North Koreans workers have failed to report for work at Kaesong Industrial Complex, suspending one of the few points of co-operation between the two Koreas.
Kaesong Industrial Complex is a joint industrial park and there are more than 120 South Korean companies that operate there, employing 53,000 North Korean workers.
The complex is seen as a crucial source of hard currency for North Korea.
The move is the latest in a series of provocations that have raised tensions in the Korean peninsula and the region.
“As of now, no North Korean workers have reported to work this morning,” a spokesperson for the South Korean Unification Ministry said.
The ministry added that 77 South Korean workers would leave the zone on Tuesday, but 479 were still inside Kaesong.
Kaesong complex was launched in 2003 and was largely funded by South Korea.
Seoul has said the purpose of the complex was to develop a joint industrial park where South Korean companies could manufacture their products using North Korean labor.
It said that would help North Korea start to reform its economy, which is in a dire state, and ease tensions between the two Koreas.
South Korea has given incentives to companies to try and encourage them to set up operations there. These include political risk insurance to cover losses in their investment.
As a result, if the project is threatened, South Korea also tends to lose.
South Korean President Park Geun-hye said the boycott by North Korea would harm the country’s credibility.
“Investment is all about being able to anticipate results and trust and when you have the North breaking international regulations and promises like this and suspending Kaesong while the world is watching, no country in the world will invest in the North,” she told a cabinet meeting in Seoul.
“I don’t know what to do, honestly. I can’t simply tell my workers to leave or stay,” an executive from a South Korean clothing firm told the Reuters news agency.
“North Korean workers didn’t talk a lot, but they appeared to have complaints about Kaesong being closed,” the agency also quoted South Korean worker Sing Dong-chul as saying.
“They worried whether they would be working or not.”
Seen as a litmus test of relations on the Korean peninsula, Kaesong also provides hard currency for North Korea through taxes and workers’ wages.
South Korean companies pay more than $80 million a year in salaries. As a whole, the Kaesong complex produced $470 million worth of goods in 2012.
It accounts for nearly all inter-Korean trade.
For almost a decade the joint industrial zone has chugged on, through North Korean nuclear tests, rhetoric, and even military clashes with the South.
But now the last symbol of joint inter-Korean co-operation is effectively suspended.
North Korea has blocked access to South Koreans working there since Wednesday.
On Monday it said it would withdraw all its own employees and suspend operations in the zone. A decision would come later on whether it would shut it down for good.
North Korea has expressed anger at South Korean media reports that the North would not shut down Kaesong because its struggling economy is heavily dependent on the complex.