Coach trip over Korean divide fails to ease nuclear fears

The first passenger coaches to travel from Seoul to Pyongyang for more than 50 years crossed the Demilitarised Zone yesterday.

North and South Korea are still technically at war but more than a thousand South Koreans are attending the opening of a $50m (£30m) sports stadium in the North funded by Hyundai, South Korea's largest conglomerate, which paid $500m to secure a summit between the leaders of the Koreas in 2000.

In Seoul, the trip is being used by President Roh Moo-hyun's floundering government as evidence that the Sunshine policy of engagement with the North - launched by his predecessor, Kim Dae-jung - is not dead and that peace with the North is possible. Mr Roh's supporters blame the Bush administration for the collapse of the policy.

But the policy has been tarnished since prosecutors showed Hyundai made $100m-worth of unauthorised payments into the bank accounts of the North's dictator, Kim Jong Il. With government support, Hyundai's founder, Chung Ju-yang, invested more than $1.5bn in the North to obtain a range of exclusive 50-year concessions. Sixteen officials and two Hyundai executives were given suspended jail sentences.

After questioning by state prosecutors in early August, Mr Chung's fifth son, Chung Mong-hun, who managed the investments in the North, threw himself out of the window of his 12th-floor office.

State banks had underwritten all the money Hyundai transferred to the North, leading to opposition claims that Kim Dae-jung had, in effect, bought the summit and the Nobel peace prize that he was awarded in its aftermath.

Last week the opposition Grand National Party, which controls the National Assembly, rejected Mr Roh's choice of one minister and forced another to resign. Mr Roh has been forced to leave his own party, the Millennium Democratic Party, set up by Kim Dae-jung. Mr Roh now commands just 43 seats in the 272-seat chamber. His followers have set up their own party, the People's Participatory and Unity Party, but Mr Roh has declared he would be more effective if he stays unaffiliated.

Mr Roh's difficulties are being exacerbated by Pyongyang's claims that it is developing nuclear weapons. Critics of the government now question if Kim Jong Il has used the Hyundai payments to finance his nuclear weapons plans.

As Mr Roh's grip on power falters, he is slackening his support for the Sunshine policy and is now prevaricating on whether or not to answer US appeals to send troops to Iraq.

"Kim Dae Jung led public opinion but Roh is now following it,'' said Scott Snyder, a Korea watcher at the Asia Foundation in Seoul.

Polls show a growing disenchantment with the engagement with the North, which is seen as greedy and ungrateful. The mood is mirrored in the number of visitors willing to join Hyundai's package tours to the Diamond Mountains across the border. Visitors peaked at 250,000 in 2000, but have since fallen away, causing the company to run up big losses.

Last month Pyongyang allowed Hyundai to transfer tourists by road instead of cruise ship, making the trip cheaper and quicker, and the company says October will be a record month, with 16,000 bookings. But after investing $600m, Hyundai has operating losses of $300m.