The delegates assessed their joint industrial complexes in China and Vietnam in order to gain ideas for streamlining the Kaesong projects, the unification ministry said.

 

Chun Hae-sung, the ministry's spokesman, described the talks as taking place "in a serious and practical atmosphere".

 

Conciliatory moves

The two sides agreed last week on the meeting - the latest in a series of  what appears to be conciliatory moves by the North - to offset months of tension.

But the possibility of talks was in doubt on Friday when the North announced a threat against South Korea.

Pyongyang said it would launch a "sacred nationwide retaliatory battle" or "holy war" and vowed to put an end to all talks with Seoul unless it apologised for an alleged contingency plan to "handle" any North Korean government unrest.

In a statement, North Korea's foreign ministry accused the South of interfering and challenging its independence.

"It is nonsensical for the (North) to sit at the negotiating table with those countries that violate its sovereignty," it said.

Economic Ties

Last year, Pyongyang quit the six-party talks - with China, Japan, Russia, South Korea and the US - in response to international condemnation of an illegal long-range rocket launch.

And on Monday, North Korea issued a statement renewing the country's demand that international sanctions be lifted before it will return to negotiations regarding its nuclear weapons programmes.

But the city of Kaesong is the most prominent example of inter-Korean co-operation as it combines the strengths of South Korean capital and technology with the advantages of cheaper North Korean labour.

Economic ties between the neighbours continue to show strength, with 110 South Korean factories employing up to 42,000 North Korean workers.