In a long-unthinkable thaw in relations, South Korea lifted a half-century ban Monday on direct trade and investment in North Korea, its communist archrival.
The move represents a dramatic shift in policy toward the North, with whom relations have been icy since war tore the Korean peninsula in half nearly 50 years ago.It could supply one of the world's most dynamic economies with a source of cheap labor and one of the world's most struggling and hermetic economies with a close source of industrial goods.
President Kim Young-sam said the major policy change was made possible by a recent agreement, brokered by the United States, to freeze the North's feared nuclear program.
"The time has come to sincerely study and push South-North economic cooperation," Kim said in a speech to business leaders televised live nationwide.
For years, South Korea had said it could improve economic and political relations with the North only after the nuclear standoff was resolved by a verifiable agreement.
That happened Oct. 21 when the United States and North Korea signed a nuclear accord after 17 months of negotiations.
The agreement requires North Korea to freeze and eventually dismantle its nuclear facilities, suspected of developing bombs, in exchange for billions of dollars in aid and diplomatic relations with the United States.
South Korea banned direct trade with the North after World War II left the peninsula divided in 1945. Indirect trade through Hong Kong and other third countries has long been conducted, however, soaring from $1 million in 1983 to $232 million in the first eight months of 1994.
"The decision to allow businessmen to visit the North will help break the decades-old constraint in inter-Korean trade," the South Korean Chamber of Commerce and Industry said in a statement.
The president said the two Koreas should adopt a framework agreement to accelerate trade and investment and that the South will begin that procedure by letting businessmen visit the North.
"From now on, South-North relations should be approached from a creative and practical viewpoint," he said.
Seoul is expected to let businessmen set up offices in North Korea soon and let labor-intensive plants move to the North for cheap labor.
Government officials, speaking on condition of anonymity, said investments will be limited initially to $5 million.
Major South Korean conglomerates said they would send executives to the North soon to open trade offices and hoped to revive negotiations on ambitious investment projects suspended because of the nuclear standoff.
Earlier Monday, South Korean conglomerates said North Korea had invited them to Pyongyang to discuss investment in the North's miserable economy.