DEVELOPMENTS October 11, 2006

- Prime Minister Han Myeong-sook said "the government is thinking about sending a special envoy to North Korea or having an inter-Korean summit meeting in order to solve the issue." Asked what she considers the most important to solve the issue, she answered "the government regards a UN resolution as very important. And the government is also contemplating how to change or make amendment in various engagement policies we have been taking after collecting different opinions from people."

- Yoo Myung-hwan, deputy Foreign Minister, said "the government is considering taking part in the Proliferation Security Initiative (PSI) partially or on a case-by-case manner. But Unification Minister Lee Jong-seok said "the government has never reviewed whether to join in the PSI since there has been no official request from the US."

- Economic institutes begin readjusting their growth projection for next year in the wake of North Korean nuclear test. LG Economic Institute was supposed to release its figure yesterday but postponed the announcement to next week, after considering that the growth figure can fall to 2-3% due to security instability. Korea Economic Research Institute, which expected the growth rate to be 4.1%, will also revise the figure and project the rate to be around 2-3% in worst case.

- Asked what he thinks about Roh's yesterday remark that he wants to suggest to take time to figure out the causal relationship between the engagement policy and the nuclear test, Han Seung-joo said "the engagement policy is necessary and based on people's consensus. But when we say 'engagement,' that means we engage North Korea, not accepting its nuclear weapons or missiles. The government has been so obsessed with the policy and that it missed out the substance of the nuclear problem. I mean, the government was too 'generous' on the problem."

- Some of ruling party lawmakers stirred controversy by saying North Korea's development of nuclear weapons did not aim at South Korea. Uri floor leader Kim Han-kil said "exaggerating what is happening now as if North Korea was going to stage a nuclear war against us is only making people uneasy." Kim Gen-tae said "North Korea pulled the trigger at the international community." Uri party lawmaker Lee Mok-hee said "North Korea's nuclear development is not designed to attack South Korea," and "nuclear weapons are the problem between the North and the US."

- Rep.Lee Seok-hyun of Uri Party said "[North Korea's test] did not result from sunshine policy failure but from the failure of US hawkish stance toward the North."

- Han Sung-ryol, North Korea's ambassador to the UN, said October 9 "when the US lifts its financial sanctions, there will be some changes in North Korea's nuclear issue." "US financial sanction and antagonistic behaviors are the basic reason behind North Korea's development of nuclear weapons."

- On the second day into the North Korea's provocative test, dollar buying is increasing at local banks. According to Korea Exchange Bank, people bought a total of $11.3m. A source from Shinhan Bank said "whenever tensions are escalating on the Korean peninsula, inquires for buying dollar is increasing. This time, given that the volume of request is a lot more than before, I think clients feel ever more anxious."

- The most popular item among foreign investors who, contrary to Korean investors, bought stocks on news of a nuclear test by North Korea, has been POSCO, followed by Kookmin Bank, Kepco, Woori Investment Securities Co., and Samsung Electronics.

- Ban Ki-moon said this morning "the government will decide its stance whether to join in the PSI in line with consultation with UN Security Council." "We have been having enough consultation with the US and have the same principle and direction on that matter," and "due to unique characteristics of inter-Korean relations and situation on the Korean peninsula, we have been partially participated in the PSI."

- Former President Kim Dae-jung said "the Sunshine policy could not lead to a complete success due to obstacles arising from relations between North Korea and the US, but given what it has achieved so far, I think the policy is a success between the two Koreas." He emphasized "in the past, people must have been so panic because of fear but now we are so calm," and "international credit rating companies announced that there will be no major change on the security of the Korean peninsula despite the nuclear test." "The nuclear test can never be accepted and is an act that can doom the fate of Korean people, so the North should immediately give up its nuclear program." "But the test is tantamount to the failure of US policy toward the North."