The demands were made Thursday at a meeting already overshadowed by the North's nuclear test and a sharp rise in border tensions, after Pyongyang scrapped the armistice in force on the peninsula.

The UN Security Council was expected Friday to adopt tougher sanctions targeting North Korea's atomic and ballistic missile programmes in response to the May 25 test.

Fox News said US intelligence officials have warned President Barack Obama that the North would respond to the sanctions resolution with another nuclear test.

Analysts were unsure whether Pyongyang's real aim was to shut down the Kaesong estate just north of the border, or whether it is still open to negotiation.

It wants a rise in wages for its 40,000 workers to 300 dollars per month from around 75 dollars currently.

The North also demands an increase in rent for the Seoul-funded estate to 500 million dollars, compared to the current 16 million dollars for a 50-year contract.

Seoul's unification ministry said it would ponder its response following close consultations with the 106 South Korean firms and the estate's South Korean developers.

"Stability must be secured for the firms in Kaesong and their price-competitiveness must be maintained. Every new demand must be viewed within this context," said spokeswoman Lee Jong-Joo.

At Thursday's meeting Seoul again raised the case of a South Korean manager at Kaesong who has been detained by the North since March 30, but failed to gain access to him.

The man was held for allegedly criticising the North's political system and trying to persuade a female worker to defect.

The North is bitterly at odds with South Korea's conservative administration, which rolled back the "sunshine" engagement policy followed by previous liberal governments.

Pyongyang said there was no longer any reason to give Kaesong's firms "preferential measures" because the current Seoul government refuses to honour the 2000 summit declaration which led to the project.

The impoverished North received 26 million dollars from South Korean firms last year in wage payments.

But some analysts say it may be willing to forgo the cash because it fears the effects of exposing its workers to the South Korean lifestyle.

"By making a demand which the South finds hard to accept, Pyongyang seems to be moving to shut down Kaesong, holding the South Korean government responsible for the closure," Yang Moo-Jin of Seoul's University of North Korean Studies told AFP.

But Kim Yong-Hyun, of Dongguk University, said Pyongyang could not make the first move to shut down Kaesong because the project was initiated by its leader Kim Jong-Il.

"By setting new talks, the North is saying, 'We're doing all we can. It's your responsibility if things go bad'," he told Yonhap news agency.

The two sides agreed to meet again on June 19.

Factory owners, whose companies produce a variety of goods such as garments, kitchenware and watches, already face a decline in business amid the political uncertainties and the economic downturn.

But some believe there is space for bargaining.

"I believe there's room for negotiation," said Ok Sung-Seok, chief of clothing company Nine Mode.

The South's chief delegate to the talks said late Thursday that judging from the sums it is asking, North Korea may seem like it is telling South Korean firms to leave.

But Kim said his understanding was "that the North Koreans in the field want to develop the Kaesong industrial park and are willing to negotiate."

earlier related report
SKorea sends more troops to NKorea border
South Korea has sent hundreds more Marines to its tense border with North Korea, military officials said Friday as world powers agreed proposals to punish the communist state for its nuclear test.

US intelligence officials believe Pyongyang will respond to the UN Security Council resolution with a third atomic test, according to sources quoted by American TV networks.

More Marines were sent last week to two islands along the disputed Yellow Sea border, the scene of bloody naval battles in 1999 and 2002, a Marine Corps source told AFP.

He gave no figures but Yonhap news agency said more than 600 had been sent to Yeonpyeong and Baekryeong islands to reinforce the present garrisons.

The North followed up its second nuclear test on May 25 by launching short-range missiles, renouncing the armistice on the Korean peninsula and threatening possible attacks on its neighbour.

It is also pressuring South Korean firms at the Kaesong joint industrial estate north of the border -- the last reconciliation project between the two nations -- by demanding huge rent and wage increases.

Fox News said US intelligence officials have warned President Barack Obama that the North would respond to the UN resolution with another nuclear test. South Korea's defence ministry said this was a possibility.

The UN Security Council voted unanimously Friday to adopt tougher sanctions targeting North Korea's atomic and ballistic missile programmes.

All 15 members endorsed a resolution sponsored by Britain, France, Japan, South Korea and the United States.

The text, which does not authorise the use of force, calls on UN member states to slap expanded sanctions on North Korea in response to its May 25 underground nuclear test and subsequent missile firings.

These include tougher inspections of cargo suspected of containing banned items related to North Korea's nuclear and ballistic missile activities, a tighter arms embargo with the exception of light weapons and new financial restrictions.

South Korea Saturday praised the UN Security Council resolution, and called on Pyongyang to accept its "clear and decisive message," Yonhap said, quoting foreign ministry spokesman Moon Tae-young.

US ambassador to the UN Susan Rice has said the resolution will signal that North Korea "must pay a price, return without conditions to a process of negotiation and that the consequences they will face are significant."

In addition to its nuclear confrontation the North is bitterly at odds with South Korea's conservative administration, which rolled back the "sunshine" engagement policy followed by previous liberal governments.

On Thursday the North demanded that South Korean firms in Kaesong raise wages for its 40,000 workers to 300 dollars a month from around 75 dollars currently.

It also called for an increase in rent for the Seoul-funded estate to 500 million dollars, compared to the current 16 million dollars for a 50-year contract.

Shocked factory bosses on Friday rejected the demands, saying they already face "unbearable operational losses" due to the soured cross-border relations.

"The Kaesong industrial zone, which was born from the desire for national reconciliation and co-prosperity, now faces a critical moment because of political tensions," the 106 firms at the estate said in a joint statement.

Analysts said they were unsure whether Pyongyang's real aim is to shut down Kaesong or whether it is still open to negotiation.

The impoverished North received 26 million dollars from South Korean firms last year in wages, which are paid to state entities and not to the workforce.

Some analysts say it may be willing to forgo the cash because it fears the effects of exposing its workers to the South Korean lifestyle.

"By making a demand which the South finds hard to accept, Pyongyang seems to be moving to shut down Kaesong, holding the South Korean government responsible for the closure," Yang Moo-Jin of Seoul's University of North Korean Studies told AFP.

At Thursday's meeting Seoul again raised the case of a South Korean manager at Kaesong who has been detained by the North since March 30, but failed to gain access to him.

The man was held for allegedly criticising the North's political system and trying to persuade a female worker to defect.

Pyongyang is separately holding two US women journalists detained along its border on March 17 while researching a story.

They were sentenced Monday to 12 years of "reform through labour" for what state media called an illegal border crossing and an unspecified "grave crime."

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