2 Koreas reach agreement in Kaesong wage row

South Korea said Tuesday it had reached agreement with Pyongyang on a wage hike for North Korean workers at their Kaesong joint economic zone, ending a six-month dispute.

The breakthrough came despite inter-Korean tensions going through one of their sporadic surges after the South accused North Korea of engineering mine blasts that maimed members of a military border patrol.

The five-percent hike will increase the minimum workers' wage in Kaesong from $70.35 a month to $73.87, a spokesman for Seoul's unification ministry said.

The agreement -- reached late Monday -- followed months of often testy negotiations prompted by Pyongyang's unilateral announcement in February that a 5.18-percent pay rise would be implemented.

The North's proposal exceeded a previously agreed five-percent annual wage rise cap and Seoul responded by insisting that any such change had to be a joint decision.

On Monday, both sides agreed to discuss the remaining 0.18-percent raise later, the ministry said.   

The Kaesong industrial estate, which lies just 10 kilometres (six miles) over the border in the North, hosts about 120 South Korean firms employing some 53,000 North Korean workers.

Kaesong is a key earner for the cash-strapped North. The hard currency wages are kept by the state, which passes on a fraction -- in local currency -- to the workers.

The South Korean companies get cheap labour as well as preferential loans and tax breaks from the government.

Kaesong opened in 2004 and has generally managed to ride out repeated inter-Korea crises, even when every other avenue of cooperation was closed off.

The glaring exception came in 2013, when Pyongyang effectively shut down the zone for five months by withdrawing its workers.

Cross border tensions are currently running high following the landmine incident earlier this month, which has resulted in both sides resuming -- after a decade-long break -- a cross-border propaganda shouting match using banks of powerful speakers.

Pyongyang has also upped its military threat rhetoric in protest at the launch this week of an annual South Korea-US military drill that the North sees as a rehearsal for invasion.