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(LEAD) New administration to create $40 billion fund to help N. Korean economy

All Headlines 16:23 January 04, 2008

(ATTN: UPDATES with details)

SEOUL, Jan. 4 (Yonhap) -- The incoming Lee Myung-bak government plans to earmark US$40 billion for an international cooperative fund to support North Korea's economic growth, Lee's transition team said Friday.

The planned fund is in line with Lee's ambitious plan to help increase the impoverished North's per capita income to $3,000 within a decade if it makes the bold decision to abandon its nuclear program and open its market, said the team's spokesman Lee Dong-gwan. There are no accurate data on the reclusive nation's economy but some estimates put its per capita income at around $1,300.

He said detailed ways of raising the fund will be discussed later but other insiders said the World Bank and the Asia Development Bank can provide help.

The announcement came after the team received reports from the Foreign Ministry on its works.

Under the liberal administrations over the last 10 years, South Korea favored direct aid to the North through its inter-Korean cooperation fund, inviting harsh criticism from conservatives who view the support as lacking reciprocity.

The government has an annual budget of nearly $1.0 billion in the inter-Korean cooperation fund aimed at promoting cross-border human exchanges and economic partnerships. The transition team did not clarify its position on the future of the fund.

It also underscored the need for a regular meeting of South Korean, the U.S. and Japanese foreign ministers as a channel for closer coordination of pending issues including the North Korean nuclear crisis.

In dealing with the communist regime, the Lee administration will push to benchmark the "Helsinki process," according to the spokesman.

The U.S.-led formula refers to a 1975 agreement between the U.S. and 34 other Western nations pledging to place their top priority on human rights in dealing with Russia -- then the Soviet Union -- and Eastern Europe.


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