South Korea readies for pullout from factories in North

SEOUL (Reuters) - North and South Korea were negotiating on Tuesday how many South Koreans would be pulled out of an industrial enclave in the North once hailed as a model of cooperation between the rival states.

The December 1 pullout of some managers who are stationed in the Kaesong industrial zone will come about a week before North Korea sits down with regional powers who are pressing Pyongyang to give up its nuclear arms program in exchange for massive aid.

The scaling back of the project is the latest measure by the North in the escalation of tension since conservative President Lee Myung-bak took office in the South in February, vowing to get tough on Pyongyang and link aid to progress it makes on ending its nuclear program.

Analysts said the North might be trying to raise pressure on Lee to free up some of the billions of dollars in aid his left-leaning predecessor had promised Pyongyang while it seeks aid on a separate front through the nuclear negotiations.

"North Korea can never quit Kaesong," said Paik Hak-soon, a North Korea expert at Sejong Institute near Seoul. "North Korea can never entirely quit its ties with the South."

The Kaesong factory park, just north of the heavily armed border and about 70 km (45 miles) from Seoul, is the only major economic tie between the two Koreas. Nearly 90 South Korean companies employ more than 33,000 low-wage North Koreans to produce goods such as watches, clothes and kitchen tools.

Tuesday's talks were to decide how many of the 1,600 South Koreans stationed in the Kaesong complex were needed to remain to keep the factories running.

"A North Korean official has asked for a list of people who will be staying and those who are pulling out and also a list of vehicles that will be remaining," South Korea's Unification Ministry spokesman Kim Ho-nyeon told a briefing.

North Korea said on Monday it would expel South Koreans in anger at Lee's policies, clamp down on border crossings and cut out tourism to Kaesong City.

In a move likely to provoke the North's anger, civic group leaders who had sent leaflets into the communist state with messages critical of its leadership said on Tuesday they would continue the campaign in light of the North's announcement.

North Korea has complained about the leaflets and threatened to attack the South. Analysts said the latest leaflets touched a nerve because they mention the health of leader Kim Jong-il, who may have suffered a stroke, a taboo subject in the North.

South Korea has appealed to the North to call off the Kaesong move, saying it would deal a serious blow to their fledgling economic ties and be a serious setback for the two states that have not formally ended their 1950-53 war.

(Editing by Jonathan Thatcher and Paul Tait)