North Korea rejects South's 'fraudulent' offer for talks over factory zone

SEOUL (AFP) - North Korea on Friday rejected South Korea's proposal for talks on the future of the Kaesong joint industrial zone, despite Seoul's warning of "significant measures" if Pyongyang declined.

South Korea on Thursday had given the North 24 hours to agree to formal negotiations on Kaesong, which has been shut down since North Korea pulled its 53,000 workers from the complex on April 9 amid soaring military tensions.

Dismissing what it called the South's "fraudulent" proposal, the North's National Defence Commission (NDC) issued a statement saying "it would be up to us to take any final and decisive grave measures".

Insisting that South Korea was responsible for the impasse at Kaesong, the NDC said resorting to "ultimatum-like announcements... would only advance (the South's) final destruction".

The South's warning had been seen as a thinly veiled threat of a permanent withdrawal from Kaesong, which lies 10 km inside North Korea and houses 123 South Korean firms.

The NDC statement challenged Seoul to go ahead with any pullout, saying it would take all "humanitarian measures" to ensure the safety of the 175 South Koreans who have remained in the complex since the shutdown.

Established in 2004, Kaesong is the last remaining example of inter-Korean cooperation and a crucial hard currency source for the impoverished North, through taxes and revenues, and from its cut of worker wages.

The project was born out of the "Sunshine Policy" of inter-Korean conciliation initiated in the late 1990s by then South Korean president Kim Dae-Jung.

It operates as a collaborative economic development zone that hosts South Korean companies attracted by its source of cheap, educated, skilled labour, with turnover in 2012 reported at US$469.5 million (S$581 million).

The Korean peninsula was already engulfed in a cycle of escalating tensions - triggered by the North's nuclear test in February - when Pyongyang decided on April 3 to block all South Korean access to Kaesong.

Pyongyang pulled out its entire workforce six days later and suspended operations, angered by the South's mention of a "military" contingency plan to protect its staff at the site.

The South Korean firms that usually operate at the complex have vowed to remain and fight to defend their investment whatever steps the government in Seoul tries to take.

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

Even given the soaring tensions, the North's decision to suspend operations at Kaesong was unexpected, as neither side has allowed previous crises to significantly affect the complex.

Permanent closure would wipe out the last remaining point of contact and cooperation between North and South, which remain technically at war after the 1950-53 Korean War was concluded with a ceasefire rather than a peace treaty.

Thursday's talks proposal from the South had coincided with the anniversary of the founding of the North Korean People's Army, marked by a military parade watched over by leader Kim Jong-Un.

Speeches made during the parade maintained the bellicose rhetoric - largely aimed at the United States and South Korea - that has been pumped out by Pyongyang for the past month.

"The flying corps... once given a sortie order, will load nuclear bombs, instead of fuel for return, and storm enemy strongholds to blow them up," Air and Anti-air Force Commander Ri Pyong-Chol was quoted as saying by state media.