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SEOUL: North and South Korea held fresh talks Thursday on the fate of their last major business project amid continuing tensions over the communist state's nuclear and missile programmes.
The third round of discussions is expected to indicate whether the North will ease its demands for huge extra payments from Seoul now that it faces international financial and other sanctions.
The South rejected the North's demands in a morning session at the Kaesong joint industrial estate just north of the border, a senior Seoul unification ministry official told reporters on condition of anonymity.
It was not yet known if there would be an afternoon session.
"Our side said in a keynote speech that we cannot accept North Korea's unreasonable demands that it has presented over the joint park after unilaterally scrapping existing contracts," Yonhap news agency quoted the official as saying.
The North faces tighter curbs on its lucrative missile exports under UN and US sanctions imposed in response to its May 25 nuclear test.
The Seoul-funded estate is an alternative source of hard currency for the impoverished North, which received US$26 million last year in wage payments.
Pyongyang's delegation, at the first round of talks last month, stunned Seoul's team by demanding a wage rise for its 40,000 workers to US$300 a month from around US$75 currently.
It also demanded an increase in rent for the estate to US$500 million, compared with the current US$16 million for a 50-year contract.
At the second round the North stuck to its financial demands but offered to lift restrictions on border crossings it imposed last December.
Kaesong, which opened in December 2004, is the last operating reconciliation project between communist North and capitalist South.
But its future has become increasingly uncertain as inter-Korean relations have worsened and as the North's nuclear standoff with the world has intensified.
Some analysts say Pyongyang may be willing to forgo the cash from Kaesong because it fears the effects of exposing its workers to a South Korean lifestyle.
"From Pyongyang's point of view, each worker... was a poster advertising capitalism, damaging the socialist system," said Leonid Petrov, research associate at the Australian National University, in an article this week.
Seoul's priority is the case of a South Korean worker at Kaesong who has been held since March 30.
The North refuses to grant access to the man, who is accused of slandering its political system and of trying to incite a local woman worker to defect. Amnesty International has called for his immediate release.
South Korea has offered to build a dormitory and a nursery for North Korean workers, mostly women in their 20s and 30s. But it rejects the wage and rent demands as excessive and unrealistic.
Representatives of the 105 South Korean firms at Kaesong say many of them are already close to bankruptcy because of falling orders amid icy cross-border relations.
So far, 89 of the firms have incurred combined cumulative losses of 39.7 billion won (US$31 million), they said last week.
Cross-border relations have been hostile for the past year, since Seoul's new conservative government rolled back a "sunshine" aid and engagement policy with Pyongyang.
The North has intermittently restricted access to Kaesong and expelled some South Korean staff.
- AFP/yb
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