PUSAN — It was a historic week for Korea. On Oct. 2, South Korean president Roh Moo-hyun walked across the 39th parallel to meet North Korean dictator Kim Jong-il, bearing gifts that included a 52-inch LCD TV set and DVDs of TV series and movies.

Two days later, the Pusan festival kicked off with the screening of patriotic Chinese war movie “The Assembly” by helmer Feng Xiaogang.

Both events are examples of South Korea, once part of the “Hermit Kingdom,” learning to get on better with the neighbors.

The new attitude is less about humility than about pragmatism. Roh is criticized in some quarters for being too soft with North Korea, but he can point out that the slippery Kim is now negotiating on nukes, not launching them. And he is leaving the South in peace to continue its economic growth.

On the festival side, the opening spot was previously reserved for Korean-made movies (even though Pusan has long claimed to be the top fest for all of Asia.)

The gesture takes on symbolic overtones. South Korean film and TV industries were a huge hit on Asian screens in what was dubbed the “Korean Wave.” Now, South Korea’s export success is in reverse while home markets are also slowing.

So South Korean entertainment firms are learning to work with their neighbors, not just sell to them.

This means investing abroad, co-producing and getting involved with other countries’ initiatives.

The prime example of the new thinking came last week when South Korea’s leading movie studio, CJ Entertainment, agreed to co-finance and promote a selection of youth filmmaking projects initiated by China Film Group. It was in good company, with Sony, MySpace and two Hong Kong studios inking the same pact.

CJ has been courting the Chinese entertainment establishment for years, holding mini-festivals and inviting ministers and officials to Seoul. The objective is to get permission to open multiplexes in China and get a bigger slice of the Chinese distribution market, which is controlled by Chinese firms but is driven by Hollywood and Chinese product.

Congloms Showbox and MK Pictures also have sought out Chinese partners.

While South Korea has not gone anti-growth like Japan, parts of the market such as theatrical exhibition are becoming saturated. And the potential upside is much smaller than in Asia’s large fast-moving, developing territories, China and Vietnam.

CJ Entertainment’s sister company, CJ Media, recently built a studio in Vietnam to produce Vietnamese-themed TV skeins, while the rival Lotte conglom is taking a good look at possibilities in the backwater that is Vietnamese exhibition.

Delegations from around the Asian region have visited Seoul and the Korean Film Council to learn more about how the economic miracle was achieved. Quotas, government support, a fervor of cultural expression and great skills all arguably played their part. But the South Korean industry is learning it needs to do more than lecture. It can have a leadership role only if it helps the wider Asian industry make progress.

That’s why Korea has found common cause with Singapore in the still emerging high-definition TV programming sector. Both countries have the deep pockets necessary to build skills and inventory while waiting for the HD market to catch up.

The Pusan fest has long sought to connect the disparate parts of Asia’s film industry, which is no easy feat, considering vast differences in language, culture and economic development. After South Korea’s 2007 performance, that impulse has become an imperative.

So Pusan has worked to bring together various film commissions through a networking system, and has launched a meeting of the Asia Pacific Artists Network, a talent-sector confab.

Even though the Korean film biz has had a tough year, there is plenty of evidence other Asian companies — or Western ones looking to grow in Asia — should consider working with South Korea.

Its entertainment companies are entrepreneurial and rich in skill and talent: Locally produced f/x enhanced “D-War” brought in $53 million at Korean turnstiles and $9.3 million at the U.S. box office — an all time high for a Korean pic.

Korean firms are providing f/x and post-production for Relativity’s Chinese movie “Forbidden Kingdom” — another example of Korea working with its neighbors.

And its TV dramas, now being made on budgets exceeding $40 million, are so powerful that Chinese President Hu Jintao and Kim Jong-il have both confessed to being addicts.

The country is seriously high tech. South Korea is showing the world that portable smallscreens are incredibly popular with viewers — even for longform drama and movies. Rival mobile TV services launched less than two years ago now have 7 million subscribers.

While there likely will be further fluctuations in the fortunes of Korean movies at home and abroad, years of investment and audience building have established an entertainment sector of a scale that can no longer be ignored, and which is firmly open for business.