By Jack Kim

SEOUL, S KOREA - North and South Korean officials failed on Thursday to resolve a dispute over fees paid at a joint factory park in the communist state that is now a key source of cash for Pyongyang, hit by U.N. sanctions for its nuclear test.

The talks came as North Korea looks ready to launch medium or short range missiles from its east coast within days, a South Korean newspaper reported, which could further stoke tensions already high due to the North's May 25 nuclear test.

Washington said this week it had tightened its crackdown on firms linked to the North's lucrative proliferation of missiles, a major source of cash for the destitute state, and has sent the U.S. point man for sanctions to Asia for discussions.

China said it was sending its envoy to six-country talks aimed at ending the North's atomic ambitions to South Korea, Japan, Russia and the United States from Thursday. North Korea, the final party in the talks, is not on the itinerary.

"China has consistently advocated dialogue and consultation, and achieving denuclearisation of the Korean peninsula through the six-party talks process," Foreign Ministry spokesman Qin Gang told a news briefing.

In talks between the two Koreas, a Unification Ministry spokesman said North Korea repeated its demand for a sharp increase in wages and lease fees at Kaesong park, where South Korean companies use cheap North Korean labor and land to make goods.

About 100 South Korean companies pay US$70 a month per person to employ about 40,000 North Koreans.

Analysts said North Korea was trying to squeeze more money out of the South Korean companies in Kaesong as U.N. sanctions imposed for its missile and nuclear tests begin to grip the state that produces few goods other than arms it can export.

The North said in May it was cancelling all wage, rent and tax agreements for the park, once hailed as a model of future economic cooperation between the rival states technically still at war who share one of the world most militarized borders.

The North refused to discuss the release of a South Korean worker held there for more than three months supposedly for insulting the North's political system.

MISSILES MOVES

The JoongAng Ilbo daily quoted an intelligence source as saying the North was likely to fire medium or short range missiles from its east coast in early July that could include Scuds with a range of about 340 km (210 miles) or Rodong missiles with a range of up to 1,000 km (620 miles).

Japan's coast guard has said it had monitored no-sail warnings by the North for 10 nautical areas around the Korean peninsula for military firing exercises.

On Tuesday, the United States said it was cracking down on companies involved in North Korea's suspected missile proliferation and in the purchase of equipment that could be used in a nuclear weapons program.

Philip Goldberg, the U.S. envoy who coordinates sanctions against the North, went to China to enlist Beijing's help in getting tough with North Korea. China is the North's biggest benefactor whose cooperation could determine the success of any sanctions regime, analysts said.

He will be in Malaysia on Sunday before heading back to Washington on Monday. It was not immediately clear why he was visiting Malaysia.

South Korean Foreign Minister Yu Myung-hwan said he was seeking a meeting of the foreign ministers of the six countries including the North on the sidelines of a regional security forum on July 23 in Thailand.

Officials said the North's military grandstanding is likely related to moves by its leadership to begin readying leader Kim Jong-il's youngest son as a future heir by consolidating the 67-year-old leader's power base. --REUTERS