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(LEAD) N. Korea says will dispose of S. Korea's mountain resort assets

All Headlines 16:23 June 17, 2011

(ATTN: RECASTS throughout with South Korea's reaction; CHANGES headline, slug)

SEOUL, June 17 (Yonhap) -- North Korea said Friday that it will dispose of South Korean assets at its scenic mountain resort in the latest sign of escalating tensions on the Korean Peninsula.

The North asked South Korean companies to visit Mount Kumgang by June 30 "to discuss the matter of disposing of the frozen and seized properties," the North's official Korean Central News Agency (KCNA) said.

South Korea quickly called on the North to honor inter-Korean deals and not to infringe on property rights of South Korean firms, though it stopped short of taking any immediate action.

The North's announcement came amid lingering tensions over Pyongyang's two deadly attacks on the South last year that killed 50 South Koreans.

The North recently threatened not to engage with South Korea anymore and to retaliate against Seoul for anti-Pyongyang psychological warfare.

North Korea has increased pressure on the South in recent years to try to resume the stalled joint tour program to the resort in an apparent move to earn hard currency.

The two Koreas launched the program in 1998 as part of moves to boost reconciliation, but Seoul halted it in 2008 after a female South Korean tourist was shot dead after straying into an off-limits military zone near the resort.

Pyongyang claims it has done everything to shed light on the shooting and guarantee the safety of future tourists, but Seoul says it has yet to receive a formal apology for the incident or guarantees to enhance safety.

In anger, North Korea last year seized or froze several South Korean assets at the resort, including two hotels, a duty free shop and a golf range as well as a reunion center for families separated since the 1950-53 Korean War.

Pyongyang has since taken steps to try to revitalize the zone that once served as a key cash cow for the North.

Earlier this month, the North announced a law designed to develop the resort as a special zone for international tours.

The North has unilaterally terminated exclusive tourism rights for Hyundai Asan, a key South Korean tour operator for the mountain resort.

Still, the North said the law would allow South Korean and other foreign investors to build a casino, golf course and night club at the mountain resort.

A spokesman for Hyundai Asan said his company had no immediate comment on the North's latest statement.

"We will consult with business operators in the future on how to deal with the North's notification," a South Korean government official said. The spokesman and the official asked not to be identified as they were not authorized to speak to media.

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