SEOUL - NORTH and South Korea failed to reach agreement in talks on Friday on the fate of their joint industrial estate, Yonhap news agency reported.

Seoul's unification ministry confirmed the talks had ended but gave no details of the outcome. It said the next meeting would be held on July 2.

The Kaesong estate just north of the heavily-fortified border is the last remaining reconciliation project between the communist North and capitalist South.

Its future has become increasingly uncertain as North-South relations have worsened and the North's nuclear standoff with the outside world has 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.

The communist state last week stunned Seoul by demanding a wage rise for its 40,000 workers at Kaesong to US$300 (S$436) per month from around US$75 currently. It also demanded an increase in rent for the Seoul-funded estate to US$500 million, compared with the current US$16 million for a 50-year contract.

Mr 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.

Representatives of the 106 South Korean firms at Kaesong, and President Lee Myung Bak, have rejected the financial demands as excessive. His strong comments spurred speculation that Seoul may have shifted from its stance of trying to keep the venture going under any circumstances.

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.

The impoverished communist North received US$26 million 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. -- AFP