SEOUL - A SOUTH Korean province on Tuesday proposed plans to turn a border area into a free tourism zone despite tension over North Korea's fatal shooting of a Seoul tourist.

Officials aim to build a tourism site stretching 220 kilometres from the South's northeastern port of Gangneung to the North's eastern port of Wonsan.

Both cities are in Gangwon Province, halved by the four-kilometre-wide demilitarised zone (DMZ) since the 1950-53 Korean War.

North Korean officials have responded favourably to the proposed zone at informal talks, Gangwon Province Governor Kim Jin Sun told reporters.

'They said the proposal should be considered as a long-term project', he said.

'The nuclear issue shows signs of making progress... When peace takes root, the DMZ will be turned from a space for blockage to a space for exchanges', Mr Kim said, citing progress at six-party nuclear disarmament talks.

Pyongyang has cut official ties with Seoul since South Korea's conservative president Lee Myung Bak took office in February and promised a firmer line on cross-border relations.

Relations chilled further after a North Korean soldier shot dead a housewife who strayed into a restricted military zone at the North's Mount Kumgang resort on July 11.

Seoul has suspended tours to the resort, which earn the impoverished communist state millions of dollars a year.

'Despite the shooting incident, inter-Korean relations will eventually return to a normal track', Mr Kim said.

The DMZ, a symbol of Cold War division, has a unique eco system with well-preserved wetlands and various wild lives, along with many historic ruins, he said.

The zone, which has been off-limits to civilians for decades and guarded by minefields and barbed wire, is seen by environmentalists as a haven for wildlife.

Mr Kim called for a second inter-Korean industrial complex in the border city of Chulwon in his province.

The two Koreas operate a special industrial estate in Kaesong just north of the border.

Mr Kim said his province would build a new coastline tourism road from the South eastern port of Samchuk to the North's Tongchun County, 60 kilometres off.

As part of its project to develop the free tourism zone, the province is already building a museum, a peace-themed town and a park.

It will sell souvenirs such as rusty barbed wire, a wild flower from the DMZ, commemorative coins, medals and postage stamps. -- AFP