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DPRK says industrial contracts are invalid

THE Democratic People's Republic of Korea declared all contracts invalid on a lucrative joint industrial complex with the Republic of Korea, the latest move to raise tensions on the Korean peninsula.

The announcement called into question the fate of a factory park once heralded as a promising example of collaboration between the countries.

More than 100 South Korean companies employ some 38,000 North Koreans in the northern border town of Kaesong to make everything from electronics and watches to shoes and utensils.

North Korea said it will draw up its own regulations on wages, rent and taxes for Kaesong.

The declaration, carried by the country's official Korean Central News Agency, indicates it will become more expensive for southern companies to run factories in the complex.

South Korea must accept the new regulations unconditionally or leave Kaesong, the statement said.

The South denounced the announcement. "This is a measure that fundamentally threatens the stability of the Kaesong complex, and it is not acceptable at all," Unification Ministry spokesman Kim Ho-nyeon said. "It is irresponsible for the North to say that (companies) should leave unless they unconditionally accept its unilateral measure."

North Korea claims the South is benefiting from "preferential treatment" at Kaesong - including free rent and cheap labor. The country scrapped those benefits yesterday, blaming Seoul's "confrontational" stance.

"We cannot provide favors forever to those seeking confrontation," the statement said.

North Korean workers in the complex are paid an average of US$70 a month, according to South Korean officials.

Raising wages and fees would reduce the appeal of operating factories in North Korea, where border restrictions and arbitrary border closures have meant losses for South Korean firms trying to survive the financial crisis.


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