By Ju-min Park
SEOUL (Reuters) - North Korea has said it can detain South Korean workers at an joint industrial park in the event of a dispute with their companies, South Korea said on Tuesday, in the latest ruling that could hurt confidence in the factory complex.
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. It is also a major source of revenue for the poor North.
North Korea shut down the complex for five months in 2013, during a period of diplomatic tension. South Korea has 125 companies there, most of them small- and medium-sized firms, employing 53,000 relatively cheap North Korean workers.
In September, the North added a regulation allowing it to detain South Korean workers if their companies failed to live up to their contracts, if the confiscation of property did not cover potential losses, South Korea said.
A South Korean business representative said the rule, which the South disclosed on Tuesday, could hurt investment.
"When you run a business, you can pull out due to worsening management conditions or go bankrupt for other reasons, but physical detention can be frustrating and squeeze investment," Yoo Chang-geun, vice chairman of the Corporate Association of Kaesong Industrial Complex, said on Tuesday in an interview.
"This is not right."
Hundreds of South Koreans commute over the border to the complex every day and more than 200 stay there on a longer-term basis.
South Korea's Unification Ministry, which handles ties with the North, said it had protested against the rule and demanded that it be dropped, but there had been no response.
A ministry official said the rule violated agreements between the North and South on the factory zone.
"There can be no basis for detention," the official said.
Kaesong has been an important source of revenue for the North since it opened in 2005 with more than $90 million a year in wages paid to a North Korean state agency that manages it.
During the 2013 crisis, the North kicked out most South Koreans working there but briefly held back seven people over a complaint about unresolved financial issues.
Despite his misgivings about the rule, Yoo, who runs a machinery parts plant employing 400 North Koreans, said he was in Kaesong to stay.
"North Korean workers are skillful and the quality of our products is very good," he said.
(Editing by Jack Kim and Robert Birsel)