SEOUL South Korean President Lee Myung-bak on Wednesday said North Korea should face reality and consider bringing about a "transformation", adding that Seoul will monitor changes in the secretive North.
Lee's comments were included in a televised speech to mark Korea's liberation from Japanese colonial rule from 1910-1945, and follow signs that North Korea's new young leader, Kim Jong-un, may be planning to carry out reforms.
Lee also urged North Korea to adhere to UN resolutions aimed at deterring Pyongyang's nuclear ambitions.
"Pyongyang has also come to a situation where it has to look straight at reality and consider a transformation," Lee said, apparently referring to the reclusive North's struggling economy, which has been in decline for years and is unable even in years of good harvests to feed its 24 million people.
"We will carefully watch for the possible changes," Lee added.
The North's untried new leader, who inherited the dynastic power after his father's sudden death in December, has presented an image that contrasts sharply with his father's. He is believed to be preparing economic and agricultural reforms after he and his powerful uncle purged the country's top general for opposing change.
Earlier this month, Kim told China's chief interlocutor with the North that his priority was to develop the economy, according to reports by China's state media.
China, North Korea's strong ally, said on Tuesday it had signed an agreement with North Korea to push forward joint development of two economic zones -- Rason and Hwanggumpyong -- in the North.
The North's state news agency KCNA, confirming the agreement, said on Wednesday the countries also agreed to "positively promote" the development of the Wihwado zone and to hold the next round of talks in Pyongyang in the first half of next year.
Kim's uncle Jang Song-thaek is now visiting China, reportedly to discuss those plans and other ways the two neighbors can cooperate.
In his speech, Lee also called for the North to comply with U.N. resolutions to dissuade it from further developing nuclear weapons.
"Denuclearization of the Korean Peninsula was agreed on between the South and North... It has to be strictly complied with as it also constitutes an international obligation under UN Security Council resolutions," Lee said. "On the basis of it, the South, along with the international community, is ready and willing to help the North."
The North's economic hardships have been compounded by a series of United Nations sanctions imposed after Pyongyang's ballistic missile and nuclear tests in defiance of international warnings, even by its ally China.
(Reporting by Sung-won Shim; Editing by Ken Wills)