South Korea's government is pushing to directly compensate firms that were forced out of the inter-Korean Kaesong Industrial Complex following the spike in cross-border tensions, an official source said Sunday.

The government is considering direct compensation for finished goods and materials left behind by South Korean companies, instead of providing loans, the official said, declining to be identified.

On Feb. 10, the Seoul government ordered the shutdown of the industrial park just north of the Demilitarized Zone (DMZ) that separates the two Koreas. The South took the step after Pyongyang tested its fourth nuclear device on Jan. 6 and fired a long-range rocket on Feb. 7.   

The North countered the South's move by declaring it will kick out the South Korean companies and confiscate all assets left behind by these businesses. It said the complex will be turned into a military zone.

Launched in late 2004, the complex merged South Korean capital with cheap North Korean labor. Kaesong lies some 10 kilometers north of the DMZ in North Korea but is connected by a road to the South.

An emergency committee of the 120 companies ordered out of Kaesong had called for government compensation for fixed assets and manufacturing equipment left behind by using the inter-Korea economic cooperation insurance scheme. They have also asked for some sort of settlement for finished products and manufacturing materials they were not able to bring out.

These businesses claimed that the value of finished goods and materials left behind stood at 246.4 billion won ($210.6 million).

After receiving damage reports from the companies, the government is now at the stage of verifying the actual losses, the official said.

"Based on the findings, we will support those who experienced 'direct and unavoidable damages' based on reasonable standards and principles that can be accepted by our people, within the boundary of our budgets," the official said.

The government is planning to announce the measures regarding the companies next month with an aim to normalize those companies within this year.

Seoul has so far provided some 150 billion won in insurance coverage to Kaesong companies that had paid premiums in the past, with each firm getting a maximum of 7 billion won.

Though those who left finished products and raw materials in Kaesong were not covered by insurance, as none of the companies had insurance contracts signed, they will be partly compensated based on the government's policy to support those who had "direct and unavoidable damages." (Yonhap)