Kaesong industrial complex to reopen as tensions ease between North and South Korea

Closure of border unit was a major blow to heavily indebted economy of North

The complex in North Korea's third-largest city, Kaesong, was the last remaining symbol of inter-Korean co-operation until Pyongyang pulled its 53,000 workers (EPA)

North and South Korea have agreed to reopen a jointly run industrial park the North shut down in April amid rising tensions, the latest sign of easing animosity between the rivals.

Seoul's unification ministry, which handles affairs between the two countries, said operations at the industrial park, located just a few miles inside North Korea, would resume some time after a trial run starting on Monday.

The Koreas also plan reunions this month of families divided by the Korean War, and last week restored a military communications channel at the border.

The agreement comes after a development last month when, after seven rounds of talks, one of which ended in a scuffle, the Koreas agreed they would work toward opening the factory park.

The complex in North Korea's third-largest city, Kaesong, was the last remaining symbol of inter-Korean co-operation until Pyongyang pulled its 53,000 workers.

The unification ministry said in a statement that South Korean companies operating at Kaesong would be exempt from paying taxes imposed for operations this year.

The two Koreas also plan to hold an international investors' information session at Kaesong in October in a bid to attract foreign companies to the park, the statement said. Chief SouthKorean delegate Kim Kiwoong said the two Koreas hope to begin providing internet and mobile phone connections to the park this year and would hold more talks on that.

North Korea's state media later confirmed work would restart at Kaesong.

While tensions are easing now, North Korea, citing a routine military drill between the US and South Korea, along with UN sanctions over its February nuclear test, unleashed an outburst of threatening rhetoric in March and April.

The industrial park combined South Korean initiative, capital and technology with cheap North Korean labour. It was also a rare source of hard currency for North Korea, though the impoverished country chafed at suggestions that it needed the money Kaesong generated.

North Korea is estimated to have received $80 million (£50 million) in workers' salaries last year, an average of $127 (£80) a month per person, paid in US currency, according to the unification ministry in Seoul.

The shutdown has also been hard on the South Korean entrepreneurs who invested up to 10 years and millions of pounds in Kaesong and were forced to wait, their assembly lines idle, while the governments negotiated. Many felt they had invested too much to abandon their factory investments or the cheap North Korean labour.

Kaesong hosted small and medium-sized, labour-intensive industries, often clothing and electronics companies. The number of South Korean companies swelled to more than 120. Last year, the factories produced goods worth $470 million (£300 million).

The decade-old industrial park had survived previous periods of tension, including attacks blamed on Pyongyang that killed 50 South Koreans in 2010, and the shutdown of other big co-operation projects. By the end of 2012, South Korean companies had produced $2 billion (£1.2 billion) of goods in the previous eight years.

AP