- The Washington Times - Thursday, October 20, 2005

NEAR KAESONG, North Korea — A group of frustrated foreign reporters squinted into the distance from a countryside bridge as a North Korean local official tried to brief them on a distant sight: the joint North-South Kaesong Industrial Zone.

The closest they came to this outpost of southern-style capitalism was a mile.

Opened last year, the industrial zone has four factories operating.

South Koreans, keen to get their share of the North’s economic pie, face major hurdles doing business there. The skittish government is reluctant to permit more horizontal communication among its population and does not allow the unleashing of information technology.

But things are under way in North Korea’s $18 billion economy, which South Korea estimates has been expanding since 1998.

Although shops and restaurants are rare on Pyongyang streets, markets and department stores are thriving. A foreign aid worker said she buys nearly everything she needs in markets, and expressed concern only about meat hygiene. A European diplomat, visiting for a seminar on economic transformation, found department stores “packed.”

Richard Ragan, head of the U.N. World Food Program in North Korea, estimates that 150,000 to 500,000 people are working in private trade, but he voiced concern about the inadequacies of central banking, lack of venture capital and the “reagriculturization” of the economy.

Trade volume is about $2.5 billion per year, he said, with China and South Korea the main players. Although South Koreans are tightly controlled, Chinese, the main source of consumer goods, operate relatively freely. This year, a Chinese aid-funded glass factory opened.

“In China, if there is a commercial vacuum, it will be filled,” said Jamie Greenbaum, a China specialist at Australian National University. “That includes North Korea, and ethnic Korean-Chinese are the perfect middlemen.”

Some South Koreans worry about the North becoming an economic colony of Beijing. The National Unification Ministry in Seoul is promoting tourism and economic cooperation. The South’s Lotte and Hyundai Asan conglomerates are sparring over development rights for the historic northern city of Kaesong, near the industrial park.

Meanwhile, wages based on individual productivity are appearing. At Pyongyang’s Handicraft Art Laboratory, which exports embroidery to Russia, Germany and Britain, workers said reforms were introduced two years ago. They expressed satisfaction at their ability to earn greater disposable income.

Salaries are difficult to establish. After economic reforms in 2002, the basic wage was set at 4,000 won. Workers at the laboratory said they earned 3,000 to 30,000 won a month. (The official exchange rate is 150 won to the dollar; unofficial rates are as high as 2,300.)

A foreign businessman said workers in a joint-venture factory earn about 50,000 won. A diplomatic source noted that Korean workers at embassies here receive salaries of 2,500 won. Inflation has pushed food prices beyond their reach.

Pyongyang is pushing high technology. At the Arirang Mass Games, 15,000 card-flashers created huge images of satellite dishes, missiles and computers. National leader Kim Jong-il has declared the 21st century “the IT era.”

“I want to be a computer scientist” was a common refrain among English-speaking middle school boys interviewed at Kumsong Educational Institute, an elite school for information technology and performing arts that graduates about 100 IT specialists per year. Using U.S.-built Suntron personal computers, boys showed impressive skills in Microsoft Power Point and programming.

However, Internet access is tightly controlled.

Although some North Koreans can use a local Intranet, school officials said, Internet access is not available.

The Korea Computer Center, established in 1990, controls the local Web. It downloads content from the World Wide Web and uploads it onto the Intranet at the request of local organizations. The Intranet also allows college students and others to browse uploaded sites, chat and download music files.

With the leadership concerned about communication, it is not known when or whether the full Internet will become available.

Cell phones were banned last year, and nonofficial use of cars has been halted.

The only people able to use cell phones and the Internet freely are Pyongyang’s foreign residents.

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