SEOUL: North Korea, whose relations with South Korea have turned increasingly bitter, said on Monday it had agreed to reopen its border with its neighbour and allow tourism and family reunions to resume.

But in a sign that tensions on the peninsula still run high, North Korea's KCNA news agency immediately followed the report with one that the entire country was being put on alert over joint military exercises by South Korea and the United States.

The agreement to ease restrictions on the border follows a meeting between the reclusive state's leader Kim Jong-il and the head of the South Korean Hyundai Group who had gone to Pyongyang to seek the release of a detained worker.

The visit followed hot on the heels of one earlier in the month by fornmer U.S. President Bill Clinton to win the release of two jailed U.S. journalists.

KCNA said Kim on Friday "granted a long audience to and had a cordial talk with Hyon Jong Un, chairperson of the Hyundai Group, and her party on a visit to Pyongyang, and complied with all her requests."

The giant Hyundai Group heads up tourism to the North as well as a joint factory just across the border which is an important source of income for the impoverished state's leadership.

Tourism has ground to a halt and the industrial park itself looked under threat as relations between the two, technically at war for more than half a century, worsened after South Korea's conservative President Lee Myung-bak took office 18 months ago ending a free flow of aid unless his neighbour gave up its nuclear weapons programme.

Under the agreement, land passage across their heavily armed border, tightly rerstricted at the end of last year, will be resumed and the scenic Mt Kumgang resort reopened.

North Korea will also allow the start again of the emotionally charged reunion of families separated by the 1950-53 Korean War in October.

There was no word on whether Hyundai had agreed, as part of the latest deal, to recent demands by North Korea for a large increase in wages for workers in the Kaesong industrial park.LINK