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Two Koreas fail to reach agreement

SEOUL, Jun 19 – North and South Korea have failed to reach agreement in talks on the fate of their joint industrial estate, Yonhap news agency has reported.

Friday\’s discussions had taken place amid high tensions between Pyongyang and the outside world over its nuclear programme.

Communist North Korea had been demanding extra payments worth hundreds of millions of dollars for Seoul\’s use of the estate and continues to refuse access to a South Korean employee it detained at Kaesong.

Seoul officials had earlier been 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 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 had 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 was pressing 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, rejected what they describe as excessive financial demands.

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"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.

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.

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