South Korea to Shut Joint Factory Park, Kaesong, Over Nuclear Test and Rocket

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SEOUL, South Korea — South Korea said on Wednesday that it would shut down an industrial complex that it runs jointly with North Korea, its strongest retaliation yet for the North’s recent nuclear test and its launching of a long-range rocket over the weekend.

In announcing the decision, Unification Minister Hong Yong-pyo said the industrial complex in the North Korean border town of Kaesong, which went into operation in 2004, had wound up providing funds for the North’s weapons programs.

Mr. Hong, the South’s point man for negotiations on the North, said South Korea had informed Pyongyang of its decision and asked it to help the 184 South Korean factory managers at the complex to cross the border safely and return home.

Although the Kaesong complex was temporarily shut down in 2013, it was the North that initiated the closing, by pulling out its workers to protest joint South Korean-American military drills. The South responded by withdrawing its managers.

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Wednesday’s action was the first time the South unilaterally closed the complex. And by officially identifying the factory park as a source of cash for the North’s nuclear program, the South seemed to indicate that the shutdown was permanent.

There was no immediate public response from North Korea.

The South’s announcement came as the United States and its allies were trying to persuade the United Nations Security Council to impose stronger sanctions against the North. South Korea and the United States have also said they will impose unilateral sanctions.

“We cannot stop North Korea’s nuclear and missile programs with the existing methods of response,” Mr. Hong said in a nationally televised statement. “We need to act strongly together with the international community to ensure that North Korea pay a price, and we need to take special actions to leave the North with no option but to give up its nuclear program and change.”

Mr. Hong said the Kaesong factory park had been an important source of cash for the North Korean government. He said North Korea had earned more than $560 million in wages for its workers there, including $120 million last year. Businesses and the government from the South have also invested $852 million in factories, roads and other facilities there.

“In the end, it appears that the money was used not for the peace the international community wanted but to advance the North’s nuclear weapons and long-range missiles,” he said.

On Jan. 6, North Korea conducted its fourth nuclear test, which it claimed was of a hydrogen bomb, and on Sunday, it launched a satellite into orbit using a long-range rocket. Both actions were in defiance of Security Council resolutions banning the North from pursuing nuclear arms or ballistic missile technology.

The conservative South Korean government of President Park Geun-hye has responded by resuming propaganda broadcasts along the border and, despite China’s opposition, agreeing to negotiate the deployment of an American missile defense system on its territory.

But Ms. Park’s conservative supporters have been urging her to go further by shutting down Kaesong, the only industrial complex in North Korea that is jointly operated with investors from outside the country.

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The Kaesong factory park began more than a decade ago as an experiment: combining South Korean manufacturing skills with cheap North Korea labor. It was the most important of a number of cooperative projects begun during a period of reconciliation between the Koreas, when the South hoped that increased economic exchanges would help ease mutual mistrust and, eventually, lead to the reunification of the divided Korean Peninsula.

Kaesong was the last of those joint projects still functioning and the most important symbol of inter-Korean good will. Streams of cars and trucks going to and from the complex crossed the otherwise tightly sealed border daily, carrying South Korean factory managers into the North and manufactured goods into the South. More than 45,000 North Koreans worked for 123 South Korean-owned factories at Kaesong last year, producing more than $515 million worth of textiles, electronic parts and other labor-intensive goods, according to the South Korean government.

But the wages, paid in American dollars, did not go directly to the North Korean workers. Instead, the Pyongyang government took the bulk of the cash, with the workers getting just a small fraction of their wages in the local currency, according to South Korean officials here. Conservative South Koreans and some American policy makers have long feared that proceeds from Kaesong have benefited the North’s nuclear arms program.

Until now, Kaesong had continued to operate despite such misgivings. Its operations were suspended for five months after the North’s third nuclear test in 2013, but they eventually resumed, with the Koreas agreeing to ensure that the complex would not be affected by “political situations under any circumstance.”

Mr. Hong, the unification minister, said on Wednesday that the South had needed to take drastic action. He said the North’s nuclear ambitions, if left unchecked, could set off a “nuclear domino effect” in the region, with other countries pursuing their own arms programs in response to the North’s.

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South Koreans who have argued for keeping Kaesong open said that cutting off trade with the North would only weaken Seoul’s economic leverage and push Pyongyang closer to China. South Korea was once a major trading partner of the North, but almost all of the isolated country’s trade now goes through China, which has resisted appeals from Seoul and Washington to use its influence to curb the North’s nuclear ambitions.

Cheong Seong-chang, a senior analyst at the Sejong Institute in South Korea, said the shutdown of Kaesong was “the worst possible option” for the South. Economically, he said, it would do the North less harm than Seoul hoped, because the North could earn more cash by sending the same skilled North Korean workers to China. “When you look at the South Korean government’s policies since the North’s nuclear test, you cannot help thinking that it is reacting emotionally,” Mr. Cheong said.

The Kaesong complex had been closed since Sunday for the Lunar New Year holiday; the South’s announcement means it will not reopen on Thursday as planned. Most of the roughly 500 South Korean managers based at the complex are home for the holiday, but 184 are still in Kaesong, South Korean officials said.