South Korea on Friday withdrew its last remaining workers from a joint industrial zone in North Korea at risk of permanent closure due to soaring military tensions.

It is the first time that Seoul has pulled out all its workers from the flagship project since it was opened in 2004, underscoring the severe deterioration in relations between the two Koreas.

The Kaesong Industrial Zone -- located 10 kilometres (six miles) north of the frontier -- was once a rare symbol of cross-border cooperation, but has fallen victim to the stand-off on the Korean Peninsula.

Seoul last week ordered all remaining South Koreans to leave after Pyongyang banned entry by southerners, pulled out its own 53,000 workers and rejected the South's call for talks on the impasse.

Most South Koreans had left by early Tuesday, and the last seven workers returned Friday after several days of talks with the North over issues such as unpaid wages for North Koreans, the Unification Ministry said.

Seoul sent two vehicles loaded with $13 million in cash over the border as the last workers returned, to make the payments demanded by Pyongyang.

Tension has been high since the North, angered by fresh UN sanctions sparked by its nuclear test in February and South-US military drills, issued a series of apocalyptic threats of a nuclear war against Seoul and Washington.

Pyongyang has repeatedly blamed the South for the deadlock over the Kaesong Industrial Zone (KIZ).

"All facts go to prove that the (South Korean) puppet forces are working hard to turn the sacred KIZ into a theatre of confrontation and source of a war against the north, not a zone for reconciliation and unity," the North's official KCNA news agency said Friday in a commentary.

"The puppet regime is getting frantic in its moves to have the KIZ closed by withdrawing all South side's personnel from it," it added.

Previously the complex had remained largely immune to strains in cross-border relations.

While neither side has gone so far as to declare a permanent shutdown, experts say the next step could be for the South to cut electricity supplies to the site.

South Korean companies with interests at Kaesong have expressed shock at the sudden withdrawal.

Hong Yang-Ho, head of the Kaesong Industrial District Management Committee, expressed hope that the two sides could still secure the future of the complex.

"I believe there will be further discussion through various channels," he told reporters at the border in Paju after his return, adding that the factories were safely locked and would remain intact despite the withdrawal.

South Korea has urged North Korea to reconnect cross-border hotlines severed last month at the height of tensions, officials said.

The North ignored a plea by South Korean businessmen to visit the joint industrial zone earlier this week for talks on its fate.

Established in 2004, Kaesong has been a crucial hard currency source for the impoverished North, through taxes and revenues, and from its cut of worker wages.

The project was born out of the "Sunshine Policy" of inter-Korean conciliation initiated in the late 1990s by South Korean President Kim Dae-Jung.