North and South Korea Friday resumed talks on the fate of their last remaining reconciliation project, amid high tensions between Pyongyang and the outside world over its nuclear programme.
The future of the Kaesong joint industrial estate just north of the border has become increasingly uncertain as North-South relations worsened and the nuclear standoff intensified.
Pyongyang is demanding extra payments worth hundreds of millions of dollars for Seoul's use of the estate and refuses to grant access to a South Korean employee it detained at Kaesong.
Seoul officials were outwardly optimistic.
"The weather is good today, so wouldn't the talks go well?" unification ministry official Kim Young-Tak told Yonhap news agency before crossing the heavily fortified border at the head of a 14-member delegation.
The ministry said the talks at Kaesong started at 10:00 am (0100 GMT).
The communist state last week stunned Seoul by demanding a wage rise for its 40,000 workers at Kaesong to 300 dollars per month from around 75 dollars currently.
It also demanded an increase in rent for the Seoul-funded estate to 500 million dollars, compared with the current 16 million dollars for a 50-year contract.
Kim said the South will press for the release of the employee detained since March 30 for "slandering" the North's political system and allegedly trying to incite a local female worker to defect.
Unification Minister Hyun In-Taek acknowledged the venture is at a critical stage.
"One step you take and one stone you lay in today's talks will be crucial to inter-Korean relations. In that sense, I ask you to remain cool-headed during the talks," he told the delegation before its departure.
Representatives of the 106 South Korean firms at Kaesong, and President Lee Myung-Bak, have rejected what they describe as excessive financial demands.
"If Kaesong shuts down, 40,000 North Koreans would lose jobs," Lee told a press conference in Washington Tuesday. "This is why the North must stop making excessive demands, for its own interest."
Lee was speaking after a summit with US President Barack Obama, who described a nuclear-armed North Korea as a "grave threat."
The North has angrily rejected UN sanctions imposed for its May 25 nuclear test and has vowed to build more atomic bombs.
Cho Bong-Hyun, an analyst with IBK bank, told Yonhap Lee's message would draw a response from North Korea since its military is believed willing to see Kaesong shut down.
"North Korea has heard South Korea's response and it will come to the talks with a tougher position, with extra demands like tax charges," Cho said.
The impoverished communist North received 26 million dollars last year in wage payments. Yet some analysts say it may be willing to forgo the cash because it fears the effects of exposing its workers to the South Korean lifestyle.
Cross-border relations have been hostile for the past year after Lee's conservative government rolled back Seoul's previous "sunshine" aid and engagement policy with Pyongyang.
The North has intermittently restricted access to Kaesong and expelled some South Korean staff.
Share This Article With Planet Earth
