South Korea pledges $272 million in loans for Kaesong companies

SEOUL Thu May 2, 2013 1:01am EDT

A South Korean security guard directs traffic as a vehicle transporting employees working at the Kaesong Industrial Complex (KIC) inside the North Korean border, passes through a gate at the South's CIQ (Customs, Immigration and Quarantine), just south of the demilitarised zone separating the two Koreas, in Paju, north of Seoul, April 8, 2013. REUTERS/Kim Hong-Ji

A South Korean security guard directs traffic as a vehicle transporting employees working at the Kaesong Industrial Complex (KIC) inside the North Korean border, passes through a gate at the South's CIQ (Customs, Immigration and Quarantine), just south of the demilitarised zone separating the two Koreas, in Paju, north of Seoul, April 8, 2013.

Credit: Reuters/Kim Hong-Ji

SEOUL (Reuters) - South Korea has offered 300 billion won ($272.41 million) million in special loans to companies affected by Pyongyang's decision last month to close a jointly run industrial zone in North Korea, a government official said on Thursday.

A government taskforce will provide the assistance from May 6 in the form of loans with interest rates of 2 percent. More than 120 South Korean businesses have invested in the border complex at Kaesong.

"The government is currently trying to provide tailored support for these businesses and once we finish determining the current status of the companies, we will continue to make more support available," said Suh Ho, a director-general at the Unification Ministry which deals with inter-Korean affairs.

Suh said cash handouts to the companies were legally impossible and that loans - money for which will be taken out of various government funds - were the only available solution in the short-term.

North Korea decided to withdraw its 53,000 workers from the Kaesong industrial zone amid heightened tensions between the two Koreas in April, and sent most South Korean workers from the zone, virtually stopping all operations.

Seven South Korean workers remain in Kaesong. North Korea had cited last-minute checks on taxes and wages as reasons for holding them back. ($1 = 1101.3000 Korean won)

(Reporting by Christine Kim; Editing by Jeremy Laurence)