North Korea to Seal Border with South

Analysts in Seoul also point out that this is a test the incoming Obama administration. "They have always strived to deal directly with the U.S. They're trying to see what kind of reaction will come out of a new Washington team; whether it be talks, ignorance, or confrontation," according to Yun Duk-Min, at Institute of Foreign Affairs and National Security.

What does North Korea stand to lose by closing the border? The Gaesong Industrial Complex has been the symbol of inter-Korean economic cooperation. Currently almost 90 South Korean companies employ 33,000 North Korean low-wage laborers to produce goods such as shoes, watches, clothes, and kitchen tools. These laborers earn a minimum $70 per month, which some believe to be going straight into the pockets of the communist party.

The project was launched to utilize cheap North Korean land and labor with South Korean capital investment and technology. The $2.28 billion complex began in June 2003 and was expected to finish by end of 2010, employing more than half a million North Koreans with hotels, golf courses, and a "peace park." If successful, it is expected to generate about 12 percent of North Korea's total economic output.

Currently, 16,000 South Koreans are working at the complex. When the North announced that it was sealing the border, they exempted permits to half of current personnel necessary to manage the site.

"It may look like North Korea is sacrificing economic profits but actually from their part, the risk is acceptable in order to use brinksmanship for a greater return," said Yun Duk-min.

Jessica Kim, Qree Yon, and Youmi Kim contributed to this report.