North Korea in recent weeks has been reaching out to South Korea, which once was a major aid donor, but also threatening its neighbour and U.S. military ally by firing artillery near its neighbour on the troubled peninsula.

Analysts said the North wants to underscore the threat it poses to North Asia, which is responsible for one-sixth of the global economy, in a ploy to increase its bargaining leverage.

The Koreas were set to begin talks on joint tourism projects in the North run by an affiliate of the South´s Hyundai group.

South Korean President Lee Myung-bak, who took office two years ago, ended unconditional handouts to the North and linked aid to progress his neighbour makes in reducing the military threat it poses to North Asia.