A public spat between Seoul and Washington over a flagship inter-Korean economic project has highlighted their deep divisions over the policy of economic co-operation with North Korea, straining the already tense relations between South Korea and its closest ally. Kaesong Industrial Park, located just north of the heavily fortified border dividing the peninsula, has been in operation for just over three years. In that time, it has attracted a handful of South Korean firms manufacturing goods from cooking pots to textiles, using cheap North Korean labour. Kaesong is a model of North-South co-operation, but it has also become one of the most high-profile points of conflict between Washington and Seoul over North Korea policy. 'Seoul and China have been working at cross purposes with Washington over North Korea, creating an unco-ordinated mixture of carrots and sticks, and that is more than demonstrated over their approach to Kaesong,' said Peter Beck, of the International Crisis Group in Seoul. Seoul, which favours engagement and quiet diplomacy with Pyongyang, is proud of the Kaesong venture and considers it a key example of economic co-operation with its former enemy. Washington believes the project undermines its attempts to squeeze Pyongyang financially, and sustains the North Korean government. Firms located in the industrial park employ about 6,000 workers, paying a minimum of US$57 a month for each. The money goes to Pyongyang. It is not known how much goes to the workers, but there have been suggestions they receive as little as US$8 a month. In a commentary in The Wall Street Journal last week, US special envoy for human rights in North Korea, Jay Lefkowitz, raised concerns about working conditions in the industrial area. Earlier, he went even further, suggesting an international body such as the International Labour Organisation inspect the complex and report its findings to the UN. Last week, Seoul responded with a stinging rebuke, and advised him to visit the industrial park. It issued a statement saying he 'showed such a biased view on these issues without proper understanding of them'. These divisions are further straining relations between the two allies as they confront deadlock in multiparty talks to resolve the standoff over the North's suspected nuclear weapons programme. 'There is growing frustration in Seoul that the Bush administration isn't showing more flexibility in dealing with North Korea and [is] putting such emphasis on human rights and especially Kaesong,' said Mr Beck. The US administration is ratcheting up the pressure on Pyongyang over its human rights record. Mr Lefkowitz's comments came as President George W. Bush met North Korean refugees in the White House, including a six-year-old girl. Despite the running sore between Seoul and Washington over Kaesong, Hyundai Asan, the South Korean company which runs the park under an exclusive contract with North Korea, has ambitious plans for the location. It wants to expand the venture to more than 6,000 hectares and develop it into a regional manufacturing centre, while making the historically important city of Kaesong a tourist destination. It is also courting overseas companies and is hosting foreign investors in June.