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South Korea-North Korea: Update. Following today's talks, the South Korean Unification Ministry said, "The talks held in the North Korean border city of Kaesong did not lead to any understanding being reached. The two sides agreed to hold the next round of talks on Wednesday."

The chief South Korean negotiator would not discuss points of disagreement with the media, but said both sides remain committed to the dialogue.

Comment: One sticking point is the South's desire for North Korean guarantees that future operations will not be suspended. The South's plan to convert the zone into an international manufacturing zone with outside investors, including from China, hinges on obtaining a more reliable North Korean commitment to protect assets and investments in the zone than was evident in April, when North Korea halted operations.

North Korea seems reluctant to surrender a pressure point against the South without significant additional compensation. However, the North's handling of these talks has potentially significant longer term economic consequences. Its refusal to take responsibility for halting operations at Kaesong and to provide guarantees against future stoppages risks deterring Chinese enterprises from investing in North Korea.

Concerning business at Kaesong, 159 South Korean businessmen representing 49 textiles and stuffed goods firms along with 52 support personnel from utility companies and officials from the Kaesong Industrial District Management Committee returned over the inter-Korean border, after having checked on their facilities. They brought back finished goods and other production materials totaling 516 tons.

Comment: The North is honoring the letter of its agreement to allow businessmen and support personnel to inspect plants and bring back finished goods and production materials.

The limited activity at Kaesong and the negotiations about normalizing operations coincide with a propaganda theme in North Korea that emphasizes Kim inspecting economic activities, even when visiting military units.

Syria: According to Syria media, and reported by Xinhua, the Syrian armed forces discovered a factory for manufacturing and storing toxic chemical weapons inside a "terrorists'" hideout near Damascus.

An official source told the state news agency, SANA, that "the army unit seized amounts of toxic chemical materials, in addition to seizing chlorine substances in containers, some of them foreign-made, while others were Saudi-made (sic)."

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