THE PACIFIC : With High Hopes, South Koreans Step Up Plans for Trade With the North : Asia: Government and business leaders want July 25-27 summit to defuse military crisis, improve commercial ties.

While there’s no such thing as a sure bet when it comes to dealings with Pyongyang, the apparent breakthrough in the military crisis on the Korean peninsula has companies south of the demilitarized zone thinking, however tentatively, about the pool of cheap labor on the other side.

Indeed, the South Korean government and businesses are now stepping up plans for economic exchanges with North Korea. Their hope is that the historic summit July 25-27 between the North’s President Kim Il Sung and South Korean President Kim Young Sam will defuse the military confrontation on the peninsula and improve trade ties.

This will be a very tall order, given the fact that Pyongyang has enough firepower trained on Seoul to turn the South Korean capital into rubble. Still, Seoul is dangling some big incentives to persuade Kim to play ball with United Nations inspectors, who want to make sure North Korea isn’t developing nuclear weapons.

The Seoul government said late last week that it will increase its South-North (Korean) Cooperation Fund, designed to help expand inter-Korean cooperation and exchanges, by $50 million to $181 million during this year and to $1.25 billion at some point in the future.

What’s more, South Korean companies are also casting a covetous gaze at the North’s low-wage work force.

“We are dusting off the old business plans in the North, which have waited for a breakthrough in inter-Korean relations,” said Kim Sang Nyun, a spokesman for the Hyundai conglomerate.

For its part, Seoul said it will use part of its Economic Development and Cooperation Fund, another government-raised fund designed to help developing nations, for the revitalization of North Korea’s economy, which has contracted for four consecutive years.

An official at the Economic Planning Board said efforts will be made to implement a historic peace treaty between the two Koreas, adopted in 1992, if and when the summit helps clear suspicions about the North’s nuclear program.

“Time is now ripe for the two economies to join hands for co-prosperity,” the official said.

Businesses in the capitalist South are also reactivating their old plans for business in the communist North, which were formed a few years ago when the two states were moving toward reconciliation, but then shelved when suspicions about Pyongyang’s nuclear ambitions started to grow.

Daewoo Group Chairman Kim Woo Choong and Hyundai Group founder Chung Ju Yung visited North Korea a few years back and agreed to build joint venture factories and large resort facilities there.

But the plans are being held up until a resolution of the nuclear issue can be reached. The Seoul government also bans visits by South Koreans to North Korea and allows only limited commercial trade through third countries.

Yet if the current thaw holds, that could change. A spokesman for the Daewoo conglomerate said its chairman Kim will quickly visit the North again to pursue the delayed projects if the summit helps resolve the nuclear problem.

The recent impasse may have been busted up by the recent visit to Pyongyang by former President Jimmy Carter. Many South Koreans hope the summit provides needed momentum for inter-Korean economic relations. During the first five months of this year, two-way trade remained low at $80 million.

Yet the prospects for inter-Korean economic cooperation are good. Many analysts see a combination of South Korea’s capital and technology with North Korea’s cheap labor as ideal.

Suffering from serious shortages of foods, fuel, daily necessities and hard currencies, the North hopes to build a huge free trade zone along the Tumen River bordering with Russia and China, by attracting the capital of the West.

The Seoul government has promised full support to the Tumen River development project, sponsored by the United Nations Development Program.

While all of this is promising, South Korean companies had better be patient. Given Pyongyang’s track record for following through on commitments to make its nuclear energy program more transparent, dreams of economic unification are probably just that--dreams.