Impoverished North Korea said it was reopening the troubled Kaesong industrial zone jointly run with the wealthy South just minutes after Seoul signalled its willingness to let it close for good.
The North's Committee for the Peaceful Reunification of Korea, which handles Pyongyang's ties with Seoul, yesterday proposed talks aimed at normalising the project and said the safety of South Koreans visiting the factory park would be guaranteed.
The committee was "prompted by its desire to bring about a new phase of reconciliation, cooperation, peace, reunification and prosperity by normalising operation in the Kaesong zone", it said in unusually conciliatory remarks.
The comments were carried by the North's official KCNA news agency about 90 minutes after South Korea announced steps to pay US$250 million compensation to its firms that operate factories in Kaesong for losses - a step widely seen as a move towards shutting down the rivals' last symbol of co-operation.
The decision to pay 109 South Korean small and medium-sized manufacturers from a government insurance fund came after the North went for 10 days without responding to what Seoul said was its "final offer" for talks aimed at reopening the project.
Representatives of the South Korean firms with plants in the complex had earlier held a rally near the border, urging both Seoul and Pyongyang to find a way out of the impasse.
The South welcomed the North's change of heart and accepted the proposal for talks to be held on August 14 in Kaesong.
"We hope that a rational solution can be found ... for the normalisation of the Kaesong industrial zone," South Korean Unification Ministry spokesman Kim Hyung-suk said.
It was not immediately clear if the South really wanted to end the project, which would have dealt a huge blow to relations, but this was the toughest it had talked since the Kaesong crisis began.
North Korea shut down the factories, a few kilometres from the border, in April, pulling out all 53,000 of its workers and banning South Korean firms from crossing the border with supplies at the height of nuclear tensions.
The Kaesong project generated roughly US$90 million annually in wages paid to the North's state agency that manages the zone. The companies had no oversight on how much was paid to workers, most of them women on assembly lines.
North Korea threatened nuclear strikes against the South and the United States after the UN tightened sanctions against it for conducting its third nuclear test in February.
The North suddenly agreed to dialogue in June that would have led to the resumption of high-level talks for the first time in six years. However, plans for that meeting collapsed over seemingly minor protocol issues.
Yesterday's statement from North Korea accepted no direct responsibility for the suspension of operations at Kaesong, and stressed that preventing any recurrence was the joint duty of "North and South".
"It still suggests that both Koreas are responsible," said IBK Economic Research Institute analyst Cho Bong-hyun, who felt it fell short of providing the safeguards Seoul had been asking for.
"How to narrow down differences in this matter will be a key issue in the talks. I see an uphill battle ahead," Cho said.
Additional reportingby Agence France-Presse