'The North is now making excessive demands concerning the Kaesong industrial zone. We will not accept them,' Mr Lee said in Washington.

'If Kaesong shuts down, 40,000 North Koreans would lose jobs. This is why the North must stop making excessive demands for its own interest.' The 106 South Korean firms at the estate have also refused to accept the demand.

They complained many of them were teetering on the brink of bankruptcy, with orders plunging amid international tensions over the North's April rocket launch and its second nuclear test last month.

The North has intermittently restricted access to Kaesong and expelled some South Korean staff.