South Korea's military was watching Tuesday for any North Korean missile tests after the communist state banned shipping from several more coastal zones in its territory.

Pyongyang's move follows a three-day artillery barrage by the North last week that ratcheted up tensions on the Korean peninsula.

South Korea's Joint Chiefs of Staff confirmed a media report that the North had declared five new "no sail" zones effective from last Sunday to 8:00 pm (1100 GMT) on Tuesday.

Last week the North banned shipping from two zones along its disputed west coast sea border with South Korea, which was the scene of bloody naval battles in 1999 and 2002.

A day later it launched a three-day artillery barrage in which 370 shells landed near the border, triggering a South Korean protest.

"We are closely monitoring North Korea to see if it is conducting short-range missile tests or further artillery fire (in the new zones)," a Joint Chiefs spokesman told AFP.

"There has been no unusual movement yet in the North."

The new zones include western waters off Kyodong island and off Chulsan and Sunchon counties in North Pyongan province, and eastern waters off Kumya county in South Hamkyong province.

Military officials confirmed that the North has tested short-range missiles off Chulsan, Sunchon and Kumya in the past, but did not exclude the possibility of artillery fire there.

Despite the military tensions, the two sides went ahead with talks Monday about ways to upgrade their joint industrial estate at Kaseong, just north of the heavily fortified land border.

The South's team used the opportunity to protest at the shelling but the North described its artillery fire as part of a regular winter exercise, according to Seoul officials.

Monday's talks held at the industrial estate ended without agreement.

But the two sides agreed that during future military talks they would discuss frontier restrictions which impede business at Kaesong, Seoul's Unification Ministry said.

The talks were the second this year about ways to develop Kaesong, where 42,000 North Koreans work at 110 South Korea-funded plants.

The sanctions-hit North demanded negotiations on pay rises, while the South said talks should first focus on easier cross-border access to Kaesong and on housing for Northern workers there.

"Pay is directly related to productivity, which can be improved only if infrastructure and facilities are improved," Seoul's chief delegate Kim Young-Tak told reporters.

Kim said border restrictions would be discussed at military talks which the North has proposed. South Korea has yet to agree a date for that meeting.

earlier related report
S.Korea says it won't reward N.Korea for summit
Seoul (AFP) Feb 2, 2010 - South Korea's president said Tuesday he would not reward North Korea for agreeing to hold a fence-mending summit, as media reported secret talks aimed at setting up a meeting this summer.

"The leaders of South and North Korea should meet under the principles that there will be no price for a summit," President Lee Myung-Bak told a cabinet meeting.

Lee last week told the BBC a summit could take place this year. He reiterated Tuesday he is willing to meet the North's leader Kim Jong-Il at any time but "only under firm principles", according to his spokesman.

Chosun Ilbo newspaper, in the latest of a spate of media reports, said a summit could be held in June or August and the South may resume desperately needed fertiliser shipments to its neighbour beforehand.

Speculation about a summit, which would be the third, following leaders' meetings in 2000 and 2007, has intensified despite military tensions.

Last week the North fired around 370 shells over three days near its disputed maritime frontier with South Korea after declaring "no sail" zones.

Seoul's military was watching Tuesday for possible short-range missile tests after the North banned shipping from several more coastal zones elsewhere.

Several analysts believe the North is raising tensions to support its claim that a formal pact is necessary to end the 1950-53 war, which finished only in an armistice.

The North says the United States must agree to hold talks about a peace pact before it returns to six-party nuclear disarmament negotiations. It quit the forum last April, a month before staging a second nuclear test.

It also demands that United Nations sanctions be lifted before it comes back.

"We and the United States still remain technically at war. Nobody can guarantee that there will be no artillery fired in a war on the Korean peninsula, where (only) the armistice continues," said the communist party newspaper Rodong Sinmun on Tuesday.

The North, with its latest demands, "has, again, put a great stumbling block in its path towards denuclearisation", South Korea's Unification Minister Hyun In-Taek said.

"By making such claims that defy the expectations of the international community, it seems to be stepping further away from the denuclearisation talks," Hyun, the chief policymaker on the North, said in a speech.

"As North Korea continues to remain unclear about whether it will return to the six-party talks, we cannot stop raising a fundamental question on its commitment to denuclearise itself."

The talks group the two Koreas, China, Russia, the United States and Japan.

The minister also criticised the North's "repeated provocations" at sea but said North-South relations were nevertheless slowly getting back on track.

But on the nuclear issue "we are still stuck in a deep, dark tunnel", he said.

Despite the recent sabre-rattling, the sanctions-hit North is pushing to upgrade or restart business projects with its vastly wealthier capitalist neighbour.

The two sides held talks Monday about ways to boost their joint industrial estate at Kaseong, just north of the heavily fortified border, but failed to agree.

The North demanded negotiations on pay rises at Kaesong, where 42,000 of its people work at 110 South Korea-funded plants -- earning millions of dollars a year in hard currency for Pyongyang.

The South says talks should first focus on easier cross-border access to Kaesong and on housing for Northern workers there.