The 100-member South Korean delegation led by Unification Minister Lee Jae-joung traveled to the main street Kaesong which served as capital of the ancient Korean kingdom of Koryo (918-1392). Lee was the first South Korean official to visit downtown Kaesong since July last year.

The North had agreed with South Korea's company of Hyundai Asan to open the city's downtown area that boasts many historic sites to South Korean tourists.

Despite its earlier contract, however, North Korea had requested a new deal with Seoul's Lotte Tours Co. instead of Hyundai Asan. As its demand was rejected, the North banned South Koreans' access to the medieval capital city.

In a bid to revive the lucrative tour project, however, the North has recently withdrawn its demand to change its South Korean tourism part, according to Hyundai officials.

"We have yet to consult concretely with them, but we will make efforts to realize the Kaesong tour project this spring," Hyun Jung-eun, chairwoman of Hyundai Group, was quoted as saying during her visit to the city Wednesday.

The North's move seems aimed at winning much-needed cash from South Korean tourists. Earlier, the North called for the South to pay as much as $200 for each tourist on its one-day trip to Kaesong.

Upbeat about the North's gesture, Minister Lee vowed to press ahead with inter-Korean exchange and cooperation despite U.N.-backed sanctions imposed following the North's nuclear and missile tests last year.

During his on-site visit to the inter-Korean joint industrial park, south of Kaesong, Lee praised the park as a "significant" project that "plays the central role in promoting peace and prosperity" on the divided Korean peninsula.

"I am overwhelmed that despite hardship and much difficulty, total production per month at the complex exceeded $10 million last year," he said.

The Kaesong industrial complex is one of two major cross-border projects South Korea has kept afloat despite concerns that it could be used to fund the North's nuclear programs. The other one is a tour program on the North's Mount Kumgang resort.

The Kaesong industrial park is a testing ground for mixing South Korean capitalism and technology with the North's cheap labor.

Some 8,000 North Korean workers are working for a dozen South Korean firms operating in the joint complex. North Korean workers there are paid about $57.5 a month. The money is not paid directly to the workers, but instead goes to the North Korean authorities, raising questions on transparency.

The North's senior officials have called for the South to improve cross-border relations strained following the North's nuclear and missile tests.

Kim Ki Nam, a secretary of the North's ruling Workers' Party, issued a statement recently calling for active efforts to promote inter-Korean reconciliation and cooperation. Seoul has suspended shipments of its food and fertilizer aid to the North to punish its missile launch last July.

"Pyongyang is expected to reach out to the South this year to improve economic ties with the South as the North is suffering from economic troubles in the wake of outside financial squeeze," said Cho Dong-ho, an economist at Seoul's state-run think tank, Korea Development Institute.

earlier related report
Analysis: Optimism rises over NKorea talks
by Lee Jong-Heon Seoul (UPI) Jan. 24 - Hopes are cautiously running high for progress in upcoming talks on ending North Korea's nuclear weapons programs as Washington and Pyongyang seem to find a compromise over the thorny issue of financial sanctions.

South Korea's chief nuclear negotiator, Deputy Foreign Minister Chun Young-woo said Tuesday six-nation nuclear talks are expected to resume no later than Feb. 5. "The date will be decided in the next few days," he told reporters upon returning home from meetings in Beijing with his North Korean and Chinese counterparts.

Chun voiced optimism about the next round of six-party talks, noting a series of bilateral meetings have paved the way for "making progress."

The United States and North Korea were showing flexibility over U.S. financial sanctions, the key sticking point in the nuclear standoff, Chun said at Seoul airport.

Pyongyang has long called for the United States to lift its sanctions on a Macau-based bank that has frozen the North's funds, as a precondition for progress at the six-party nuclear talks.

The United States in September 2005 slapped restrictions on Banco Delta Asia accused of laundering money for North Korea. Under the U.S. measure, BDA has frozen $24 million of the North Korea's holdings in some 50 accounts and cut off transactions with the communist, which is believed to chock off Pyongyang's cash flow.

Washington has rejected the North's demand, saying the financial issue is not relevant to the nuclear talks but a matter to be handled by law-enforcement authorities.

In an angry response, the North left the multilateral dialogue table and launched a volley of missiles in July, which was followed by a bombshell underground nuclear in early October.

Neighboring countries and the United States have been put alert with concerns that North Korea may conduct a second nuclear test or launch a ballistic missile which could be equipped with a nuclear warhead and may be capable of reaching the continental United States.

But North Korea and the United States have reached "certain agreement" at bilateral meetings last week in Berlin.

Pyongyang's Foreign Ministry said the Jan. 16-18 meeting between nuclear envoys from the North and the United States took place "in a positive and sincere atmosphere, and a certain agreement was reached there."

In Beijing, the North's top negotiator Kim Kye Gwan told journalists Tuesday that he was "satisfied" with the Berlin meetings. He also said he had gotten "positive impressions" from his U.S. counterpart Christopher Hill that Washington could change its stance toward the North.

Kim refused to disclose what they talked about in Berlin, but South Korean news reports said the North proposed to halt its nuclear activities and allow international inspectors back into the country to "monitor" its nuclear facilities in return for U.S. moves to lift its financial sanctions.

Seoul's Yonhap News Agency said the United States was considering easing its restriction of North Korean funds believed to have come from legitimate business.

According to the South's largest daily Chosun Ilbo, South Korea has asked for the United States to unfreeze "legitimate" North Korean bank accounts, saying at least five of the 50 accounts with the BDA are from legitimate business.

A Seoul official said Kim Man-bok, the South's intelligence chief made the demand during a recent meeting in Washington with John Negroponte, the director of National Intelligence and deputy secretary of state-designate.

Analysts here also expect progress in the upcoming talks. "Both the United States and North Korea feel the need to make tangible progress in the six-way talks to keep the dialogue momentum," said Nam Sung-wook, a North Korea professor at Korea University.

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