SEOUL, Sep 30 (Reuters) The leaders of divided Korea will share smiles this week and talk cash but skirt around Pyongyang's nuclear arms ambitions and human rights abuses in favour of fostering dreams of unification.
South Korean President Roh Moo-hyun said he wants peace between the states, technically still at war, and may pledge billions of dollars for the North's beleaguered economy when he meets Kim Jong-il in Pyongyang for the October. 2-4 summit.
''South Korea's economic cooperation is aimed at reducing military tension,'' said Jeong Hyung-gon, a research fellow at the Korea Institute for International Economic Policy. ''A peaceful peninsula has a direct impact on South Korea's economy.'' South Korea has lived for decades with the North's military threat, but it fears a sudden collapse of Kim's government and worries that the hundreds of billions of dollars it would cost to absorb its impoverished neighbour would wreck its own economy.
North Korea's creaking economy has become a shambles under Kim while his neighbour's has surged. Hit hard by massive summer floods and U.N. sanctions for its October 2006 nuclear test, North Korea depends on food and oil handouts.
The summit -- only the second between the erstwhile foes since the peninsula was divided after World War Two -- will be high on symbols of unification. North Korean civilians in their finest clothes are certain to be sent out into Pyongyang's streets to cheer the leader of South Korea -- a country the North has trained its 1.2-million-man army to attack.
Roh will lead a motorcade from Seoul to Pyongyang on Tuesday, steeping out of his bullet-proof limousine to become the first leader from the South to walk across the hugely fortified border.
In the Northern capital, he is to witness an extravaganza featuring goose-stepping soldiers, dancing schoolgirls and a massive flip card animation section that promotes unification -- but under the North's communist banner.
According to some media reports, Roh plans to give film buff Kim Jong-il a huge flat panel television, despite UN sanctions that forbid the trade in luxury goods.
CHEAP LAND AND LABOUR The first summit in June 2000 -- also held in Pyongyang -- broke the ice in the two states' Cold War rivalry and launched economic and humanitarian projects.
Officials said Roh might propose new projects to rebuild the North's dilapidated infrastructure and develop joint economic zones in the isolated state where its own dynamic manufacturers could further exploit cheap land and labour.
Most South Koreans want unification, but a recent survey said that three in four want the process to move slowly.
''Unification on an instalment plan,'' was how one analyst described rebuilding the North's economy.
''The most important thing in unification is getting rid of the economic gap,'' said Kim Young-yoon, an economic expert at the South's Korea Institute for National Unification.
Critics worry Roh may pledge so much in aid that North Korea will feel it can spurn incentives offered by regional powers to scrap its nuclear arms programme, one of Asia's greatest security threats.
At six-country nuclear talks in Beijing at the weekend, envoys worked to draw up a schedule for energy-starved North Korea to permanently disable its reactor, source of bomb-grade plutonium, in exchange for 950,000 tonnes of heavy fuel oil.
''The South Korean government had promised the US that inter-Korean engagement would be a half-step behind the six-party talks. But instead, it seems several steps ahead,'' said Bruce Klingner, a senior research fellow for Northeast Asia at the Heritage Foundation in Washington.
South Korean officials said they did not want to sour the mood by pushing Pyongyang on sensitive issues such as nuclear arms, its abysmal human rights record or freeing the hundreds of South Koreans it has kidnapped over the years.
REUTERS SZ RK1125