Trade between Koreas surges in first four months

Seoul, May 30: Trade between South Korea and its poor communist neighbour to the north jumped 50 per cent in the first four months of 2006, due mainly to the growing output of a North Korean industrial park set up by southern firms.

Fifteen South Korean firms employ about 6,000 North Koreans who turn out shoes, watches, car parts and clothing, mostly for re-import back into the South.

With wages set at about 50 dollars a month, it's a boon for South Korean companies seeking cheap wages and land. But there is also a strong political element to the exchange, as the government sees the project, which was launched in 2004, as a model for integration if the two Koreas ever re-unite.

South and North Korea remain technically at war because only a truce was declared at the end of the 1950-53 Korean War, but commercial and political ties have warmed rapidly since their leaders met in 2000 and pledged reconciliation.

South Korea's International Trade Association said in a report that the exchange of goods and services and South Korea's shipment of aid across the border totalled 327.5 million dollars between January and the end of April.

Equipment and material sent to the Kaesong industrial park just hundreds of metres (yards) from the militarised border and shipment of finished goods amounted to 66.9 million dollars, an increase of 65.5 per cent from the same period a year ago.

Trade in goods outsourced to other parts of North Korea also increased by about a quarter to 76.7 million dollars, while imports of North Korean products -- mostly farm, fisheries and minerals -- amounted to 62.4 million dollars, a rise of 11 per cent.

Humanitarian aid to the North grew by 201 per cent in the period to 74.6 million dollars, mostly accounted for by fertiliser sent by the South's Red Cross worth 53.5 million dollars, the agency said.

Further sharp increases in cross-border trade are expected in coming months as more planned factories come on stream at the Kaesong park, the agency said.

North Korea's economy is in ruins so South Korea's role is vital.

In Kaesong, for example, the plants are powered by electricity supplied from the South.

Some critics say overseas investment in North Korea only helps to support the North's leaders and prolongs their authoritarian rule over the country. South Korean leaders say it is the best way to encourage change.

Reuters