Dec. 11 (Bloomberg) -- North Korea and South Korea began a regular freight train service across their fortified border today, expanding economic cooperation and paving the way for a rail link with the rest of Asia.

A train with 10 cars crossed the border at about 8:30 a.m. Korean time on its 16.5 kilometer- (10.3 mile-) journey from the South Korean border town of Munsan for North Korea's Panmun station in Bongdong, the Unification Ministry said in Seoul.

The service, which will make the return trip every weekday, was approved at a summit between President Roh Moo Hyun and Kim Jong Il two months ago. It will carry goods to and from the Gaeseong industrial complex in North Korea.

South Korea is trying to narrow the gap between the economies of the two countries and prepare for eventual reunification. South Korea's economy is 35 times bigger than its northern neighbor and its citizens earn 17 times more. South Korea also wants to establish a rail link with the rest of Asia and ultimately to Europe via the Trans-Siberian and the Trans- China routes.

South Korea has been pushing for more economic ties with North Korea since the government in Pyongyang began disabling its nuclear program last month under the supervision of U.S. inspectors. The agreement to denuclearize was reached with South Korea, Japan, China, Russia and the U.S.

Korean War

North Korea and South Korea tested the rail link in May, when trains crossed the border for the first time since 1951. The two nations are still technically at war since the 1950-53 Korean War ended in a truce rather than a peace agreement.

South Korea has pushed since 1982 for a cross-border train service, which may cut transportation costs to Europe by as much as 20 percent and delivery times by a third. South Korea is surrounded by the sea on three sides and by the mine-strewn demilitarized zone to the north.

The Gaeseong complex is one of South Korea's key undertakings in its policy of engagement with North Korea.

More than 400 trucks cross the demilitarized zone by road every day, carrying raw materials into Gaeseong and bringing back finished goods. Inter-Korean trade more than tripled to $1.35 billion last year from $425 million in 2000.

South Korea will next year begin upgrading the railway between Gaeseong and Sinuiju, near North Korea's border with China, and the expressway between Gaeseong and Pyongyang.

To contact the reporter on this story: Heejin Koo in Seoul at hjkoo@bloomberg.net.

Last Updated: December 10, 2007 19:18 EST