A day earlier, North Korea, in another of its dangerous threats against South Korea and the United States, had said it would pull all of its about 50,000 workers at the complex in Kaesong, a border town in the North across from the Demilitarized Zone, to protest what it said were South Korean provocations.
South Korean figures show the Kaesong complex is run by more than 120 South Korean companies which together make about $40 million worth of goods a month and provide annual salaries of $87 million. About 800 South Koreans also work at the complex.
The complex was set up in 2000 under an inter-Korean agreement and has remained the only economic link between the two Koreas, allowing the isolated Communist country to derive much economic benefit. Last week, the North barred South Korean workers and goods from entering the industrial zone amid worsening tensions on the Korean Peninsula.
The North has accused South Korea of using the Kaesong facility as a pretext to start a war and that suspending operations at the complex would allow it to decide whether or not to resume operations there at a later date, Yonhap reported.
The report said the latest development is the most serious affecting the complex, as such steps have not been taken during past tensions including the sinking of a South Korean warship and the shelling of Yeonpyeong Island in 2010.
"The government remains unchanged in its position that the Kaesong industrial complex should continue normal operations," said Yoon Chang-jung, a spokesman for the South Korean president. "It is not true that the government has been drawing up measures with the shutdown of the Kaesong industrial complex in mind."
"The government will appropriately handle this while urging North Korea to make the right choice," he added.
Tensions on the Korean Peninsula have worsened since the North began issuing its threats after the U.N. Security Council tightened its sanctions over the North's third nuclear test in February. The North also has reacted strongly against the annual U.S.-South Korean joint military exercises currently underway.
Last week, the North also announced it would restart a nuclear reactor complex, which is currently closed.
There were also concerns that the North might be getting ready to conduct a missile test this week.