South Korea says North drops demand for wage hike at joint Kaesong factory park

SEOUL (REUTERS) - North Korea has dropped a demand for a wage hike for its workers at the Kaesong factory park run jointly with Seoul, South Korea said on Friday, paving the way for talks to resolve the latest dispute over the zone.

An official of the South's Unification Ministry said officials from the two countries and executives from South Korean companies operating in the industrial complex had agreed for the firms to pay back wages under the current terms.

"Things will move on by current rules, and South and North Korea will meet again to talk about the minimum wage issue," the official added.

The agreement comes after Pyongyang withdrew its approval at the last minute for UN Secretary-General Ban Ki Moon to go to the zone this week, without giving any explanation.

North Korea had demanded an increase of about US$3.65 (S$4.90) in the minimum monthly wage for its workers, which slightly exceeded the annual rate of 5 per cent provided by the current agreement, to US$74 a month.

South Korea has rejected the demand, saying the unilateral increase violated agreements and the spirit of conducting business through discussion.

North Korea has said it had the sovereign right to raise wages at Kaesong, considered the last remaining vestige of the cooperation efforts spawned by the neighbours' first summit meeting 15 years ago.

South Korean businesses have held back wages for March and April, as the government advised them not to pay salaries to the North Korean workers until the issue was resolved.

The Kaesong industrial complex, located a few kilometres north of the heavily fortified border, has been a much-needed source of income for the impoverished North and a cheap source of workers for labour-intensive South Korean firms.

South Korea now has 124 mostly small and medium-sized companies operating in the zone, employing 53,000 North Korean workers, most of whom get paid more than the minimum wage, but are considered cheap by South Korea's labour standards.

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