By Jack Kim
SEOUL (Reuters) - South Korea proposed formal talks on Thursday with North Korea to discuss restarting a joint factory zone located just north of the rivals' heavily armed border that was suspended in early April, sharply deepening security tensions on the peninsula.
It was the first formal proposal aimed at making a breakthrough in a deadlock over the Kaesong factory project, which was the last remaining channel open between the two Koreas until it was forced to close.
North Korea has denied South Korean workers and supplies entry to the industrial zone, located a few miles inside the border, accusing Seoul of using the project to insult its leadership. About 180 South Korean workers have chosen to stay there and are believed to be running out of food and supplies.
"The government today officially proposes to hold working-level talks between the authorities of the South and North to resolve humanitarian issues affecting Kaesong workers and to normalize Kaesong industrial zone," Unification Ministry spokesman Kim Hyung-suk said.
He demanded the North respond by Friday morning. That is likely to anger Pyongyang, which has blamed the South for jeopardizing the project by disparaging its goodwill.
The zone is seen as a lucrative source of cash for the impoverished North.
The North withdrew its workforce of about 53,000 from the zone amid spiraling tensions between the two Koreas. North Korea said the United States and the South were to blame because of what it sees as threatening U.S. and South Korean military drills.
The South's 123 small- and medium-sized manufacturers paid about $130 a month to the North Korean state authorities for each of the North Korean workers they employ.
The number of South Korean workers inside the Kaesong industrial zone has dwindled from the 700 or so normally needed to keep the factory running since the North banned entry on April 3. The 170 or so workers still there are kept by the South Korean firms as the minimum required to safeguard assets at the 1 trillion won ($894.73 million) park.
U.N. Secretary-General Ban Ki-moon, a South Korean, said he was seriously concerned about the closure of Kaesong and "sincerely hopes the operation of the complex can return to normal as soon as possible through dialogue."
Ties between the two Koreas were all but severed after the sinking of a South Korean navy ship in 2010, widely blamed on Pyongyang. The North also bombed a South Korean island later that year.
North Korea, after a series of threats of nuclear war on the United States and South Korea, has since toned down the bellicose rhetoric and on Thursday marked the anniversary of its armed forces day with a low-key event.
The North's supreme leader, Kim Jong-un, attended the 81st anniversary ceremony at the Kumsusan Palace of the Sun where the bodies of the North's two former leaders, Kim Jong-un's father and grandfather, are preserved, the official KCNA news agency said.
Military officers delivered speeches boasting of the armed forces' readiness to strike the United States with missiles but the North's state TV showed no parade of military equipment or remarks by Kim Jong-un.
(Reporting by Jack Kim and Ju-min Park; Additional reporting by Michelle Nichols; Editing by David Chance, Nick Macfie and Vicki Allen)