S. Korea’s Park Expresses Relief After North Korea Talks Advance

South Korean President Park Geun Hye expressed “relief” after negotiators made progress with North Korea toward reopening a shuttered factory park, indicating a thaw in ties soured by the North’s February nuclear test.

Negotiators yesterday ended 16 hours of talks at the Panmunjom border village with a pledge to meet on July 10 in Gaeseong, the industrial zone closed by North Korea in April in protest U.S.- South Korean military drills and United Nations sanctions. Leader Kim Jong Un, who has threatened nuclear strikes against the U.S. and South Korea, began softening his stance last month by proposing talks.

“It is a relief that an agreement was reached between North and South Korea on Gaeseong,” Park told her advisers today, according to a statement on her website. She said South Korea must “prevent a relapse of wrongdoings to not only resolve the Gaeseong issue but for future progress in inter-Korean relations.”

North Korea has often reneged on its commitments, firing a missile last year and scrapping a plan for inter-Korean dialogue last month days after proposing talks. The international community backed U.S. and South Korean demands that the North abandon its nuclear-weapons program before resuming talks.

The Koreas will “restart Gaeseong when ready” and will discuss ways to prevent future closings at the next meeting, according to terms of an agreement reported by North Korea’s official Korean Central News Agency. South Korean businessmen will be allowed to retrieve completed goods and materials from the site and inspect equipment from July 10, KCNA said.

Building Relations

While South Korea sees this as the result of its bid to resolve disputes through talks, it doesn’t mean it’s “simply willing to go back to the way things have been,” Unification Ministry spokesman Kim Hyung Suk told reporters today in Seoul. “Conditions have to be created for the complex to be run not only on a company level but also on the government level.”

Shares of companies operating in Gaeseong gained in Seoul. Watchmaker Romanson Co. (026040) gained 1.6 percent and Ehwa Technologies Information Co. (024810), a producer of battery chargers and electricity transformers, rose 2.6 percent. The benchmark Kospi (KOSPI) index of stocks fell 0.9 percent.

Three officials from each side held the initial talks at Panmunjom, the site for the signing of the armistice that ended the 1950-1953 Korean War without a peace agreement, according to the ministry.

Shut Down

“North Korea didn’t shut Gaeseong with a permanent closure in mind, they were only trying to pressure the South,” said Koh Yu Hwan, a North Korean studies professor at Dongguk University in Seoul. “North Korea knows that it can’t afford to lose Gaeseong for good,” he said.

The North on April 3 started blocking South Korean businessmen from entering Gaeseong. Five days later it decided to withdraw its workers from the industrial zone. On April 11, an unidentified North Korean government spokesman called the closing temporary, while blaming the South for a halt to operations.

Last month, the North requested talks with the South on Gaeseong, then scrapped the offer over a protocol dispute, and less than a week later suggested high-level talks with the U.S. on a peace treaty to formally end the Korean War.

North Korea faces increasing diplomatic isolation as China, its biggest trading partner, tightens enforcement of UN sanctions targeting financial transactions and joins the U.S., South Korea and Japan on no-tolerance for its nuclear ambitions.

Closing Gaeseong deprived Kim’s regime of a key source of hard currency. Recalling nearly 54,000 of its workers employed by 123 South Korean companies has disrupted the $100 million that Yang Moo Jin, a professor at the University of North Korean Studies in Seoul, estimates the North earns in annual profits.

Panmunjom, about 60 kilometers (37 miles) northwest of South Korea’s capital Seoul, is used for diplomatic engagements and talks. It straddles the military demarcation line that runs through the four kilometer-wide demilitarized zone.

To contact the reporter on this story: Sangwon Yoon in Seoul at syoon32@bloomberg.net

To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net

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