US envoy shown North Korean factory park by South

SEOUL, June 12 (Reuters) The US ambassador to South Korea and dozens of other diplomats were today taken for a tour of an industrial complex in North Korea that is at the centre of a war of words between Seoul and Washington.

The trip to the Kaesong Industrial Park, where South Korean firms use cheap land and labour, was arranged after the top US official for human rights in North Korea said the project may simply end up providing funds that prop up Pyongyang's leaders.

The two allies sparring over Kaesong in recent weeks comes at a time of diplomatic tension over North Korea.

Pyongyang has refused to return to six-country talks on its nuclear ambitions, and today the Financial Times said North Korea may be planning to test fire a ballistic missile.

South Korea said the trip to Kaesong was designed to give US ambassador Alexander Vershbow and other diplomats a first-hand view of a project Seoul sees as a model of integration between the capitalist and communist economies of the two Koreas.

It shot back last month at the critical remarks made by the US official, Jay Lefkowitz, saying he was biased and ill-informed about how Seoul dispenses aid to its neighbour.

South Korea favours quiet diplomacy and engagement with its neighbour, while Washington has taken a tougher line, including clamping down firms it suspects of helping the North in illicit activities such as counterfeiting. Pyongyang has said it cannot return to the nuclear talks until Washington ends such measures.

MISSILE TEST REPORT South Korean Foreign Minister Ban Ki-moon accompanied the group of about 80 diplomats, which marked his first trip to North Korea since taking office. Vershbow had not previously visited North Korea since taking up his post in Seoul.

The park, run by an affiliate of the Hyundai group, is located just a few hundred metres (yards) north of the Demilitarised Zone that divides the peninsula.

There are currently 15 South Korean companies at the park, turning out goods such as shoes, clothes and cosmetic cases.

South Korea envisions a day when about half a million North Koreans will work at the park, turning out billions of dollars worth of goods.

South Korean factories at Kaesong have paid a minimum monthly wage of 50 dollars for workers along with a 7.50 dollars fee for social insurance. The money is not paid directly to the workers, but instead goes to North Korea, which then dispenses the wages.

Separately, the Financial Times reported today that Pyongyang was preparing for a possible test of an intercontinental ballistic missile with the potential to hit the United States, citing Washington officials.

Officials in Seoul, Tokyo and Washington said they had no information indicating preparations for a test, though last week Ban had said a possible missile test would be ''a grave concern''.

North Korea shocked the world in August 1998 when it fired a Taepodong missile that flew over Japan before splashing down in the Pacific Ocean.

REUTERS MA RAI1022