The industrial park as well as the tourism projects have been important sources of foreign currency for the North Korean government.

Meanwhile, North Korea put its troops on alert Monday as an annual joint South Korean-US war game commenced and accused its neighbour and the United States of planning an attack.

North Korea would react to any provocation with a 'merciless and prompt annihilating strike at the aggressors with all offensive and defensive means, including nuclear deterrent', state media quoted the high command of the Korean People's Army as saying.

South Korean's defence ministry played down the statement, saying it was part of Pyongyang's usual posturing in reaction to the annual war games. A ministry spokesman said South Korea could not detect any unusual army movements in the North.

The military exercises, which were scheduled to end Aug 27, involve 10,000 US troops and 56,000 South Korean soldiers and focus on computer simulations.

Relations between North and South Korea have deteriorated since a conservative government took power in Seoul in February 2008 and took a harder line toward Pyongyang.

South Korea has repeatedly called for its neighbour to reopen dialogue, but North Korea has rejected the overtures.

Instead, North Korea has repeatedly threatened the South with a military attack and caused tensions in the region to rise after conducting a nuclear test in May and a series of missile tests before and after the atomic blast.