The results of this week's inter-Korean summit will inspire investor confidence by easing geopolitical tensions on the divided peninsula, South Korea's finance minister predicted yesterday.
The summit will "contribute considerably to reducing [South Korea's] country risk as the leaders of the South and the North clearly stated a firm commitment to denuclearization," Finance and Economy Minister Kwon O-kyu told reporters.
Kwon spoke a day after South Korean President Roh Moo-hyun and North Korean leader Kim Jong-il concluded a three-day meeting with a declaration promising a joint effort to implement previous agreements from six-nation arms talks "for the solution of the nuclear issue on the Korean peninsula."
Moody's Investors Service and other credit rating companies, meanwhile, said the summit would not immediately lift South Korea's rating.
The accord signed on Thursday in Pyongyang also included a pledge to pursue a formal peace treaty ending the 1950-53 Korean War as well as agreements to expand economic cooperation.
"It will also remove uncertainties, thus improving investor sentiment, external credibility and conditions for obtaining loans," Kwon said of the summit, only the second ever held between the countries.
Kwon was one of a number of South Korean Cabinet ministers, government officials and business executives who accompanied Roh to the North. The first summit took place in 2000 between North Korea's Kim and then South Korean president Kim Dae-jung.
Developments in North Korea have long been a concern for potential investors in South Korea. Credit ratings agencies like Moody's factor in such risks when evaluating the country's economy, as well as the potential cost it could eventually bear to pay for eventual unification with the North.
"This is a continuation of the positive trend in geopolitical factors related to the six-party talks and a containment of the risks associated with North Korea's nuclear weapon and missile development activities," Moody's senior vice president Tom Byrne said in a statement.
He said that was "already reflected" in a July upgrade of South Korea's government bond ratings by Moody's from A3 to A2, its sixth-highest level and five rungs above "junk" status.
Standard & Poor's Ratings Service and Fitch Ratings said on Thursday the summit would have no immediate effect on South Korea's credit ratings.
China, Japan, Russia, South Korea and the US have been engaged in negotiations with North Korea since 2003 to persuade Pyongyang to end its nuclear programs.
At their most recent gathering this week in Beijing, North Korea said it would disable its main nuclear facilities and give a "complete and correct declaration" of all its nuclear programs by Dec. 31, Chinese Vice Foreign Minister Wu Dawei said.
At the summit, the two Koreas also agreed to establish a new special economic zone, further develop an existing joint industrial park, construct shipbuilding facilities and improve a railroad and highway in the North.
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