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The inter-Korean Kaesong Industrial Complex is seen across the demilitarised zone (DMZ) separating North Korea from South Korea in this picture taken from Dora observatory in Paju, 55 km (34 miles) north of Seoul, September 25, 2013. REUTERS/Lee Jae-Won

(reuters_tickers)

By Hyonhee Shin

SEOUL (Reuters) - South Korea said on Thursday it "humbly accepts" there is no evidence North Korea diverted wages paid to its workers by South Korean firms in a now-closed border industrial park to bankroll its weapons programmes as the previous government asserted.

The South's unification ministry was responding to the findings of a panel which contradicted claims of money being transferred by North Korea as it pursues its nuclear and missile programmes in defiance of U.N. sanctions.

It said would take follow-up steps to boost transparency and public trust in its policy towards the North.

South Korea said last year that most of the cash that flowed into the jointly run Kaesong complex was being diverted. It made the claim when it pulled out of the joint venture in response to the North's launch of a long-range missile.

In July, two months after liberal President Moon Jae-in was elected, a South Korean government official said there was no hard evidence to back up the assertion.

The decision to suspend the Kaesong project was "unilaterally and verbally" made by Moon's predecessor, ousted president Park Geun-hye, a day after the missile test and without any formal discussions within the administration, the panel, appointed by the unification ministry, said.

"The presidential office inserted the wage-diversion argument as major grounds, yet without concrete information, sufficient evidence and consultations with related agencies, mainly citing defector testimonies that lack objectivity and credibility," Kim Jong-soo, a priest who heads the panel, told a news conference.

"This impairs the decision's legitimacy and could constrain our ground over a future restart of the complex, while hampering the companies' rights to protect their assets due to the hasty pullout process."

About 120 South Korean companies paid about double the $70 a month minimum wage in North Korea for each of the 55,000 workers hired in Kaesong.

The project resulted from the first inter-Korean summit meeting in 2000, when leaders of the two Koreas vowed reconciliation and cooperation. It was the last remaining symbol of inter-Korean rapprochement amid frosty cross-border ties.

Moon has pledged to reopen the industrial park if there is progress on the North's denuclearisation, but political tensions and the North's aloofness have tied the president's hands.

Reclusive North Korea and the rich, democratic South are technically still at war because their 1950-53 conflict ended in a truce, not a peace treaty. The North regularly threatens to destroy the South and its main ally, the United States.

A group of South Korean businessmen who own factories in Kaesong demanded a formal apology.

The companies together suffered losses of 250 billion won ($200 million) due to the closure, aside from equipment and raw materials left behind, the group said in February.

"Now that the wage-diversion claim has proved groundless, the government must apologise for abusing state power to suspend the complex and make utmost efforts to reopen it," the group said in a statement after the conference.

North Korea’s state-run web sites said in October the country had restarted some operations in Kaesong on its own, saying it was "nobody’s business what we do in an industrial complex where our nation’s sovereignty is exercised”.

(Reporting by Hyonhee Shin; Editing by Nick Macfie)

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