South Korea said on Wednesday it would suspend 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.
North Korea's February 7 rocket launch put a satellite into orbit, although the US and South Korea view the launch as a ballistic missile test.
South Korean Unification Minister Hong Yong-pyo told a media briefing that suspending operations at the Kaesong Industrial Complex was to stop funds from it "being used for North Korea's development of missile and nuclear weapons programmes".
The Kaesong Industrial Complex is just on the North Korean side of the two Koreas' heavily defended border and is one of the few examples of cooperation between the rivals.
South Korea has 124 companies at the complex, most of them small- and medium-sized firms, employing 54,700 North Korean workers as of August, whose wages are paid to a North Korean state agency.
The complex generated 132bn won ($110mn) in wages and fees for North Korea last year, Hong said.
The suspension comes amid heightened tension on the Korean peninsula, following the missile launch and North Korea's fourth nuclear test last month, which has prompted calls from the US and South Korea for tougher UN sanctions against the isolated country.
Seoul had notified Pyongyang of its plan to suspend operations at Kaesong, Hong said, and would take necessary measures for the safe return of South Korean nationals there.
He said North Korea was suspected of spending funds from the complex on advancing its nuclear weapons and long-range missiles programmes.
In 2013, North Korea shut down the complex for five months during a period of diplomatic tension.
The South Korean government and companies have invested about 1tn won in the Kaesong complex including 616bn won in cash since it opened in 2005, Hong said.
There was no immediate response in North Korean state media to the South Korean decision.
