SEOUL (Reuters) - There was no evidence that North Korea had diverted wages paid to its workers by South Korean companies operating in now-suspended industrial park on their border to its weapons programs, a South Korean official said on Thursday.

The assertion by the official in President Moon Jae-in's government was a reversal of the contention by the previous government that most of the cash that flowed into the jointly run Kaesong project was diverted to North Korea's military.

South Korea suspended the operations at the industrial park, just on the North Korean side of their common border, where South Korean factories employed North Korean workers, last year after the North launched a rocket that put an object into orbit.

At the time, South Korea said it would no longer allow the funds paid at Kaesong to be used in the North's missile and nuclear programs.


"The previous government said repeatedly that Kaesong wages were diverted by the North but I can say the government does not have any basis for this," the senior government official told reporters on the condition of anonymity.

The liberal Moon came to power in May winning a snap election called after the removal of his predecessor, Park Geun-hye, whose conservative government implemented a hardline policy against the North.

Park was forced from power this year over a corruption scandal and is now on trial.

Moon was elected in May on a plan to engage in talks with North Korea.

He had pledged to reopen joint commercial projects with the North, including Kaesong, but has modified that position by saying there must first be progress on suspending North Korea's nuclear program.

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 pledged reconciliation and cooperation.

But by last year, it was the last remaining symbol of that effort amid deteriorating cross-border ties.

Park's conservative government said 70 percent of the U.S. dollars paid as wages and fees at Kaesong was channeled to the North's ruling party.

It said various sources had confirmed the flow of money but it did not specify who they were.

(Reporting by Christine Kim; Writing by Jack Kim; Editing by Robert Birsel)

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