SEOUL - North and South Korea resumed talks Thursday on the future of their last major remaining joint venture, but hopes of progress were low amid tensions and Pyongyang's detention of a manager from the South.

The talks started at 10.40 am (0140 GMT) at the Seoul-funded industrial estate in Kaesong City just north of the border, the South's Unification Ministry said.

"We will do our best to return home with good results," chief Seoul delegate Kim Young-Tak said before crossing the heavily fortified frontier.

"We expect to hold in-depth talks on the detention issue and problems facing Kaesong."

Government officials from the two sides met in April for the first time in more than a year. But the talks broke down after 22 minutes, with the North demanding pay rises for its workers and refusing to discuss the detainee.

Workers are currently paid around US$75 a month including insurance. The money goes to the North's state agencies, which return a portion to workers.

Last month Pyongyang announced it had scrapped wage and rent agreements at the estate. It told South Korean firms to pack up and leave if they cannot accept pay rises and other new terms.

The estate opened in December 2004 as a symbol of reconciliation but has often been buffeted by political disputes.

Communist North Korea, which is bitterly at odds with South Korea's conservative government, has in the past expelled South Korean managers from Kaesong and restricted access to the estate.

Since March 30 it has been detaining a manager accused of criticising its political system and of trying to persuade a female worker to defect.

On Tuesday a clothing company announced it would become the first firm to quit the estate, largely because of the detention issue.

At Thursday's talks Seoul will again press North Korea about the fate of its citizen, unification ministry officials said. North Korea has refused to allow access to him, saying only that an investigation is under way.

"Chances of negotiation are low," unification ministry spokesman Chun Hae-Sung said before the talks began.

Kaesong is the last significant joint project between the communist North and capitalist South. More than 40,000 North Koreans work for 106 South Korean firms producing items such as garments, kitchenware and watches.

But companies face mounting uncertainty and a slump in business amid tensions over the North's nuclear and missile development.

Their output fell 6.6 percent from a year earlier to US$74.5 million in the first four months of this year.

Exports from the estate fell 56 percent year-on-year to US$7.15 million in January-April amid sour relations and the global economic downturn.

Apart from its rocket launch and nuclear test, the North has renounced the armistice that ended the Korean War in 1953.

South Korean and US troops have gone on heightened alert, saying the North may stage a border provocation on land or at sea.

Pyongyang is also holding two US journalists, who were detained on March 17 along the frontier with China 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."

Analysts believe Pyongyang will use them as bargaining chips in attempts to open direct negotiations with Washington on its nuclear programme and other issues.