N Korea to open cross-border tour route

SEOUL, South Korea (Reuters) -- North Korea has agreed to open a route across the heavily-armed border to save Hyundai's loss-making mountain tours and to start rebuilding the inter-Korean road by late July, local media said on Saturday.

"Hyundai Asan and North Korea's Asia Pacific Peace Committee have agreed to rebuild a 13.7 km [8.5-mile] road, which has been severed since the end of the war," the Korea Economic Daily newspaper said, quoting an unnamed source.

Hyundai expects more tourists when the land route opens next spring as it will considerably cut traveling time, making it more convenient compared with the current ferry trips.

Chung Mong-hun, chairman of Hyundai Asan, which handles North Korean business projects for the Hyundai Group, made a two-day visit to Pyongyang on Thursday to discuss ways to rescue the tours, Hyundai said.

"They agreed to complete the construction earlier than scheduled so that the tour through the land route can take place next Spring," said the source who is close to the deal.

A spokeswoman for Hyundai Asan confirmed that both sides agreed to open a land route.

"I heard that Hyundai and North Korea had agreed on the tour through a land route, but I can't confirm any details," Huh Hyun-sook said.

"Mr. Chung is likely to hold a press conference soon to announce the outcome of the talks."

But a Unification Ministry spokesman said they had not yet been officially informed about the matter.

The newspaper said the two Koreas were expected to start talks in early July to discuss the issue further.

Pyongyang had also agreed to lower tour fees for Hyundai's money-losing tours to a mountain resort in the communist state, and make the scenic Mount Kumgang a special tour zone, it said.

The Hyundai Group launched the ferry cruises in 1998, spearheading South Korea's rapprochement with the communist North.

But Hyundai, which agreed to pay North Korea $12 million per month for the right to operate cruise tours, has had problems meeting the fee because of its own financial problems.

Hyundai has incurred massive losses from the tours, failing to attract enough tourists to break even. It hopes tourists would be wooed by the one-hour car ride to the mountain compared with the 12-hour cruise tour.

The two Koreas remain technically at war since the 1950-53 Korean War ended with an armistice.

U.S. to reopen talks with N Korea

The reports come in the same week that South Korean President Kim Dae-jung welcomed news that the United States is to reopen talks with communist North Korea on key military issues.

Kim said he hoped the announcement by President George W. Bush would lead to continued close coordination between the two countries.

In a statement from the South Korean president's office Thursday, Kim also urged the North to engage in "serious and earnest" dialogue with Washington in order to bring about progress.

The reaction from South Korea has lifted hopes that cross-border dialogue between Seoul and Pyongyang -- stalled for months -- could benefit as a result.

Bush's announcement Wednesday came after an intense review by Washington on its policies towards North Korea.