North Korea on Saturday threatened to shut down an industrial park that is the last remaining showcase of inter-Korean cooperation.
The Kaesong Industrial Complex "will be mercilessly shut down" unless South Korea stops "damaging our dignity," the North Korean agency in charge warned according to the official KCNA news agency.
The threat came just a day after North Korean leader Kim Jong-un signed an order putting missile units on standby to attack U.S. military bases in South Korea and the Pacific.
North Korea has been getting increasingly irate as massive South Korea-U.S. military exercises wind down.
North Korea has threatened to shut down the industrial park or evict South Korean manufacturers operating there every time cross-border tensions mounted. But it has never made good on those threats since the complex is an important source of hard currency it desperately needs. On Monday, South Korean workers entered Kaesong as usual.
An unnamed North Korean spokesman for the industrial complex accused South Korean media of "seriously insulting" the North with reports saying that Pyongyang will not shut down the complex since it needs the money and that it employs a two-faced strategy over Kaesong. He urged South Korean companies in the complex to protest against the "groundless" reports.
The spokesman said that it is small and mid-sized South Korean manufacturers who benefit from the complex and claimed that Pyongyang is trying hard to restrain itself since its closure would bankrupt them and put those who work for them out of a job.
Some 123 South Korean manufacturers operate in the industrial park, producing an estimated $40 million worth of products a month. Investments in the complex total W556.8 billion (US$1=W1,111).
South Korea stands to lose money if the industrial park is closed, but the losses would be restricted to the companies operating there, whereas the North Korean regime would take a much bigger hit.
The regime would have to relinquish some $87 million a year it makes from the wages of 54,000 North Korean workers there. A worker makes an average of $134 a month, but most of it goes straight into the regime's coffers.
And the families of North Korean workers as well as some 250,000-300,000 residents in Kaesong and surrounding areas would be heavily affected. "If the water that is pumped into the city via the industrial complex is shut off, the locals will have to start digging wells," said a government official here.
One former senior North Korean official who defected to South Korea said, "There's no guarantee that people won't stage a protest."
Laborers are also given daily rations of South Korean snacks and instant noodles by their employers, which they mostly resell in open-air markets, making the complex the hub of a much larger informal economy.
"The economic impact of the Kaesong Industrial Complex on North Korea is bigger than can be seen on the surface," said one former high-ranking government official here.