Koreas reach agreement to reopen Kaesong industrial zone

North and South Korea reached an agreement yesterday to reopen the Kaesong joint industrial zone - closed by Pyongyang in April at the height of soaring military tensions.

A five-point agreement that came out of a seventh round of talks committed both sides to making "active efforts" to resume normal operations as soon as possible after inspecting shuttered plants. A joint panel will discuss compensation for economic losses suffered as a result of the complex's closure.

The agreement will help lower tensions ahead of the launch of joint South Korean-US military exercises on Monday which the North had warned could bring the divided peninsula "to the brink of war".

Established in 2004 as a rare symbol of inter-Korean co-operation, Kaesong was a key hard-currency earner for the North and the decision to shut it down took many observers by surprise. It was closed amid heightened tension following the North's third nuclear test in February.

The previous six rounds of talks had foundered on the South's insistence that North Korea provide a binding guarantee that it would not close the complex again.