SKorean firm hit as ties with North worsen

SEOUL, July 21 (Reuters) The main South Korean company for business contacts with North Korea pulled out more than 100 of its workers from the reclusive state today, the latest sign of worsening ties on the peninsula.

North Korea has halted several projects with the South after Seoul pressed Pyongyang to explain why it defied international warnings and fired missiles on July 5. Seoul has said it would suspend food aid for its impoverished neighbour.

Hyundai Asan, a member of South Korea's giant Hyundai Group, said its affiliate has withdrawn construction equipment and 106 of its workers building a hall to host reunions of Koreans separated by the 1950-1953 Korean War.

''The North told us to withdraw our workers,'' said Hyundai Asan official Roh Jee-hwan by telephone.

The reunions had been seen as a sign of cooperation between the two countries, technically still at war. They united many elderly who said it was their dying wish to see their long-lost relatives on the other side of the peninsula.

North Korea said on Wednesday it would halt the family reunions and demanded the South give it massive rice aid.

Hyundai Asan runs a mountain resort on the east coast of North Korea, where it was building the hall. It also helps operate a factory park in the North Korean border city of Kaesong, which is about 70 km northwest of Seoul.

The projects are the two main points of contact between the two Koreas and are seen by the South as a model of cooperation for eventual unification.

The company has rights for tours from South Korea to Kaesong, but today a South Korean Unification Ministry official said the North had requested another tour operator take over. The North also wants to restrict South Korean visits there.

Hyundai Asan has paid over 500 million dollars to North Korea to be the exclusive operator of tours to Kaesong, an ancient Korean capital, as well as six other business projects there, Yonhap news reported.

The company was hoping to start regular tours from this year.

Ties between the two Koreas have warmed in recent years, but North Korea has expressed outrage over South Korea's decision to put a hold on food aid until Pyongyang returns to stalled talks on ending its nuclear weapons programme.

REUTERS DKA RK1602