Premiers from divided Koreas talk peace and money

SEOUL, Nov 14 (Reuters) The prime ministers from the two Koreas met today for the first time in 15 years to discuss a peace deal for the divided peninsula and a massive aid package the South plans to help its impoverished neighbour.

The meeting comes about six weeks after the leaders of the two countries, technically still at war, held only their second summit and as North Korea disables its nuclear arms facilities in a separate disarmament-for-aid deal.

In their three-day meeting, the prime ministers will try to iron out the details of an aid package -- which some estimates said could be worth billions of dollars -- to develop a major North Korean port, its shipping industry and antiquated roads and railways.

The discussions between South Korean Prime Minister Han Duck-soo and the North's Prime Minister Kim Yong-il, considered an advocate of economic reform, are being held at a Seoul hotel known for its casino and circus shows.

The meeting, which will also focus on developing a joint fishing zone off the west coast in disputed waters and pushing for a peace deal for the peninsula, is the highest level contact between the two Koreas to take place in the South since 1992.

The summit between North Korean leader Kim Jong-il and President Roh Moo-hyun was held in Pyongyang.

Prime ministers of the two Koreas hold little real power but in this case the meeting is still considered important because the two are expected to act as proxies for their countries' top leaders.

Defence ministers from the two Koreas will meet later this month in the North Korean capital to discuss ways to decrease tensions along one of the world's most heavily armed borders.

South Korea, fearful the hundreds of billions of dollars needed to absorb the destitute North would ruin its economy, has been working to develop its neighbour to soften the blow of unification.

Analysts said Roh, who has strongly backed engagement with the North, may be looking to set up as many economic cooperation ventures as possible before his term as president expires in about four months.

The front-runner to succeed Roh, who is barred from serving another term, has said he would take a harder line with Pyongyang and place more conditions on aid than Roh.

Roh called yesterday for a meeting with the leaders of the United States, North Korea and China to formally end the war that has split the Korean peninsula for over 50 years.

He said a summit would help international efforts to scrap the North's nuclear arms programme and conclude a peace treaty to replace the armistice that ended the 1950-1953 Korean War.

US President George W Bush and China's ambassador to South Korea have said a peace treaty cannot be reached until North Korea abandons its nuclear weapons programme.

In exchange for massive aid and an end to its status as an international pariah, North Korea agreed in a deal with China, Japan, Russia, South Korea and the United States to disable by year-end a nuclear complex that makes plutonium for weapons.

REUTERS SV KP1017