North Korea has rejected South Korea's offer to open formal talks on restarting operations at the Kaesong joint industrial zone, Yonhap news agency has said.

Yonhap news agency confirmed the rejection on Friday, citing the North Korea's National Defence Commission.

Seoul on Thursday had given the North 24 hours to agree to formal negotiations on the Kaesong complex, warning of unspecified "significant measures" if Pyongyang declined.

"If the South Korean puppet force continues to aggravate the situation, it would be up to us to take any final and decisive grave measures," Yonhap cited the defence commission statement as saying.

North Korea blocked access to the Kaesong site and pulled out its 53,000 workers as military tensions soared in the region this month.

On Thursday, South Korea would take "grave action" if the North rejected the proposed official talks.

Cooperation symbol

He did not elaborate, but South Korea's proposal was seen as a thinly veiled threat of a permanent withdrawal from Kaesong.

The industrial zone, about 10km inside the North, was seen as a rare example of cooperation across the heavily militarised border.

But Pyongyang suspended operations on April 9 because it was angered by the South's "military" contingency plan to protect its staff at the site.

The Korean peninsula was already engulfed in a cycle of escalating tensions, triggered by the North's nuclear test in February when Pyongyang blocked all South Korean access to Kaesong.

Tensions are still high amid reports that Pyongyang has moved more missile launchers to its east coast.

The latest developments come as two months of joint military exercises between the US and South Korea are starting to wrap up.

Fight to stay

Kaesong was established in 2004 as a rare symbol of inter-Korean co-operation.

There are 176 South Korean staff still in Kaesong, compared with the normal number of about 850.

The South Korean firms that usually operate at the complex have vowed to remain and fight to defend their investment whatever Seoul's decision.

"We've decided to protect Kaesong Industrial Complex no matter what difficulties we may face," said a spokesman for the South Korean companies, Ok Sung-Seok.

The North's decision to suspend operations was unexpected.

Neither of the Koreas has allowed previous crises to significantly affect the complex, which is a valued source of hard currency for the impoverished North and seen as a bellwether of stability on the Korean peninsula.