North Korea also agreed to participate in the upcoming Asian Games scheduled for Sept. 29-Oct. 14 in the South Korean southern port city of Pusan, said the statement issued at the end of working-level talks that began Friday at Mt. Kumgang.

''Both sides agreed that the North side would participate in the 14th Asian Games in Pusan and the South side would guarantee convenience (for the North Korean squad) and fully cooperate'' on their participation, the statement said.

The inter-Korean accord to resume a high-level dialogue, suspended since November, is widely expected to help put the stalled inter-Korean rapprochement back on track.

At the planned ministerial talks, the two sides will discuss matters of mutual concern, including the reconnection of a cross-border railway, measures to promote inter-Korean economic cooperation and resuming talks at the military level, the statement said.

Relations between the two Koreas, which had flourished in the wake of the historic inter-Korean summit in June 2000 in Pyongyang, have seriously deteriorated due to the June 29 naval clash that resulted in the deaths of soldiers on both sides.

In the deadly exchange of gunfire near the disputed sea border, four South Korean soldiers were killed, one is still listed as missing and 19 others were wounded. South Korea estimates that 13 North Korean soldiers died and 17 others were wounded in the most serious naval clash since a similar incident occurred in June 1999.

In a major turnaround, North Korea last week expressed regret over the battle and also proposed a dialogue with the South.

During the working-level talks, South Korea demanded that North Korea take ''satisfactory'' measures to prevent recurrence of a similar incident in the future, including a clear apology and the punishment of those found responsible for what the South said was ''armed provocation'' launched by the North.

Also agreed on at the just-concluded working-level contact was to hold Red Cross talks aimed at discussing arranging a fifth round of exchanges of separated families at Mt. Kumgang.

The two sides also agreed to fully cooperate with each other on the successful holding of private-level joint events to commemorate Korea's 1945 liberation from Japan's colonial rule on Aug. 15 in Seoul, and also a friendly soccer match between the two Koreas on Sept. 8 in Seoul.

The inter-Korean working session, held to lay the groundwork for the seventh ministerial talks, was the first governmental contact between the two countries since a South Korean presidential envoy visited Pyongyang in April for talks with North Korean leader Kim Jong Il.

North and South Korea have so far held six rounds of ministerial talks to discuss the implementation of agreements reached between their top leaders at the first-ever inter-Korean summit between South Korean President Kim Dae Jung and Kim.

Rhee Bong Jo, the Unification Ministry's assistant minister for unification policy, and Suh Young Kyo, a director of the ministry, represented South Korea in the working-level session, while Choi Sung Ik and Kim Man Kil from North Korea's Committee for the Peaceful Reunification of the Fatherland represented the North.

Twelve attendants and six journalists accompanied the South Korean delegation scheduled to return home later Sunday.