South Korea said Wednesday it had authorised a $250 million compensation payout to companies based in the inter-Korean Kaesong industrial zone, which was shut down due to surging military tensions in April.
"Payment will begin Thursday," said Unification Ministry spokesman Kim Hyung-Suk.
The move is seen by some as presaging the permanent closure of Kaesong, after six rounds of fruitless North-South negotiations aimed at resuming operations there.
Representatives of the 123 South Korean firms with plants in the complex held a rally near the border on Wednesday morning, urging both Seoul and Pyongyang to find a way out of the impasse.
Labelling Kaesong a "symbol of peace", they called on North Korea to accede to the South's request for a binding guarantee to avoid any unilateral shutdown of the complex in the future.
They also suggested Seoul show more "flexibility" in the negotiations.
A rare symbol of inter-Korean cooperation, Kaesong was effectively shut down in early April when the North withdrew its 53,000 workers from the zone as military tensions soared across the Korean peninsula.
Pyongyang argued that its hand had been forced by intimidation from the South which was holding a series of joint military exercises with the United States.
A total of 109 companies have applied for compensation.
Han said the final payout would amount to 280.9 billion won ($251.2 million), with a ceiling of seven billion won per company.
On July 28, South Korea had proposed a "final" round of talks to resolve the Kaesong issue and, after Pyongyang failed to respond, Seoul said Sunday that it was "reaching the limit" of its patience.
Set up just north of the border in 2004, Kaesong had survived previous inter-Korean crises, but eventually fell victim to two months of elevated tensions following a nuclear test by the North in February.
The North has rejected the South's demands for a guarantee against future shutdowns, saying it would be tantamount to accepting responsibility for the current situation.