Created: 7/28/2000

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sense of the community memorandum

Outlook for North-South Relations

Intelligence Community analysts expect North and South Korea to make modest progress in tbe next few months on economic and humanitarian issues, sustaining the positive momentum in relation* following last month's summit. Both governments remain pleased with the positive results of last month's meeting for their respective interests, and there is little likelihood of significant backsliding or divergence in the near term.

An umntended military clash or incident could occur, but both governments probably would strive to limit the consequences ia the interest oftable envuonment-

A sudden downturn in the health of either Korean leaderossible surprise initiative from Kimas calling for tripartite peacechange the outlook.

Presidents Kim Chong-il and Kim Dae-jung intend to build on the positive postsummit atmosphere. North Korea has improved iu image and increased its international leverage in seeking economic advantage by opening to South Korea, Japan, and the West For its part, the South Korean Government has gained greater popular support and domestic political ctrength.

Closer economic ties and cultural and sports exchanges are often mutually advantageous and noncontroversial; they probably will advancease-by-case basis, depending in part on the South Korean Government's willingness to provide economic and other support and North Korea's flexibility in allowing greater contacts with the South.

Indicators of progress include South Korean support forKorea's ailing electric power grid and North Korean approval of

proposed South Korean industrial parks^T-

Visits between some divided families and return to the North of prisoners held in South Korea probably will proceed in the OCX! tew weeks. Active planning and official contacts on future initiatives also will continue, although neither side currently shows interest in meaningful steps toward reunification.

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