March 18, 2015 / 4:33 AM / in 2 years

South Korea business officials visit factory park to protest North's wage rises

A general view of the inter-Korean Kaesong Industrial Complex in this picture taken from Paju, in this September 25, 2013 file photo.Lee Jae-Won/Files

PAJU, South Korea (Reuters) - A group of South Korean businessmen on Wednesday visited an industrial park Seoul runs jointly with Pyongyang to protest North Korea's decision to increase wages paid to workers there, the latest in a series of spats over the zone.

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

The complex has operated for a decade but there have been persistent questions about its viability given the political tension between the two Koreas, which remain technically at war.

South Korea currently has 124 companies operating in the zone, most of them small- and medium-sized firms, employing 53,000 relatively cheap North Korean workers.

The North Korean agency that supervises the complex has demanded an increase of about $3.65 in the minimum monthly wage for its workers, to $74 a month.

South Korea has rejected the demand, saying the unilateral increase violated agreements. North Korea has said it has the sovereign right to raise wages at Kaesong.

Chung Ki-sup, the leader of a group of South Korean companies that operate in the zone, said he believed the stalemate over Kaesong was linked to Seoul's refusal to ban activist groups from launching into North Korea balloons carrying leaflets critical of the North Korean government. The balloons infuriate Pyongyang.

Chung told reporters before the visit: "The unilateral change of labor rules is a problem."

He said after the visit that North Korean officials told his delegation that wage increases were needed because of inflation faced by the workers and the complex, but they agreed to meet again for further talks.

Another business official said the North's officials did not respond to the request to resume government dialogue.

Kaesong is the last remaining symbol of economic cooperation between the rival states.

North Korea shut down the complex for five months in 2013, during a period of diplomatic tension, and dialogue between the two sides on its operations have been patchy for years.

In September, the North introduced a regulation allowing it to detain South Koreans if their companies failed to live up to their contracts, if seizing property did not cover losses.

A South Korean business representative said the rule could hurt investment.

The wage increase and lack of dialogue about it are likely to compound such doubts.

Editing by Jack Kim, Robert Birsel and Jeremy Laurence

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