The main reason for the increase was the expansion of a business park in the North Korean border city of Kaesong.

There, South Korean companies tap cheap North Korean land and labour to produce goods.

The South says the factory is a model for economic integration in the event of unification.

South Korea fears instability caused by its impoverished communist neighbour. However, it suspended food aid to the North after Pyongyang defied international warnings and test-fired seven missiles in July 2006.

Seoul s
aid it would abide by the UN sanctions, which are aimed at halting the North's weapons trade and imports of luxury goods for its leaders. The sanctions were imposed on Pyongyang after it nuclear test on October 9.

However, while trade is up, tourism is down.

Fewer South Koreans visited the Mount Kumgang mountain resort in North Korea in 2006, which is run by an affiliate of the South's Hyundai Group.

Tourist visits to the resort were down by 21.4 per cent from the year before. 

South Korean officials said that fewer people wanted to visit the resort due to political tensions on the peninsula.