South Korea says it will punish three factory owners who have accepted a North Korean demand to raise wages of workers at the Kaesong joint industrial zone.

Pyongyang announced in February an increase in wages for over 50,000 North Korean workers employed by South Korean firms operating in Kaesong, just north of the inter-Korean border.

According to the North's proposal, the South should increase the average monthly sum for each worker, including allowances, welfare and overtime, from 155 dollars to 164 dollars.

The demand, however, was dismissed by South Korea, saying based on a previous accord, employment conditions in the zone could only be adjusted with the agreement between the two sides.

Following the intensification of the dispute, South Korea ordered the companies to refuse the demand, but the South's Unification Ministry said on Tuesday three companies had paid the increased wage.

Now the company owners will have to pay for bowing to North Korean pressure, says Seoul

The South Korean government gives firms in Kaesong cheap labor on top of preferential loans and tax breaks, which also effectively underwrites their investment.

Kaesong opened in 2004 and had survived many crises between Pyongyang and Seoul.

North Korea shut down the industrial zone for five months in 2013 after it withdrew its workers amid a surge in military tensions between the two neighbors.

SF/GHN/HMV