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Weapons of Mass Destruction (WMD)

North Korea cancels all contracts with South at joint factory

RIA Novosti

14:4115/05/2009 MOSCOW, May 15 (RIA Novosti) - North Korea announced on Friday the cancellation of all contracts with South Korean companies at the Kaesong industrial park to the north of the shared border, amid rising tensions.

The complex, which employs tens of thousands of North Koreans in light-industry goods manufacture, bringing much-needed revenue to the impoverished communist regime, is the only remaining joint project between the two Koreas.

"We declare the nullification of all incumbent regulations and contracts regarding the Kaesong industrial complex," Pyongyang's official Korean Central News Agency quoted the factory management as saying.

The statement said the decision is due to the "extreme confrontational policy" on the part of Seoul, which has "destroyed the foundation" of the joint project.

A set of new regulations and contracts will be drawn up for the complex, with increased wages for workers and revised land lease agreements, the management said.

Analysts said the North's decision does not signal the closure of the industrial park, but that the issue is being used by the country as a bargaining chip in negotiations with the South.

Responding to the decision, South Korean Unification Ministry spokesman Kim Ho-nyeon said: "This is a measure that fundamentally threatens the stability of the Kaesong complex, and it is not acceptable at all."

Relations between the two countries, which have yet to sign a peace treaty more than half a century after the Korean War, have deteriorated since conservative President Lee Myung-bak took power in the South last year, demanding stricter conditions for the substantial aid previously provided to the North.

Pyongyang has since boycotted reconciliation talks, and ended most joint projects between the countries.

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