TOAST TO TALKS: South Korea's Mr Han (right) and his North Korean counterpart Mr Kim attending a dinner in Seoul on Thursday after talks. -- PHOTO: AP

The service will begin on Dec 11, according to a joint statement issued at the end of a three-day meeting between South Korean Prime Minister Han Duck Soo and his North Korean counterpart Kim Yong Il in Seoul.

The prime ministerial meeting, the first in 15 years, was convened to discuss follow-up actions to a joint declaration signed by leaders of both countries last month at the second-ever inter-Korean summit. The first summit was held in 2000.

South Korean President Roh Moo Hyun and North Korean leader Kim Jong Il pledged to work towards a formal peace on the divided peninsula and agreed on a series of projects to help develop the North Korean economy.

The cargo trains will serve a Seoul-funded industrial estate in the North Korean city of Kaesong, and reduce the costs of transporting raw materials and goods to and from the Kaesong Industrial Complex. Currently, such transportation is by road and sea.

Seoul also agreed to start repairs next year on rail tracks between Kaesong and the North's border with China, and a major highway between Pyongyang and Kaesong.

South Korea hopes the inter-Korean railways could ultimately be linked to Russia's trans-Siberian railroad. This will allow for an overland route connecting the Korean peninsula to Europe and greatly cut delivery times for freight that now requires sea transport.

Pyongyang yesterday also agreed to lift a ban next year on the use of the Internet and mobile phones for South Korean workers at the Kaesong Industrial Complex.

'We've made big progress in removing the obstacles that have limited the competitiveness of firms in Kaesong,' Unification Minister Lee Jae Joung told reporters yesterday.

The two prime ministers also agreed to form committees and take measures to implement other projects, including the setting up of a joint fishing area around their disputed western sea border next year and building shipyards in the North.

Prime ministerial meetings will be held every six months in future.

The multibillion-dollar projects are aimed at improving the North Korean economy and paving the way for eventual unification.

'The agreements set the stage for our companies to expand investment in the North and contribute substantially to its economic development,' the South Korean Prime Minister's Office said in a statement.

This week's talks did not touch on sensitive security issues, which will be discussed at a defence ministers' meeting in Pyongyang later this month.

Mr Baek Seung Joo at Seoul-based Korea Institute for Defence Analyses told the Associated Press that the fate of the inter-Korean agreements depends on who becomes the South's next president, how the North would view the new leader, and how the international stand-off over Pyongyang's nuclear programme is resolved.

South Korea will hold presidential elections on Dec 19 and leading opposition candidates have called for a tougher stance towards the North.

Pyongyang has shown signs that it will honour an international deal to roll back its nuclear arms programme.

leeteejong@yahoo.com