UPDATE 2-North Korea blinks minutes after South threatens closure of factory park
park@ (Adds South Korea comment, paragraphs 8-9)
SEOUL, Aug 7 (Reuters) - Impoverished North Korea said on Wednesday 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, 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 normalizing 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 compensate its firms that operate factories in Kaesong for losses - a step widely seen as a move towards shutting down the rivals' last symbol of cooperation.
Reclusive North Korea, for which Kaesong has been a rare source of hard currency, and the South, one of the richest countries in the world, are technically still at war as their 1950-53 civil conflict ended not in a treaty but in a mere truce.
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.
South Korea had said it would not wait forever.
The South welcomed the North's change of heart and accepted the proposal for talks to be held on Aug. 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 between the two foes, but this was the toughest it had talked since the Kaesong crisis began.
North Korea shut down the factories, a few miles from the two Koreas' heavily armed 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 between the two sides.
The Kaesong project generated roughly $90 million annually in wages paid directly to the North's state agency that manages the zone. The companies had no oversight on how much was paid to the workers, most of whom are women who work on assembly lines.
Earlier this year, North Korea threatened nuclear strikes against the South and the United States after the United Nations 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.
The reopening of Kaesong is seen as addressing the political interests of the democratic South and the economic interests of the North that is so poor it can't feed its people.
South Korean President Park Geun-hye has pledged to engage the North in dialogue and take steps to build confidence for better ties, but has also vowed not to give in to unreasonable demands or make concessions to achieve superficial progress.
(Editing by Nick Macfie)