Once billed as an important experiment for Korean reunification, the factory complex across the border at Kaesongexposed North Korea to capitalism, pairing the South’s manufacturing skills with cheap North Korean labor. At the time it was opened in 2004, the park was revolutionary; to build it, the two Koreas breached one of the world’s most heavily fortified frontiers, pushing back military encampments, clearing mines and constructing a cross-border road and rail line.
The decision to effectively close the 123 factories there is an indication of how fraught relations between the two nations have become in recent months. The South had preserved the Kaesong complex even when it cut off all other trade ties with the North after the sinking of one of its warships in 2010. That episode killed 46 sailors, and the South blamed the North. North Korea had also continued its support of the plant, which provided badly needed hard currency, through previous diplomatic crises.
“The Kaesong complex fell victim to a war of nerves between the new leaders of both Koreas, who don’t want to be seen as weak,” said Kim Yong-hyun, a professor of North Korean studies atDongguk University in Seoul.
North Korea had already removed its 53,000 workers this month as part of an escalation of threats after the United Nations imposed sanctions to punish the North for its nuclear test in February. The North’s leaders cited the danger of war that it said was posed by joint South Korean-United States military drills. It also blocked supplies and personnel from the South, forcing all the factories to stop production. Most South Korean managers already at the plant returned home, but some stayed in the hope that relations would improve.
The decision to withdraw the managers came hours after North Korea rejected the South’s proposal for talks on the park’s future. South Korea said the situation was becoming untenable because the North was no longer letting food and medicine be shipped to the site.
“To protect our citizens, we have made an inevitable decision to bring all of them home,” Unification Minister Ryoo Kihl-jae, South Korea’s point man on the North, said in a nationally televised statement.
The decision reflected President Park Geun-hye’s determination not to succumb to what she called North Korea’s tactic of using provocations and pressure to extract concessions — a move the impoverished country was accused of using successfully in the past to secure major shipments of aid. On Friday, Ms. Park told her cabinet ministers that she had no intention of “waiting forever” for North Korea to change its mind over the factory complex.
The managers are expected to begin leaving on Saturday.
So far, neither country has publicly said that it wants to shut the complex permanently. But the countries’ tit-for-tat moves have deepened doubts that the factories would resume operations anytime soon.
South Korea’s leaders have liked to point to the complex’s continuing operations to assuage foreign investors who might have second thoughts about investing in their country because of military tensions with the North. It is unclear how investors will react; the announcement was made after the stock market closed.
This month, General Motors said it might need to reconsider its presence in South Korea if the conflict intensified. But such jitters appear to have calmed somewhat in recent days as the level of fearsome speech from the North mainly died down.
On Thursday, South Korea signaled it might remove the workers, threatening to take a “grave measure” regarding the complex if the North did not agree to talks.
On Friday, North Korea’s National Defense Commission, the country’s highest governing agency, called the South’s proposal a “trick” not worth considering and threatened its own “grave measure” if the “South’s puppet clique further aggravates the situation.”
The North did, however, promise that it would allow the managers to leave and would provide help if needed.
Mr. Kim, the Dongguk University professor, said he doubted that either country would move to permanently close the complex because each has too much to lose.
But Yang Moo-jin, a professor at the University of North Korean Studies in the South Korean capital, Seoul, said that if South Korea cut electricity to the complex, North Korea was likely to confiscate all the factory assets — a step that Mr. Ryoo, the unification minister, warned against on Friday. The minister reminded the North of inter-Korean agreements on protecting investments in Kaesong.
North Korea seized South Korean properties in a joint tourism resort on the North’s Diamond Mountain after South Korea stopped sending tourists there in 2008. The South suspended the tours after North Korean soldiers killed a South Korean who had strayed out of the tourist zone.
South Korea spent nearly $1 billion to build the Kaesong complex, and nearly 820,000 people and a half-million cars from the South have crossed the border to travel there since 2005.
The park was a critical component of South Korea’s “sunshine policy” of encouraging economic cooperation with the North to ease military tensions on the divided Korean Peninsula. That policy was suspended when conservatives took power in the South in 2008.
Some conservative South Koreans have argued that the complex has extended a lifeline to the North Korean leadership. Last year, the South Korean factories in Kaesong produced $470 million in textiles and other labor-intensive products. They also provided the North with $90 million a year in wages for the workers, much of it believed to be taken by the government.