South Korean President Lee Myung-bak warned leaders in North Korea on Sunday that it would be counterproductive for Pyongyang to pursue a path involving the development of missiles that threaten its neighbours.

North Korea has announced plans to test-launch its ‘Kwangmyungsung No. 2′ satellite into orbit for telecommunications purposes, but this involves ‘dual use’ technologies that are applicable to long-range missiles.

In a speech, marking an uprising against the 1910-1945 Japanese occupation of the peninsula, Lee reminded the North that its best bet lay in cooperation with the South. ‘’What protects North Korea are not nuclear weapons and missiles, but cooperation with the South and the international community,” Lee said.

Observers believe that that Pyongyang is rattling its missile technology as a way to pressure the West and possibly extract more concessions.

The planned satellite launch may also be a way to show defiance of warnings made by United States Secretary of State Hillary Clinton, during her Asian tour in February, against adventurism by Pyongyang involving weapons of mass destruction.

North Korea, according to observers, is developing missile technology as a bargaining chip in its dealings with the West and also to make money by selling that technology to countries like Iran and Syria.

Seoul believes, however, that the time has come for North Korea to take off its rose-tinted glasses and face the reality that it will no longer allow Pyongyang to play the brinksmanship game.

To show that it means business, Seoul has stopped unconditional aid to its impoverished neighbour and called on the North to return to the negotiating table.

Pyongyang has responded by insisting that it was about to launch a communications satellite as part of a peaceful space programme.

North Korea, which conducted a nuclear test in October 2006, does not yet have the technology to mount a nuclear warhead on a missile, according to experts. But it is has its neighbours worried by refusing to agree to any verification of its claims to having shut down its nuclear programme.

In his Sunday speech President Lee told Pyongang that denuclearisation would quickly help the reclusive regime to reintegrate with the international community.

Seoul has been ignoring provocations from Pyongyang, including suggestions that Lee was playing the role of a U.S. stooge.

“We will remain even-tempered no matter how tough N. Korea talks against us,” said South Korean defence minister Lee Sang-Hee, last week, in response to Pyongyang’s announcement that it was ready to launch a missile. “We are also ready to fire back our missile if N. Korea strikes us,” he added.

“We South Koreans should not allow North Korea to be tempted to strike Seoul with its short-range missile. That is why we may need at least 10 more defence missiles to be deployed in South Korea as a possible deterrence to North Korea’s temptation,” said Kim Chang-June, a former U.S. lawmaker of Korean origin, during a visit to Seoul.

Military insiders have said that another missile launch by North Korea would strengthen the position of hardliners in Seoul and Washington who are talking about beefing up the military as a deterrent.

Seoul has offered a carrot to induce Pyongyang to drops its nuclear ambitions in the shape of resumption of suspended economic package including food and fuel aid. There are also a dozen energy development projects in the pipeline for developing North Korea’s rich resources.

South Korean manufacturers are also waiting for a chance to invest in North Korea as they find their factories in China costly to run and subject to heavy regulations.

“By insisting on its missile launch, North Korea is giving up all of the fortunes that await it in return for giving up its nuclear cards,” writes Kim Young-Hee, a senior journalist in an editorial in the ‘Joong-ang’ newspaper.

Since Lee’s new conservative government took over in February 2008, most of the official contacts between the two Koreas have virtually been severed. South Korean tourists who once flocked to North Korea’s scenic Kumgang mountain are no longer able to travel after the North stopped allowing more S.Koreans on its soil.

If Pyongayang persists with launching its missile some 23 million North Korean people are likely to suffer. A third of that number relies on international aid of food supplies.

On this side of the border the South Korean economy, which is now heading for a minus GDP growth, will be affected. Already, investors are using the North Korean threat as a reason to pull their money out.

Finally, it will hurt the interests of about 1,000 North Korean defectors living in the South, who have maintained contact with the families they left behind during the 1950-1953 Korean war.

North Koreans have, in recent times, sued their half-brothers for shares in million-dollar inheritances left behind by a deceased common father.

“If North Korea continues to be into its false belief [that the missile or thenuclear card will work as it did before], the clock is clicking back into the past [for North Korea],” says Kim Sung-Han, a professor at Korea University.