South Korean President Kim Dae-jung met President Clinton here yesterday and discussed how to make North Korea "pay a substantial price" if it goes ahead with a long-range missile test that U.S. intelligence believes Pyongyang is preparing, officials said.

A senior White House official said that while Kim and Clinton were pressing North Korea to abandon plans to test a long-range ballistic missile that would be capable of hitting much of the United States, the two also discussed "how to deal with it if those efforts should fail."

Kim, here for his third summit with Clinton since his December 1997 election, praised U.S. efforts and said, "I do hope that this close cooperation sends a clear message to North Korea."

U.S. and South Korean relations have rarely been better. Clinton and Kim share views on efforts to engage North Korea and open up its hermit-like Stalinist government. Kim has also overseen economic reforms that have brought South Korea back from a financial crisis that struck on the eve of his election.

"We have seen an astonishing turnaround in the Korean economy, going from a period of contraction to a period of quite robust growth, in ways that no one could have predicted. It is a great, great success story," said Clinton. A senior administration official said that Clinton pressed Kim to pay further attention to the restructuring of giant conglomerates and financial institutions, a slow process considered the weak point in Korean economic recovery.

Clinton and Kim's meeting comes at a time of heightened tensions with North Korea. In addition to worries about a possible missile test similar to one last Aug. 31, the U.S. and South Korean efforts to engage North Korea's reclusive leadership have been thwarted by North Korean naval incursions into South Korean waters and detentions of a South Korean and an American citizen. The South Korean has been released; the American still has not received a consular visit after two weeks in custody.

Yesterday South Korea threatened to cut off deliveries of fertilizer to the north after the suspension of talks in Beijing over the reunification of Korean families divided by war nearly 50 years ago. North Korea a month ago agreed to discuss family reunions in return for 200,000 tons of fertilizer.

But South Korean delegates at the talks said that instead of discussing the issue of families, North Korean delegates had harped on a South Korean magazine article and the sinking of one of the North Korean vessels last month by South Korean ships. There was no contact between the two sides Thursday.

CAPTION: Oval Office talks concluded, President Clinton escorts South Korean President Kim Dae-jung as he prepares to depart. Clinton said "We have seen an astonishing turnaround in the Korean economy."