TYPE=CORRESPONDENT REPORT

TITLE=KOREA/TALKS (L-ONLY)

BYLINE=HYUN SUNG KHANG

DATELINE=SEOUL

INTERNET=YES

CONTENT=

VOICED AT:

INTRO: North Korea has expressed concern over a possible change in U-S policy under the Republican administration of President-elect George W.Bush. The issue was raised during talks between North and South Korean officials in Pyongyang. As Hyun-Sung Khang reports from the South Korean capital, the second day of discussions between the two sides was marred by a disagreement over a South Korean defense paper, labelling the North as a military threat.

TEXT: South Korean media pool reports from Pyongyang say North Korean officials have asked their South Korean counterparts whether they expect a change in direction from Washington when George W. Bush assumes the U-S Presidency. There have been steadily improving relations between Washington and Pyongyang, and Secretary of State Madeleine Albright visited the North Korean capital earlier this year to hold talks with the country's leader.

The North Koreans also raised concerns that the economic slowdown in the South would hamper investment plans in the North. South Korea's largest conglomerate, Hyundai, which has extensive investments in the North, is presently wrestling with billions of dollars of debt, which has pushed it to the verge of bancruptcy.

Hyundai is also heading a plan to build a massive industrial complex in the North. The head of the South Korean delegation, Park Jae-Kyu proposed that work begin on the site next year.

During the talks, the North Koreans expressed anger over a recent South Korean Defense White Paper that labelled Pyongyang as the South's main enemy. They said the paper violated the spirit of a summit agreement reached by the leaders of the two Koreas following discussions in June, in which they agreed to work for reconciliation and reunification

South Korean officials said the position reflected the reality of national division and would be resolved as confidence-building measures progressed. They have proposed a third set of family reunions before the end of January and the setting up of a permanent meeting place. South Korea is concerned at what it sees as the slowing pace of improvement in inter-Korean relations.

These are the fourth talks to take place between North and South Korean officals since the unprecedented inter-Korean summit last June. They are scheduled to end Friday with the release of a joint statement. (Signed)

NEB/HK/HSK/FC/PFH