Two Koreas PMs agree on aid projects for North

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SEOUL, Nov 16 (Reuters) North and South Korea, in the first meeting in 15 years of the prime ministers of the two states technically at war, today agreed on more massive projects to help rebuild the North's broken economy.

They also agreed to begin freight train services over the heavily armed border on December. 11, more than half a century after the tracks were severed during the 1950-53 Korean War.

''The agreements set the stage for our companies to expand investment in the North and substantially contribute to its economic development,'' South Korean Prime Minister Han Duck-soo's office said in a statement.

Next year, South Korea will help repair the 170-km stretch of highway between Pyongyang and the North's border city of Kaesong, about 70 km northwest of Seoul, as well as rail tracks between Kaesong and the North's border with China.

The road and railway link will eventually be used to transport goods between the two states at a sharply lower cost when exchanges between the two grow further, Han's office said.

The two will also work to create a joint fishing and shipping zone next year off the Korean peninsula's west coast, the site of border disputes that have led to several deadly naval clashes in the past.

The meeting of the premiers was aimed at implementing pledges made at only the second summit of their leaders last month and comes as the communist state is starting to roll back its nuclear arms programme under an international deal.

South Korea, fearful a collapse of its communist neighbour would ruin its own economy, has been working to develop the North to soften the trauma of eventual reunification.

South Korea will also help create a special shipping district in the North's west-coast port city of Haeju and begin the construction of a shipbuilding plant in Anbyon.

The South's Unification Minister Lee Jae-joung, briefing reporters after the talks, said no estimate of the project costs were available but economists have said it could run into billions of dollars.

Lee tried to dispel doubts that the secretive North was really willing to allow the projects to go ahead and so open the authoritarian state up to the prying eyes of outsiders.

''The commitments of the two leaders are strong, so the environment and conditions for implementing the agreement in full are there,'' Lee said.

REUTERS SG RK0922

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