Viewing cable 06SEOUL1879
Title: NORTH-SOUTH COOPERATION: DPRK AND ROK REACH

IdentifierCreatedReleasedClassificationOrigin
06SEOUL18792006-06-07 08:32:00 2011-08-30 01:44:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Seoul
VZCZCXRO0476
PP RUEHVK
DE RUEHUL #1879/01 1580832
ZNR UUUUU ZZH
P 070832Z JUN 06
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC PRIORITY 8290
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC 1481
RHEHNSC/NSC WASHDC
RUEHKO/AMEMBASSY TOKYO 0824
RUEHBJ/AMEMBASSY BEIJING 0751
RUEHSH/AMCONSUL SHENYANG 2966
RUEHVK/AMCONSUL VLADIVOSTOK 0976
UNCLAS SECTION 01 OF 04 SEOUL 001879 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/K AND EB/IFD 
COMMERCE FOR 4431/MAC/OPB/EAP/DUTTON 
PASS USTR FOR CUTLER, AUGEROT AND KI 
TREASURY FOR IA/ISA/DOHNER AND BUCKLEY 
NSC FOR CHA AND COLLINS 
 
E.O. 12958: N/A 
TAGS: PREL ETRD EINV SOCI KN KS
SUBJECT: NORTH-SOUTH COOPERATION: DPRK AND ROK REACH 
AGREEMENT ON RECIPROCAL DEAL TO ALL RAILWAY TEST RUNS 
 
 
SUMMARY 
------- 
 
¶1. (SBU) North Korean and South Korean delegations meeting 
on Jeju Island reached an agreement late on June 6 that 
should allow the two sides to go forward with test runs of 
the two reconstructed cross-border railways located on the 
east and west coasts of the Korean Peninsula.  Under the 
deal, South Korea will lend USD 80 million worth of raw 
materials to manufacture shoes, soap and other essentials, 
to be repaid at 1 percent interest over 15 years through 
shipments of North Korean natural resources.  Provision of 
the material is conditioned upon the North Korean military 
granting permission to allow the railways to go into 
service.  End Summary. 
 
NORTH-SOUTH MEETING YIELDS BREAKTHROUGH ON RAIL TESTS 
--------------------------------------------- -------- 
¶2. (U) The two Koreas held their twelfth round of official 
inter-Korean economic talks on Jeju Island on June 3-6. 
The South Korean delegation was led by Vice Minister of 
Finance and Economy Park Byung-won.  The North Korean 
delegation was headed by Vice Chairman of the National 
Economic Cooperation Committee Choo Dong-chan. 
 
¶3. (SBU) Under a deal closed on June 6, South Korea agreed 
to provide North Korea USD 80 million worth of raw materials 
for light industry -- shoes, soap and clothing --   on the 
condition that the canceled test-runs of the two inter- 
Korean railways are revived.  In return, North Korea will 
provide natural resources this year such as zinc and 
magnetite, to repay 3 percent of the costs of raw materials 
for light industry provided by South Korea.  The rest will 
be repaid at 1 percent interest over 15 years through 
additional shipments of North Korean natural resources. 
 
¶4. (U) There are nine provisions in the agreement reached on 
June 6.  In addition to the main agreement, the two Koreas 
adopted a key addendum on light industry and natural 
resource development cooperation that outlines additional 
detailed terms of cooperation.  The following are the main 
portions of the agreement: 
 
-- Addendum on light industry and natural resources 
development; 
-- Extraction of gravel from the Han River; 
-- Promotion of the Kaesong Industrial Complex project; 
-- Preventing floods along the Imjin River; 
-- Preventing natural disasters; 
-- Joint ventures into a third country in economic and/or 
natural resources development; 
-- Exchange of economic delegations; and 
-- Fisheries, science and technology cooperation. 
 
¶5. (U) The South Korean government welcomed the agreement on 
expanded economic cooperation.  However, the South Korean 
media noted that it still remains unclear whether the 
agreement will be fully implemented due to the history of 
the North Korean military attempting to regulate the speed 
of inter-Korean economic cooperation projects, including the 
Kaesong project. 
 
¶6. (U) An unofficial Embassy translation of the full text of 
the agreement and the addendum signed between the two Koreas 
at the talks follows below. 
 
COMMENT 
------- 
 
¶7. (SBU) Ministry of Unification (MOU) press handlers made a 
point of emphasizing the new spirit of "reciprocity" in the 
June 6 deal, perhaps missing the irony of negotiating new 
benefits for North Korea to get the DPRK to agree to put in 
use cross-border infrastructure that was entirely bankrolled 
by the South.  Many Seoul-based observers noted that if the 
provisions of the agreement are properly carried out, both 
sides could benefit -- South Korea could receive needed 
natural resources while North Korea could resolve chronic 
 
SEOUL 00001879  002 OF 004 
 
 
shortages of daily necessities such as soap, clothing and 
footwear.  Still, some doubt whether the agreement can be 
implemented, and instead point out that South Korea may give 
more than it receives in the agreement because North Korea 
lacks proper production facilities of light industry and 
poor infrastructure in its mines.  Thus, in order for North 
Korea to fulfill the conditions of the agreement, North 
Korea may request additional assistance in related fields. 
End Comment. 
 
--------------------------------------------- -------- 
Agreement of the 12th Round of Inter-Korean Economic 
Cooperation Promotion Committee Talks 
--------------------------------------------- -------- 
 
South and North Korea held the 12th round of the Inter- 
Korean Economic Cooperation Promotion Committee Talks on 
Jeju Island, South Korea on June 3-6, 2006. 
 
At the meeting, the two Koreas discussed issues in order to 
further expand and develop inter-Korean economic cooperation 
projects based on  the fundamental spirit of the June 15, 
2000 Inter-Korean Joint Declaration and agreed on the 
following: 
 
In relation to the implementation of the first Provision of 
the agreement from the 10th  Inter-Korean Economic 
Cooperation Promotion Committee Talks, the two Koreas 
adopted an "Agreement (addendum) on the inter-Korean 
cooperation in light industry and natural resource 
development" and to put it into effect at the earliest 
possible date, as soon as the proper conditions are created. 
 
The two Koreas agreed to discuss and promote a project to 
extract aggregation from the mouth of Han River once the two 
militaries guarantee security. 
 
Both Koreas agreed to provide conditions to make Kaesong 
Industrial Complex (KIC) internationally competitive. 
 
Toward that end, the two Koreas agreed to hold a second 
working-level contact for the construction of the KIC in 
Kaesong, North Korea on June 20-21, 2006.  These meetings 
will focus on such issues as simplifying customs procedures 
(such as the rapid implementation of the pass system stable 
provision for necessary workers), and constructing more 
living quarters and amenities for the increasing number of 
South Korean workers in the KIC. 
 
South and North Korea agreed to hold the first working-level 
contact to discuss flood prevention at the Imjin River on 
June 26-27, 2006 and specifically discuss the results of 
independent surveys, a plan for conducting joint surveys, 
and a flood warning system. 
 
The two Koreas agreed to actively cooperate in preventing 
natural disasters such as floods, forest fires, and yellow 
dust, and discuss concrete plans by holding a working-level 
contact in Kaesong sometime in July, 2006. 
 
Both Koreas agreed to discuss a possible joint venture into 
a third country in natural resource development by holding a 
working-level contact in Kaesong sometime in July 2006. 
 
The two Koreas agreed to exchange economic observation 
delegations when the "Agreement (addendum) on Inter-Korean 
Cooperation in Light Industry and Natural Resources 
Development" comes into effect. 
 
The two Koreas agreed to discuss and determine a timetable 
for a working-level meeting on regarding fishery scientific, 
and technical cooperation.  In addition, the two Koreas will 
form an arbitration committee dealing with inter-Korean 
economic cooperation projects. 
 
The next round of Inter-Korean Economic Cooperation 
Promotion Committee Talks will be held in Pyongyang, North 
Korea sometime in September 2006. 
 
SEOUL 00001879  003 OF 004 
 
 
 
--------------------------------------------- ------------- 
Agreement (addendum) on Cooperation in Light Industry and 
Natural Resources Development 
--------------------------------------------- ------------- 
In relation to the implementation of the first Provision of 
the agreement of the 10th Inter-Korean Economic Cooperation 
Promotion Committee Talks, the two Koreas share the 
understanding that light industry and natural resources 
development cooperation should seek the nation's mutual 
prosperity and interests, as well as, actively contribute to 
a balanced development of the nation's economies and thus 
agreed as follows: 
 
South Korea will supply raw materials of light industry on 
credit starting from 2006 that are necessary to produce 
clothing, footwear and soap in North Korea.  According to 
how cooperation in the natural resources development is 
carried out, North Korea will pay back the costs with 
natural resource products, natural resources development 
rights, and/or product disposal rights. 
 
 
South Korea will supply USD 80 Million worth of raw 
materials of light industry to North Korea in 2006.  The 
North will repay three percent in natural within 2006. 
 
The remaining payment will be deferred for five years, 
repaying the principal and interests in evenly divided 
payments for ten years.  The interest rates will be set at 
an annual one percent and in cases of overdue payments four 
percent. 
 
Prices of raw materials of light industry and redeemable 
materials will be set in accordance with international 
market price.  North Korea shall not export to a third 
country the raw materials of light industry and manufactured 
goods supplied by South Korea. 
 
North Korea shall guarantee South Korean experts' site 
visits, technical aid, safety for South Korean personnel, 
safe operation of transportation means, and other 
conveniences so that light industry cooperation can be done 
smoothly. 
 
The two Koreas will jointly invest in mines for zinc, 
magnesia clinker, and other types of mineral that they agree 
upon. 
 
North Korea shall guarantee necessary materials to the 
maximum such as mineral prospecting materials, facility- 
related materials such as tunneling, mining, and ore 
dressing of the subject of cooperation that they agreed upon 
as well as infrastructure related materials for 
corresponding areas so that natural resources cooperation 
can be actively carried out. 
 
North Korea will actively guarantee South Korean experts' 
and businessmen's joint field survey, feasibility studies, 
installment of necessary facilities and technical aid, 
infrastructure such as roads, railways, harbors, 
electricity, water, and communication, the coming and 
goings, and safety for related personnel, and safe operation 
of transportation means. 
 
South and North Korea will determine an all-inclusive 
implementing body that will discuss and handle the related 
issues and inform it to the other side within one month 
starting from the day that this agreement comes into effect. 
 
Any issues that are brought up during the process of 
implementing this agreement will be settled through 
consultation between the two Korean authorities. 
 
This agreement will come into effect according to the first 
Provision of the Agreement of the 12th Inter-Korean Economic 
Cooperation Promotion Committee Talks.  This can be revised 
 
SEOUL 00001879  004 OF 004 
 
 
and supplemented according to consultation between the two 
Koreas. 
 
VERSHBOW