SEOUL, Feb 10 (Reuters) - South Korea suspended on Wednesday operations at a jointly run factory park just inside North Korea following the North's long-range rocket launch over the weekend, cutting off an important source of revenue for the impoverished North.
The decision to stop operations at the Kaesong Industrial Complex ends the only significant daily interaction across the heavily fortified inter-Korean border.
North Korea put what it said was an observation satellite into orbit with its rocket launch on Sunday, although the United States and South Korea view the launch as a ballistic missile test that violated U.N. Security Council resolutions.
South Korea has 124 companies at the Kaesong complex, most of them small- and medium-sized firms, employing 54,700 North Korean workers, as of August. The North Korean workers' wages are paid to a North Korean state agency.
The suspension of activity there comes amid calls from the United States and South Korea for tougher U.N. and other sanctions against the isolated North following the rocket launch and its fourth nuclear test on Jan. 6.
South Korean Unification Minister Hong Yong-pyo told media North Korea was suspected of spending funds from Kaesong on advancing its nuclear weapons and long-range missiles programs, and the suspension of operations was to stop funds being used for that.
"We are not going to be able to crack North Korea's nuclear and missile programs by sticking to the same kind of response we have taken all along," Hong told a briefing.
The Kaesong complex went into operation in 2005 and was the last area of cooperation between the rivals after their first summit meeting in 2000 ushered in a period of warmer political and commercial ties known in the South as the "Sunshine Policy Era."
The North shut Kaesong for five months in 2013 during months of high tension following its third nuclear test. But the complex had survived volatile North-South relations even as other commercial projects were suspended.
The complex generated 132 billion won ($110 million) in wages and fees for North Korea last year, Hong said.
South Korea had notified the North of its plan to suspend operations at Kaesong, Hong said, and would take necessary measures for the safe return of South Korean nationals there.
There was no immediate response in North Korean state media to the South Korean decision.
Yang Moo-jin of the University of North Korean Studies in Seoul said closing the factory park removed an important buffer zone between the Koreas, leaving the Panmunjom truce village on the border as the last point of contact.
"Tensions will inevitably rise, raising the chance of sudden clashes," Yang said.
South Korean companies operating in Kaesong protested against their government's decision, accusing it of breaking a promise not to use the factory park as a card against the North.
"The government is pushing our companies to the edge of a cliff by taking this step," an association of Kaesong companies said in a statement.
The United States and its allies are seeking more sanctions against North Korea over its weapons programs, although sanctions have apparently failed to deter its weapons plans up to now.
Japan said on Wednesday it was imposing fresh sanctions on North Korea, clamping down on remittances of money to North Korea.
The South Korean government and companies have invested about 1 trillion won in Kaesong including 616 billion won in cash since it opened in 2005, Hong said.
South Korean tours to the Mount Kumgang resort on the North's east coast, another major commercial joint venture, have been suspended since 2008, following the shooting of a South Korean tourist by a North Korean soldier.
The North has repeatedly called for a resumption of the tours.
($1 = 1,195.8300 won)
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