Trade and business ties between North and South Korea have experienced little fallout from the rivals' military clash in June, their worst in three years.

South Korea had one of its frigates sunk, and at least four sailors killed, with the North losing an unknown number of men in the shootout between the two countries' navies over a disputed sea border.

The clash soured opinion in South Korea and prompted Seoul to freeze plans to send experts to Pyongyang to help set up a mobile phone network in the North's capital.

But businessmen and officials say trade between the two has hardly been affected.

"Our businessmen visited North Korea even after the clash," said Park Kyung-suk, a South Korean Unification Ministry official who monitors inter-Korean economic relations.

"Newcomers seem to wait and see if the situation gets better, but the old hands are still visiting North Korea," he said.

After falling slightly last year, trade between the two Koreas rose 8.9 per cent to $215 million in the first half of 2002 on the year, South Korean government figures show.

This is just half a day's exports for powerhouse South Korea, but represents a significant flow of hard currency for North Korea - a communist country where drought and economic mismanagement mean many of its 22 million people go hungry.

Dubbed by Washington as part of an international "axis of evil", North Korea has few friends and a steady trickle of residents flee poverty and politics across its border to China.

South Korea's economy is about 27 times as big as the North's, which grew 3.7 per cent in 2001 on massive aid inflows to address the food shortage.

The clash over the maritime border, set at the end of the 1950-53 Korean War but no longer observed by the North, had no lasting effect on container traffic between the two Koreas, the South's unification ministry said.

Nineteen South Korean firms began trade with North Korea in June, raising to 214 the number of companies operating business projects in North Korea, it said.

Among the firms are the home appliance giant LG Group, the family-run Hanwha Group conglomerate and Pyeongwha Motors Corp - a carmaking joint venture between South Korea's Unification Church and the North Korean government.

LG International, a trading arm of LG Group that has made television tubes and textiles in North Korea for more than a decade, said it was business as usual 20 days after the clash.

"We have been paying close attention to this situation after the clash, but so far it has not harmed our business," said an LG International official.

With no direct air links between the two Koreas, businessmen fly via China - one of North Korea's few allies.

Road and rail links remain blocked by a heavily fortified frontier where thousands of North Korean troops face South Korean and US military units.

Hyundai Asan, the biggest South Korean company doing business in North Korea, runs tours to North Korea's Mount Kumgang, a mountain legendary for its beauty.

The tours are controversial in South Korea because they survive only through large government subsidies that effectively transfer taxpayer cash to North Korea.

The South Korean government defends the Kumgang project as a pillar of President Kim Dae-jung's "Sunshine Policy" of using aid and exchanges to ease tensions with the North.

"Our Kumgang project is often called a public opinion project or a press project," said Hyundai Asan official Hong Joo-hyun.

"If public opinion does not go too far against the North, the travel programme will not be influenced," Hong told Reuters.

Hong said ferry trips up the eastern coast of the Korean peninsula were fully booked until September and there were no cancellations as a result of the clash.

"The tour did not stop after the 1999 sea battle either," she said, referring to a previous clash in the same Yellow Sea waters in which dozens of North Korean sailors were killed.

Even in the best of times, North Korea's opaque and unwieldy decision-making process and its politics make business difficult, said Hanwha Group official Kang Ki-soo. Hanwha has a plastics plant and condominium project in the North.

"Our project to build condominiums in the North did not work well even before the naval clash because the North had problems," said Kang.

Problems included difficulties shipping building materials and a lack of finance systems in the communist state.

"Business is just business, but it seems that there is always political interference behind business deals with them. This is the hardest thing to cope with in the North."