate by force if the South imposed sanctions.

The Kaesong industrial complex just north of the armed border dividing the peninsula is the only channel left open between the two states which are still technically at war, having only signed a truce at the end of the 1950-53 Korean war.

“I believe a second Kaesong industrial complex can be built and I want to see that happen,” Lee told Russia 24 state television in an interview on the sidelines of a forum in Yaroslavl, north of Moscow.

“But for that to happen is entirely up to the North.”

The comments were released by his office in Seoul.

About 40,000 people work at the Kaesong project set up in 2003 under the Sunshine Policy of Lee’s liberal predecessors as a model of future economic cooperation between the two states.

Both states benefit from Kaesong. South Korean firms use cheap North Korean labour to produce household goods, while for the destitute North the complex is a lucrative source of hard cash.

“The Kaesong project is the only channel of cooperation left between the North and the South that authorities on both sides know. That’s why we want to maintain and develop it, and I think that’s what the North also wants.”

Lee halted aid to the North and refused to engage in dialogue after he came to office in 2008, demanding Pyongyang drop its atomic ambitions if it wanted to enjoy lucrative commercial ties with the southern neighbour.

Tensions heightened on the peninsula after the torpedoing of the South Korean warship, with Seoul and Washington imposing new sanctions and conducting a series of military drills.

In recent weeks, there have been signs of an easing in hostilities as the two Koreas have talked about a resumption in aid and Pyongyang has expressed a desire to return to nuclear disarmament talks.

The apparent thaw comes as the North gears up for the biggest meeting of its ruling Workers’ Party in 30 years this week, possibly to anoint Kim Jong-il’s youngest son as successor.

Reporting by Jack Kim; Editing by Jeremy Laurence and Ron Popeski

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