North Korea has restored facilities for missile engine testing destroyed by an explosion in December 2002, the JoongAng newspaper said, citing South Korean diplomatic and defense sources.

The 6,000-kilometer (3,600-mile) range would bring Hawaii, Alaska and the western fringes of the United States within the missile's scope, it said.

The United States has accused North Korea of being a leading global proliferator of weapons of mass destruction. But the cash-strapped country has refused to stop missile exports, a major source of hard currency earnings.

The United States and South Korea stepped up surveillance following intelligence reports that North Korea resumed the development of Taepodong-2 missiles, the newspaper said.

Pyongyang stunned the world in August 1998 by test-launching over Japan a Taepodong-1 missile with a range of up to 2,000 kilometers, claiming it was a satellite launch.

A 30-meter (33-foot) launching pad was restored late last year in the Musudan missile complex in North Hamgyong province, JoongAng said.

The Taepodong-2 missiles use Chinese liquid fuel engines as a first stage rocket and a Rodong missile as a second stage, it said.

"We have confirmed that they have moved the crane that would hoist the oxidizer -- the liquid fuel of the missile -- and the rocket," an unnamed official was quoted as saying.

North Korea's resumption of missile development aims to increase its negotiating leverage with the United States, he said.

US and South Korean intelligence measure the flame of North Korean rockets during engine combustion testing to determine the capability and range, the newspaper said.

Seoul officials refused to confirm the report.

"As information on missiles is intelligence, I am not in a position to confirm if it is true or not. But I have learned North Korea has yet to deploy Taepodong-1 missiles it has developed," Foreign Minister Ban Ki-Moon said.

North Korea has already deployed short-range Scuds and Rodongs with a range of 1,300 kilometers, while actively developing longer-range missiles. US intelligence reports say North Korea has developed ballistic missiles with a range of up to 4,000 kilometers.

South Korea's defense ministry estimates North Korea has about 600 Scuds and and 100 Rodong missiles.

US State Department spokesman Richard Boucher urged North Korea to stop developing arms and use resources for its impoverished people.

"North Korea has been a problem in terms of proliferation...We don't think it's right for North Korea to become a source of proliferation and, therefore, a danger to the rest of the world," he said at a press briefing Wednesday.

But North Korea's number two, Kim Yong-Nam, insisted that Pyongyang should be "entitled to sell missiles to earn foreign exchange."

Kim, however, ruled out exports of nuclear technology or material, the London-based Financial Times said Tuesday, adding his remarks were made in an interview with Selig Harrison, a US expert on North Korea.

Pyongyang sold 60 million dollars' worth of missiles and parts to Iraq, Iran, Syria and Yemen in 2002, according to South Korean defense data.

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