The two Koreas held a ceremony on Wednesday for a project to reconnect rail and road links, although construction cannot begin while sanctions over North Korea's nuclear and missile programmes remain in place, officials said.
The two sides agreed in October to inaugurate work on reconnecting railways and roads that have been cut since the 1950-53 Korean War, another example of the thaw in North-South relations this year.
A special train carried 100 South Korean officials, politicians and members of families displaced by the war to the ceremony at Panmun Station in the border city of Kaesong.
They were joined by a 100-strong North Korean delegation, as well as officials from the United Nations, China, Russia and Mongolia, according to South Korea's Unification Ministry.
The United States and the UN Security Council gave their support for the ceremony, South Korean officials said, but construction cannot begin while sanctions block the shipment of energy and metal products, as well as other supplies.
"There's a lot of things to do before we actually start construction," Transport Minister Kim Hyun-mee said, adding the two sides would conduct additional joint surveys and design work for one or two years.
There was a feeling of nervous excitement on the South Korean train as it left the capital Seoul.
"I'm just deeply moved," said Shin Jang-chul, who drove the last freight train between the Koreas a decade ago.
"It's been 10 years and I've been wondering if I would ever be able to come back after I retire," he added.
The ceremony was another example of the thaw in relations between the Koreas, technically still at war after their conflict ended in a truce not a peace treaty. But major economic initiatives have been stalled by the lack of progress on denuclearising the North.
South Korean President Moon Jae-in agreed to the ceremony during a September summit in Pyongyang with North Korean leader Kim Jong Un as a step toward joint industrial zones and reconnecting transport links.
However, the plan has been delayed amid US concerns that improving Korean ties could undermine efforts to press Pyongyang to give up its nuclear weapons.
Kim agreed to work toward denuclearisation at a summit with US President Donald Trump in June, but talks have since made little headway, with Pyongyang upset at Washington's insistence that sanctions remain until the North takes concrete steps toward denuclearisation.
"The South is trying to build on existing agreements, believing that advancing inter-Korean ties would have a positive impact on denuclearisation," said Shin Beom-chul, a senior fellow at the Asan Institute for Policy Studies in Seoul.
"But given the absence of actual construction, the North will keep pressing the South to make it happen despite sanctions, in line with Kim's efforts to shore up his regime," he added.
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