FACTBOX: South Korea's industrial park in the North

(Reuters) - North and South Korea hold talks on Friday over the fate of a joint industrial park located in the North Korean border city of Kaesong which is one of the communist state's few sources of foreign currency.

Here are some facts about the Kaesong Industrial Complex where South Korean companies use cheap North Korean land and labor to make goods:

OPERATIONS

As of the end of April, 108 small to medium-sized South Korean companies employed nearly 40,000 North Korean workers to make products such as cooking pots, clothes, shoes and watches. The companies receive tax breaks and other incentives from the South to set up in Kaesong, and pay workers a minimum monthly salary of $70.

REASON FOR EXISTENCE

The project, which began construction in 2003 and is run by a Hyundai group affiliate and the South's Korea Land Corp, was designed to serve as a model of future economic cooperation between the states, which have not formally signed a peace treaty to end their 1950-53 war. South Korea's leaders envisioned the park eventually employing more than half a million North Koreans working at 2,000 firms while adding a peace park and hotels.

BENEFIT FOR NORTH

Wages and other fees paid by the South in hard cash go directly into the coffers of the North's leaders. Critics say the park allows the North to exploit the Kaseong workers for its own benefit with funds generated there helping Pyongyang pay for its various weapons programs.

RECENT TROUBLES

At the end of last year North Korea began to restrict traffic over the border, making it more difficult for goods and workers from the South to enter. In May, North Korea said it was cancelling all wage, rent and tax deals at Kaesong in what analysts said was a hard-nosed negotiating ploy to squeeze more money out of the South. The North has held a South Korean worker there for about three months, saying he insulted the North's leaders. A South Korean firm this month became the first firm to pull out of Kaesong, saying the turmoil led to its decision.

LOGISTICS

The South Korean built park is located about 70 km (45 miles) northwest of Seoul. A new highway and restored rail link run through the Demilitarized Zone buffer dividing the two since the end of the Korean War, taking materials to and from the park. The fenced-off park, with its new buildings, paved roads and steady supply of electricity from the South, marks a stark contrast to the North's impoverished city of Kaesong, with its dilapidated buildings and broken down infrastructure.

(Reporting by Jon Herskovitz and Christine Kim; Editing by Jerry Norton)