In July 2001, Kim left Seoul on a trip to China and promptly disappeared. By that time, it was not uncommon for defectors to travel to the ChinaNorth Korea border and mount rescue operations to try to bring out family members. Sometimes they employed Chinese who could travel freely in North Korea, but some of the defectors actually went in themselves- sometimes succeeding, sometimes not. At least one defector who went in himself-was captured and publicly executed. The Seoul newspaper JoongAng Ilbo JoongAng Ilbo in reporting Kim Jong-min's disappearance the following February quoted colleagues as recalling his often expressed wish to bring his daughters to South Korea. in reporting Kim Jong-min's disappearance the following February quoted colleagues as recalling his often expressed wish to bring his daughters to South Korea.1

TWENTY-SIX.

Yen for the Motherland Hong Song-il, also known by his j.a.panese name, Seichi Tokuyama, might have seemed an anomaly. Forty years old "when I interviewed him,1 the third-generation Korean resident of j.a.pan owned a chain of eight the third-generation Korean resident of j.a.pan owned a chain of eight pac.h.i.n.ko pac.h.i.n.ko - j.a.panese pinball-parlors in and near Tokyo, drove a Mercedes-Benz and was both objectively and in his own mind a rich capitalist. Nevertheless, he contributed substantial funds both directly and indirectly to communist North Korea. In our talk he explained "why he and many other capitalistic Koreans looked north to Pyongyang rather than south to Seoul for their Korean homeland. - j.a.panese pinball-parlors in and near Tokyo, drove a Mercedes-Benz and was both objectively and in his own mind a rich capitalist. Nevertheless, he contributed substantial funds both directly and indirectly to communist North Korea. In our talk he explained "why he and many other capitalistic Koreans looked north to Pyongyang rather than south to Seoul for their Korean homeland.

Q: How do you and your family happen to be among the 700,000 Korean residents of j.a.pan?A: "My grandfather came first. Around 1929 my father at age seven came over to join him, and ended up working as a day laborer in Osaka. After j.a.pan surrendered in 1945, my family could go back and forth often to our home town on Cheju Island. But my grandfather supported the 1948 mutiny by Cheju people opposed to Rhee's rule in South Korea. After Rhee's government put down that uprising, the whole family-all my father's brothers and sisters-came to j.a.pan."Q. Could they still go back and forth to South Korea?A. "No. The South Korean government prohibited entry by anyone affiliated with Chongryon, the p.r.o.north Korean residents' a.s.sociation in j.a.pan. I think my father had joined that shortly after the single Korean group here split into pro-North and pro-South groups in 1945."Q. Why did he take the pro-North side?A. "Before 1945, 1945, he opposed j.a.panese imperialism, which dominated and colonized Koreans. He came to j.a.pan for economic reasons, to earn bread for his family. He believed socialism or communism would provide a better life for Koreans. He also realized the bitterness of statelessness under j.a.panese domination." he opposed j.a.panese imperialism, which dominated and colonized Koreans. He came to j.a.pan for economic reasons, to earn bread for his family. He believed socialism or communism would provide a better life for Koreans. He also realized the bitterness of statelessness under j.a.panese domination."Q. It's been many years since that time. Why do you and other second- and third-generation Korean residents support North Korea and Chongryon?A. "Upbringing has something to do with it, at least in my case. Not only did my father support the North, but I attended a North Korean school in j.a.pan and so did my wife. In fact the cultural role of Chongryon is one of the reasons many in the younger generations continue to support it. It functions as a rallying or unifying agent in maintaining the Korean community and keeping up traditional culture. It even conducts weddings and funerals."Q. Is that enough to persuade even a businessman such as yourself to support a pro-communist organization?A. "To survive in capitalist j.a.pan you need some political support. The economic policy of the j.a.panese government is very hostile to Koreans. My business, pinb.a.l.l.s, requires a license. The more successful my business becomes, the worse the police and political hara.s.sment becomes. Chongryon champions our rights. That's the reason we support it. Kim Il-sung is something like a father figure for us."Q. In Juzo Itami's movie A Taxing Woman A Taxing Woman the female tax inspector goes after a the female tax inspector goes after a pac.h.i.n.ko-parlor pac.h.i.n.ko-parlor operator. When you talk of official hara.s.sment, is tax one of the things you're talking about? operator. When you talk of official hara.s.sment, is tax one of the things you're talking about?A. "There is overt and covert hara.s.sment."Q. After all these years in j.a.pan, have you thought of becoming naturalized?A. "After graduating from the North Korean school here, I did waver and think of becoming naturalized. But one day two young drunks kicked my car, and when I spoke to them about it we got into an argument. At first witnesses and the policeman who came to the scene were very cordial to me, blaming the two drunks and sympathizing with me as the victim. But after the policeman asked for my driver's license and saw that I was Korean, his att.i.tude changed abruptly and he blamed me for the incident and incited the witnesses to blame me as well, telling them I was Korean. He threatened not to let me go home until I confessed I had started the whole thing. When my wife and newborn baby came to get me out, I looked at my baby's sleeping face and realized I must remain Korean. Although Koreans speak j.a.panese and live j.a.panese-style, we remain Koreans."Q. Do you believe in the North's communist system?A. "Frankly I don't have much faith in communism. I think there needs to be a sort of Korean-style perestroika perestroika to reform it." to reform it."Q. Have you been to North Korea?A. "Yes, in 1982 and again in 1987, to visit an uncle and an aunt who had moved there from j.a.pan. The uncle and his family live in the mountains of North Pyongan Province. The aunt lives in Wonsan."Q. What did you think of what you saw?A. "I felt some contradiction between what I saw in North Korea and what I had been told. They have a party-first system. The Workers' Party is everything. The basic requirements of living are met, yes, but there is little luxury in food, housing or amenities. Pyongyang has developed impressively but once you get outside the capital there is much to be desired. However, on the plane back to j.a.pan I reflected that contradictions couldn't be helped. In view of the military situation facing North Korea, its confrontation with the United States and the fact that it's almost surrounded by major countries, its survival is at stake."Q. What about the question of personal freedom?A. "What you call 'freedoms' in the capitalist countries cannot be found in North Korea, but they do enjoy sovereignty and independence. Just look: There are no foreign troops in North Korea."Q. How were living conditions at your uncle's place?A. "Pretty bad by j.a.panese standards, although if you went there from certain Asian countries you would find better conditions than you had left at home."Q. If your uncle moved there voluntarily, why was he put in such a remote corner of the country instead of being allowed to live somewhere with some urban comforts?A. "That kind of economic condition is just the same everywhere in the country."Q. What sort of work do your relatives do?A. "My uncle is a mining engineer. His son drives a truck and his daughter is a clerk. Another of my uncle's sons graduated from medical school in Pyongyang."Q. One recent report by Asia Watch and another human rights group describes a North Korean cla.s.s system in which people are ranked according to how well they can be trusted to support Kim Il-sung, with those opposed to the regime given the hardest living conditions. Does that jibe with what you saw?A. "I detected nothing that would suggest the presence of any opposition to the government. Wherever I went I saw no sign of opposition to or disaffection with Kim Il-sung or Kim Jong-il. I did see differences in political treatment. Of course the best treated are Kim Il-sung's family, then the anti-j.a.panese guerrilla fighters in World War II. Then come those who fought against the Americans in the Korean War."Q. How were you received at your uncle's place?A. "I got the most fervent welcome and warm hospitality-for the reason that I was a pro-Pyongyang Korean businessman who had donated money to the town. I've given hundreds of millions of yen to the pro-Pyongyang organization in j.a.pan, mostly for Korean schools here as a sort of repayment of my obligation for what those schools did for me. The North Korean government started sending money to Korean schools in j.a.pan right after the Korean War. I've given tens of millions of yen directly to the North Korean government in cash, trucks and heavy equipment. But still my donations are a joke compared "with those some businessmen have made."Q. Will your family stay in j.a.pan, or maybe try to go back to South Korea?A. "If Korea is reunified I'll go back to South Korea. For the moment it's politically impossible to go back. I'm telling my children, 'Never think j.a.pan is the only place where Koreans can live. You may go to Canada or the United States but still remain Korean.' j.a.pan is racially and politically intolerant. We think Canada or the United States is more tolerant and comfortable for Koreans. People of my parents' generation are always talking of returning to the homeland. My generation's main concern is how to live as Koreans wherever we live. Maybe in the fourth generation the att.i.tude may change, I don't know."

TWENTY-SEVEN.

Winds of Temptation May Blow It was clear that something was going on in the spring of 1992, when North Korea's Ministry of External Economic Relations sponsored a weeklong tour by more than one hundred business executives, scholars and officials. Most were from j.a.pan and South Korea but small delegations came from China, Russia and the United States. The visitors would travel though remote areas that few Westerners had seen for decades. The unusual arrangements signaled unprecentedly serious efforts to attract foreign investment-and for good reason. Despite Kim Il-sung's trumpeting of juche, juche, national self-reliance, his country for four decades had gotten more than a little help from its socialist friends abroad. Now, the rest of the communist bloc had shrunken to China, Cuba and not much else, and that flow of aid and subsidized trade was squeezed off. A clear sign that Pyongyang's external partnerships were falling apart had come in the summer of 1990, when South Korean President Roh Tae-woo's "northern policy" of wooing the Soviet Union and Pyongyang's other communist allies paid off spectacularly: Roh flew to San Francisco (I was the lone foreign reporter on his plane) for an epochal meeting with Soviet leader Mikhail Gorbachev. Diplomatic relations followed-and by late 1992, China, the last major communist holdout, would exchange amba.s.sadors with Seoul. national self-reliance, his country for four decades had gotten more than a little help from its socialist friends abroad. Now, the rest of the communist bloc had shrunken to China, Cuba and not much else, and that flow of aid and subsidized trade was squeezed off. A clear sign that Pyongyang's external partnerships were falling apart had come in the summer of 1990, when South Korean President Roh Tae-woo's "northern policy" of wooing the Soviet Union and Pyongyang's other communist allies paid off spectacularly: Roh flew to San Francisco (I was the lone foreign reporter on his plane) for an epochal meeting with Soviet leader Mikhail Gorbachev. Diplomatic relations followed-and by late 1992, China, the last major communist holdout, would exchange amba.s.sadors with Seoul.

With 21 million people to keep reasonably satisfied, the regime had little alternative but to look to the global free-market economy. Belatedly following China's example, Pyongyang had decided to set up its first free economic zones. The North Koreans welcomed the visitors from capitalist countries in the hope they would funnel investment into infrastructure and manufacturing. The goals were simple, explained Kim Song-sik, vice-chairman of the Committee for Promotion of External Economic Relations: "Introduce more modern factories of international standard, and generate more foreign exchange." (I noticed that Kim Song-sik was wearing proletarian garb: Lenin cap, Mao jacket. But he set those off-with a modern accessory of more or less international standard, for which someone had expended foreign exchange: his belt buckle, which bore a Playboy Playboy bunny motif.) bunny motif.) Besides the knowledge that they were being blamed for their countrymen's plight, another factor had been helping to coax Pyongyang officials out of their sh.e.l.l. That was an international scheme for developing manufacturing, trade and shipping among countries facing the Sea of j.a.pan, with help from the United Nations Development Program. Meetings in various cities in the region had explored multinational development of a triangular area of Russia, China and North Korea surrounding the mouth of the Tumen River, which formed the border among the three countries. Pyongyang's turn to host a conference on the proposal was the occasion for our tour in North Korea.

The tour provided a chance for North Korea to stage what one American called "a rolling party through the countryside" and play up its ambitious plans to expand tourism. Kim Do-jun, director of the Bureau of Tour Promotion, said around 100,000 foreign visitors were arriving annually, bringing in a total of about $100 million. Hong Kong, Thailand and Australia were being considered as the origins of new tourist flights. Pyongyang wanted to increase the visitor total to 500,000 foreigners, in addition to South Koreans and overseas Koreans. And Kim Do-jun spoke of long-range plans for such developments as "a Disney World" in Kangwon province, near the South Korean border in the mountainous eastern region. Clearly, though, there was a long way to go before the infrastructure would be up to handling such an influx. Counting those of us in the press, the delegation's numbers were so great that hotels outside the capital couldn't or wouldn't house the group-so we had to bunk together for nights on end in the sweaty compartments of a slow-moving pa.s.senger train.

The only delegates from the United States who had been invited for the 1992 affair were a pair of researchers at the East-West Center in Honolulu. I happened to be working at the center as journalist in residence (starting on a project that eventually turned into this book) and I applied to make the tour with them. I hoped that in the years since 1989 the Pyongyang authorities somehow would have removed my name from their list of unwelcome scribes-or, otherwise, that I would manage to go unrecognized as a blacklisted reporter thanks to my new scholarly affiliation. Perhaps, I hoped, there were separate bureacracies involved in screening scholars and journalists. After all, commentators on the top-down North Korean political system had noted that there was remarkably little in the way of lateral communication among parallel governmental units-apparently they needed to save their breath and paperwork for dealing vertically with their bosses and subordinates.

Whatever the cause for my good fortune, I not only was accepted for the trip but received VI.P. treatment including a first cla.s.s seat on the Air Koryo plane that took our delegation and others from Beijing to Pyongyang. When we arrived at the airport it turned out that a pair of young foreign affairs officials, a.s.signed as handlers of the foreign reporters who were expected, did know who I was. "Have you really left Newsweek, Newsweek, Mr. Martin?" one of them asked. "Oh, yes," I replied, truthfully. (I was happy that they did not ask whether I had left journalism. Would they have branded me an imposter and put me on the next plane back to Beijing if I had revealed, there at the airport, that I would return to full-time journalism after my fellowships ran out-and that I planned to pay for that trip by writing an article for a magazine? Mr. Martin?" one of them asked. "Oh, yes," I replied, truthfully. (I was happy that they did not ask whether I had left journalism. Would they have branded me an imposter and put me on the next plane back to Beijing if I had revealed, there at the airport, that I would return to full-time journalism after my fellowships ran out-and that I planned to pay for that trip by writing an article for a magazine?1) In the past, normally, it had been North Korean officials who restricted foreigners, while the foreigners demanded more freedom of movement-but early in this visit the tables were turned somewhat. Our j.a.panese j.a.panese tour organizers insisted that the accompanying foreign newsmen stay in the hall to cover the two-day Tumen conference. Then the two North Korean press handlers, officials in their twenties who were both named Kim, struck an unaccustomed blow for a free press. They heatedly argued the journalists' case for skipping conference sessions to leave time for seeing more of Pyongyang. By that time the press corps had developed considerable affection for the two, to the point of giving them nicknames. A relatively tall and handsome Kim worked for the Ministry of Foreign Affairs. He was dubbed Slick Kim because he always wore a well-tailored pinstriped suit. (It was the same suit day after day, I noticed eventually; probably he couldn't afford a spare.) His shorter, slightly chubby colleague--who resembled Kim Jong-il and other ruling-family Kims--was called Fat Kim. Fat Kim, who worked for the Society for Cultural Relations with Foreign Countries, told us that Slick Kim was on the fast track to eventual cabinet position. tour organizers insisted that the accompanying foreign newsmen stay in the hall to cover the two-day Tumen conference. Then the two North Korean press handlers, officials in their twenties who were both named Kim, struck an unaccustomed blow for a free press. They heatedly argued the journalists' case for skipping conference sessions to leave time for seeing more of Pyongyang. By that time the press corps had developed considerable affection for the two, to the point of giving them nicknames. A relatively tall and handsome Kim worked for the Ministry of Foreign Affairs. He was dubbed Slick Kim because he always wore a well-tailored pinstriped suit. (It was the same suit day after day, I noticed eventually; probably he couldn't afford a spare.) His shorter, slightly chubby colleague--who resembled Kim Jong-il and other ruling-family Kims--was called Fat Kim. Fat Kim, who worked for the Society for Cultural Relations with Foreign Countries, told us that Slick Kim was on the fast track to eventual cabinet position.

Successful as it had proven up to that point, my Clark Kentstyle change of ident.i.ty had begun to threaten my mission. When we arrived at the conference hall where the official delegates were to convene I found that the scholar Martin had been cla.s.sified as an official delegate. Not only that, I had been a.s.signed a front-row seat facing the dais, my name in very large letters affixed to a placard on the table in front of me. I couldn't bug out without being noticed. Fearing that I would end up wasting precious days vegetating in that conference room, I approached Fat Kim and Slick Kim and won their kind permission to give up my VI.P. status and join the rest of the crew of foreign reporters to look around in Pyongyang and environs.

With the notable exception of Kim Jong-su, whom I did not meet on this visit, North Korean officials had been notorious for bland, filibustering, prevaricating replies to interviewers; they would talk for hours but give little useful information. Speaking with the foreign reporters who were covering this tour, however, our chief host, Deputy Prime Minister Kim Dal-hyon, was a refreshing departure from the rule. Kim Dal-hyon frankly acknowledged that the collapse of Soviet and East European communism had hit his country hard. "Because of the rapid destruction of the world socialist market," he lamented, "we can't export our goods to socialist countries and import oil in exchange."

In particular, longtime barter partner Moscow had begun demanding payment in hard currency, which was in very short supply in North Korea. Trade with the former Soviet republics had accounted for 38 percent of Pyongyang's global trade in 1990, but dropped to less than 14 percent in 1991, according to South Korean figures.2 Not only was North Korea importing less from its old ally; its exports were down even more, since its products generally were not compet.i.tive with rival free-market products. a.n.a.lysts were saying the North's economy actually had shrunken each year since 1990 (including, by one estimate, a sickening drop of as much as 30 percent in 1992 alone). Not only was North Korea importing less from its old ally; its exports were down even more, since its products generally were not compet.i.tive with rival free-market products. a.n.a.lysts were saying the North's economy actually had shrunken each year since 1990 (including, by one estimate, a sickening drop of as much as 30 percent in 1992 alone).3 China reportedly had joined Russia in demanding hard-currency settlement, further fueling the alarming trend. Not surprisingly, Pyongyang appeared determined to squeeze every possible dollar or yen out of foreign visitors: A European businessman living in Pyongyang's thirty-five-story Koryo Hotel said his daily room rate had doubled to $200 not long before our arrival. China reportedly had joined Russia in demanding hard-currency settlement, further fueling the alarming trend. Not surprisingly, Pyongyang appeared determined to squeeze every possible dollar or yen out of foreign visitors: A European businessman living in Pyongyang's thirty-five-story Koryo Hotel said his daily room rate had doubled to $200 not long before our arrival.

Nickel-and-diming, however, would not solve the problem. Evidence of poverty and economic stagnation was too abundant for the authorities to hide as we rode by train and bus from Pyongyang across the central mountains to the east coast and north-ward to the Russian and Chinese borders. In previous years I had seen progress in farm mechanization in other parts of the country, but it seemed not to have occurred in this area-or, if it had occurred, to have been reversed, perhaps because of the oil shortage. Farmers plowed far less often with tractors than with oxen, which were among the few farm animals visible. Beanpoles lining the dooryard of almost every house along the route were the only visible source of protein-helping to explain a propaganda campaign that recently had pushed the slogan: "Let's eat two meals a day instead of three.4 Little nonfarming work could be seen. At the port of Rajin, for example, we were told that the dock-workers were taking a "holiday." In Pyongyang, large numbers of people were out and about in mid-afternoon, a marked change from the semi-deserted streets noted during most daylight hours on earlier visits. My guide explained that new working hours permitted people to start early and finish early-but reflection suggested that there were reasons other than humanitarian that kept them from the workplace. All this tended to confirm reports that up to half the factories and working population had been idled by energy and other material shortages resulting from the collapse of the international socialist barter economy.

Whether operating or not, factories looked old and inefficient-and their products showed it. Of course, there were occasional bright spots. In a downtown Pyongyang department store, a new display featured stylish jogging suits. But who in North Korea could afford 148 won, won, about about $67 $67 at the official rate and more than a typical worker's monthly pay for a jogging suit? As for the choices provincial residents were offered, there was no chance to find out. The train we were living on did not stop in cities and towns overnight but instead poked around in the countryside and sat on rural sidings. Our suspicion that this was intended to keep us from exploring the provincial towns and cities became a certainty when we visited the port of Chongjin. Some journalists attempted to walk out of the port's gate to a nearby department store, but a port guard stopped them at gunpoint. at the official rate and more than a typical worker's monthly pay for a jogging suit? As for the choices provincial residents were offered, there was no chance to find out. The train we were living on did not stop in cities and towns overnight but instead poked around in the countryside and sat on rural sidings. Our suspicion that this was intended to keep us from exploring the provincial towns and cities became a certainty when we visited the port of Chongjin. Some journalists attempted to walk out of the port's gate to a nearby department store, but a port guard stopped them at gunpoint.

The most jarring scene that confronted me as I sat peering out of the train window was a trainload of North Koreans pa.s.sing us in the opposite direction. They were a ghastly sight. Their clothing was ragged and filthy, their faces darkened with what I presumed to be either mud or skin discolorations resulting from pellagra. There was no gla.s.s in the windows of their train. At that moment I figured I must have glimpsed accidentally what it was the authorities with their elaborate scheduling and preparations tried so hard to prevent visitors from seeing. Another surreal experience of lavish hospitality in a starving land, such as I had experienced at Kim Jong-su's picnic in 1989, drove the image home later in the trip when we were served a magnificent feast of giant crabs on a beach in the Rajin-Sonbong area.

With almost nothing positive happening in the domestic economy, a hint of change could be seen in North Korea's approach to the outside world. The Tumen River proposals clearly had sparked major interest in Pyongyang. China had initiated the discussions, seeking access to the Sea of j.a.pan from landlocked Jilin Province. China's Hunchun, about ten miles up the Tumen from its mouth, had been a bustling small port with navigation rights guaranteed by a regional treaty before j.a.panese troops in 1938 drove pilings into the mouth of the Tumen to cut off shipping. Conference partic.i.p.ants traveled to Friendship Bridge, the railway crossing between North Korea and Russia just south of Chinese territory. One look was enough to convince most of them of the impracticality of China's proposal to dredge the Tumen for ocean-going ships. The river was so silted up that dredging obviously would be constant and very expensive.

A compromise proposal aired in Pyongyang by officials of the United Nations Development Program suggested focusing development efforts on North Korea's coastal Rajin and Sonbong ports. China could tie in by rail and road and use those as its own ports, free of customs-clearance or visa formalities. China was studying that proposal. But I heard from my East-West Center colleague Mark Valencia, a specialist in maritime matters, that "China wants the rights of navigation on the Tumen, even if it's a rowboat. They're thinking generations down the line."

Besides the river port versus coastal port controversy, countries involved disagreed on whether management of specific zones should be multinational or national. China sought multinational management, and its delegates mentioned Hong Kong and Macao, neither of which it had yet taken over, as models for placing territory under the management of an ent.i.ty other than the sovereign. Sovereignty was not at stake, the Chinese insisted, but only management. Those questions were to be taken up at further international meetings later that year in Beijing and Vladivostok. But North Korean officials were skeptical already about the part of the proposal that called for multinational management of the zone--which would mean sharing power in their own territory.

Thus Pyongyang was proceeding with a parallel go-it-alone approach. On paper, North Korea had already established its first special economic zone at Rajin and Sonbong, inside the territory that would be part of a Tumen Delta multinational zone if the Chinese and others should have their way. Trying to lure investors there-regardless of how the multinational negotiations might turn out-clearly was a big part of what the government had in mind when it admitted our group of visitors. Rajin and Sonbong port officials planned to expand cargo capacity from six million to 50 million tons a year in two stages-and also planned to build a brand new port in the area with annual capacity of another 50 million tons. Unlike some nearby Russian ports, they boasted, the North Korean ports didn't freeze up in winter. A slick brochure complete with four-color maps projected that the population of 131,000 North Koreans living in the vicinity of the two ports would grow into a modern industrial city of a million people.

Conceivably a purely North Korean economic zone could work, if South Korean, j.a.panese or other foreign interests invested in factories there. But Yasuhiro Kawashima, deputy director-general of the Bureau of Port and Airport Development of j.a.pan's Niigata Prefecture, cautioned that proposals to expand port facilities in Rajin, Sonbong and nearby Chongjin might go nowhere unless Pyongyang persuaded neighbors to trans-ship cargoes through the North Korean ports. Lately, the trend had been the other way China had tried large-scale exports through North Korea's Chongjin port several years before, but had backed off-when its freight cars weren't always returned after they were unloaded. Chongjin port manager Chong Chi-ryong said the total of transit cargo handled on behalf of China and other countries was only 100,000 to 150,000 tons a year. Restoring China as a major user of the North Korean ports might require concessions to Beijing on the questions of multinationalism and access to the Sea of j.a.pan. Future conferences would try to sort out the issue. But regardless of the outcome, said Lee-Jay Cho, East-West Center vice-president and senior researcher, it was significant that North Korea at least was talking about the various proposals.

The country, at least partly thanks to China's prodding of Kim Jong-il, had sounded the general theme of-welcoming outside investment since 1984. But only some one hundred businesses had resulted from the joint-venture law enacted that year. Those businesses had brought in foreign funds estimated by South Korea's Unification Board at only about $150 million5 -most of the money coming from pro-Pyongyang Korean residents of j.a.pan. In those ventures the government permitted-but only unofficially-some capitalist-style incentives-such as "gifts" of merchandise to more productive factory workers. -most of the money coming from pro-Pyongyang Korean residents of j.a.pan. In those ventures the government permitted-but only unofficially-some capitalist-style incentives-such as "gifts" of merchandise to more productive factory workers.6 From an investor's viewpoint, key points remained unclarified in the joint-venture and foreign exchange regulations. Outsiders' distrust combined with internal inertia to keep real change to a minimum. From an investor's viewpoint, key points remained unclarified in the joint-venture and foreign exchange regulations. Outsiders' distrust combined with internal inertia to keep real change to a minimum.

If there were reasons in 1992 to imagine that more investors might respond to the new initiatives, a most intriguing factor headed the list: North Korea had managed something of a generation shift. In a typically Korean pattern also found in South Korea, Kim Jong-il had formed his support network partly from alumni of the schools he had attended: Namsan Junior and Senior Middle School, Mangyongdae Revolutionary School and Kim Il-sung University. By 1987, the Mangyongdae school's graduates accounted for 20 percent of the party central committee, 30 percent of the party polit-buro and 32 percent of the military commission of the central committee.7 The school "produces revolutionary warriors to carry on, generation after generation," according to a 1982 speech by O Guk-ryol, then-chief of the armed forces general staff and a cla.s.smate of Kim Jong-il's, who by one account had been with him as a child at the Eighty-eighth Brigade camp. The school "produces revolutionary warriors to carry on, generation after generation," according to a 1982 speech by O Guk-ryol, then-chief of the armed forces general staff and a cla.s.smate of Kim Jong-il's, who by one account had been with him as a child at the Eighty-eighth Brigade camp.8 Mangyongdae provided military training along with the regular junior-high and high-school curriculum. Graduates entered the army for three years and could become party members during that time. After their hitches, they could enroll in Kim Il-sung University or the military academy. The graduates-about 120 students per year-formed an elite. "They're very loyal," one high-level defector told me. "Most of the people around Kim Jong-il have graduated from Mangyongdae." According to Kang Myong-do, son-in-law of a prime minister, applicants whose parents were still living were eligible to enroll in Mangyongdae if they were the children of officials at least at the level of party department head-higher than vice-premier. "It's a great privilege to be admitted," he said. Children of the elite who in the past would have gone to Namsan now went to Mangyongdaae, he said.

Besides alumni of schools he had attended, some people who had worked for Kim Jong-il in the Three Revolutions teams became prominent among his militant followers.9 Youth coming to the fore was a positive omen in the eyes of many outside a.n.a.lysts. "There is an ascendance of the younger, more pragmatic elite ... who are of Kim Jong-il's generation," South Korean scholar-diplomat Han Sung-joo told reporters in Tokyo in 1992. "They are saying their country has to open up a little bit ... or they will lag hopelessly behind South Korea and the polity-will collapse." Youth coming to the fore was a positive omen in the eyes of many outside a.n.a.lysts. "There is an ascendance of the younger, more pragmatic elite ... who are of Kim Jong-il's generation," South Korean scholar-diplomat Han Sung-joo told reporters in Tokyo in 1992. "They are saying their country has to open up a little bit ... or they will lag hopelessly behind South Korea and the polity-will collapse."10 Kim Jong-il, who turned fifty on February 16, 1992, remained a mysterious figure who almost never met foreigners-but as day-to-day chief of the government and party he had placed proteges in a great many key economics and foreign-relations posts. Some, such as Kim Dal-hyon, the deputy prime minister who was our host, were relatives. Still they represented "a changing of the guard," as Kim Duk-choong, former chief executive officer of South Korea's Daewoo Corporation, said during the trip. "All are young generation- fifties and forties," he noted. "They're much more forthcoming than in the past."

True, Kim Dal-hyon's acknowledgment of serious economic difficulties had not yet become the party line; subordinates such as Kim Song-sik continued to a.s.sert that all was well and the country was experiencing little ill effect from the changes in other communist nations. And even Kim Dal-hyon insisted that his countrymen "do not have any worries about food, clothing and housing." Significantly, though, he acknowledged bluntly that "the world is changing" and that creation of special economic zones "is for our survival," in a world where "there are only a few countries following the socialist model."

Another small example of the new, more enlightened approach: North Korean officials seemed to have realized that outsiders had little stomach for hearing-worshipful encomia to the wondrous leadership of President Kim Il-sung and his son Kim Jong-il. During our 1992 visit, unless they-were asked specifically, they mercifully refrained from spouting the interminable old lines about how the Great or Dear Leader provided this or that factory of school out of love for the people, blah blah blah.

Some of the younger officials also embodied a fascinating answer to a very real question: In a country that neither taught nor understood free-market economics, where could one find competent managers for a push to join the global economy? It turned out that some of the rising economic stars had been trained in the sciences-one of the few areas in which a North Korean could get an education with a relatively small component of ideological cant. Kim Jong-u, vice-minister of external economic affairs and chairman of the Committee for the Promotion of External Economic Cooperation, had been a nuclear scientist. Deputy Premier Kim Dal-hyon himself had been a chemist and head of North Korea's Academy of Sciences.11 I had a glimpse of the quality of Kim Dal-hyon's mind during a press conference. He announced at the outset that he would take all questions first, and then answer them at once. Reporters groaned, fearing that this was his trick to avoid answering any questions he considered challenging. He insisted, though, so the reporters one after another stood to ask questions, giving Kim their toughest shots. Kim acknowledged the questions as they came, but did not note them down--which intensified our concern that we were about to be spun big time. But when all the questions were in, he gave a lengthy overall reply that actually answered all but a couple of the questions. When reporters reminded him that he had missed those, he answered them, too. The impression he gave with that performance was one of electrifying brilliance. Just listening to him raised my level of optimism about the North Korean economy by several notches.12 Alas, even the scientists-turned-economists offered no cure for North Korea's perennial allergy to dealing in hard statistics. "The main shortcoming of socialism is that we are not accustomed to figures," Kim Dal-hyon explained wryly as he begged off giving cost figures for April 15 celebrations so extravagant that Kim Il-sung's eightieth birthday would do for a run-up to the Second Coming of Jesus. But at least the deputy premier showed some understanding of prospective investors' need to know just where they stood. "Detailed laws and regulations on preferential treatment for investors, free flow of people, visa and tax exemptions will be promulgated within this year," Kim promised. In the future the country could open additional free-trade zones in such cities as Wonsan and Nampo, "and also create free tourism areas." North Korea had joined the United Nations, simultaneously with South Korea in 1991, and Kim Dal-hyon hoped for help from international organizations in financing the infrastructure projects. "The major cost will be undertaken by our country, the Asian Development Bank and banks and businesses of other countries," he said. "We'll soon be admitted to the ADB."

The regime knew that it still had work to do before very many outsiders would be ready to plunk down their money. "We want to revise laws, and make special new laws for the zones alone, to satisfy your demands," Kim Dal-hyon said. "Our intention is to make a better zone than China's Shenzhen." (Indeed, it turned out that new regulations were enacted on October 5, 1992. They offered foreign investors tax breaks, guaranteed them property rights and allowed remittance of some profits back home. Not only joint ventures, as before, but also wholly foreign-owned ventures were now permitted. South Koreans, barred by the 1984 law, could invest in the North under the law's new version.13 Tax rates, published February 6, 1993, were more favorable to foreign investors than China's rates. Tax rates, published February 6, 1993, were more favorable to foreign investors than China's rates.14) While hardly anyone in North Korea had much experience with market economics, Yoo Jang-hee, president of the Korea Inst.i.tute for International Economic Policy (KIEP), a Seoul think tank, and leader of the South Korean delegation, was encouraged that such new-generation officials at least understood "their "their kind of economics." Intriguing as the new approaches were, however, they did not represent a decision in favor of fundamental change. North Korean authorities remained impaled on the horns of an old dilemma: Although failure to open to investment by capitalists could doom the Pyongyang regime, so could the att.i.tudes, knowledge and ideas that would enter the country along with such change. After all, how could a separate North Korean regime be justified once its subjects could see it had become merely an inferior imitation of the wildly successful capitalist Korea to the South? kind of economics." Intriguing as the new approaches were, however, they did not represent a decision in favor of fundamental change. North Korean authorities remained impaled on the horns of an old dilemma: Although failure to open to investment by capitalists could doom the Pyongyang regime, so could the att.i.tudes, knowledge and ideas that would enter the country along with such change. After all, how could a separate North Korean regime be justified once its subjects could see it had become merely an inferior imitation of the wildly successful capitalist Korea to the South?15 The solution that Kim Dal-hyon and his technocrats proposed sounded like the ultimate test of totalitarianism: establish free economic zones, but segregate them so tightly they would have no effect on people and inst.i.tutions elsewhere in the country. Kim insisted that there should be little problem of other North Koreans envying the wages and living conditions of workers inside the zones, since "we believe in our people." But Kim Duk-choong and other visitors speculated that the regime had picked Rajin and Sonbong as the first free-trade zone precisely because the area was remote from main population centers. (Years later it was reported that the state was clearing out the zone's population, replacing it with new residents whose ideological commitment was considered beyond reproach.) The experience of other countries such as China suggested that the economic apartheid envisioned would not work for long, and that real economic takeoff would both require and contribute to real market reform and opening. Pyongyang officials, however, had their marching orders. While capitalistic methods would be allowed in the trade zones, Kim Song-sik said, "we think we can keep those methods from affecting enterprises elsewhere in the country, where the government's economic policy is unchanged."

In addition to more rather than less control over the people, the strategy to accomplish such a containment of capitalist ideas envisioned even more intense propaganda efforts to whip up ma.s.s enthusiasm for the status quo. In April 1992, the regime unveiled a new stage extravaganza, Song of Best Song of Best Wishes, Wishes, featuring a cast of thousands who wished Kim Il-sung a happy eightieth birthday and praised the system he had installed. "Winds of temptation may blow," the gigantic chorus sang, but "we'll go our way forever. Hey hey let's defend socialism!" featuring a cast of thousands who wished Kim Il-sung a happy eightieth birthday and praised the system he had installed. "Winds of temptation may blow," the gigantic chorus sang, but "we'll go our way forever. Hey hey let's defend socialism!"

"There are quite a number of people on earth who are anxious to see our style of socialism corrupted by the filthy germ of revisionism," Kim Il-sung explained in a volume of his memoirs published around that time. "We do not want our Party to be reduced to a club or a market-place by the tendency of ultra-democracy The suffering inflicted upon us by the evils of ultra-democracy in military affairs during the anti-j.a.panese war and the lessons of Eastern Europe cry out to us that we must not allow this."16 To prospective foreign investors, officials audaciously pointed out the discreet charms of totalitarianism-social stability not least among them. At his press conference, Kim Dal-hyon was asked whether workers for foreign firms would be subjected to the time-consuming ideological cheerleading sessions that workers in other enterprises were required to attend. Perhaps not, he indicated, but "I think our ideology will help the creation of the free economic zones. There won't be any thieves, punks or pimps in our zones. We are constantly educating our younger generation and our older population to work as hard as possible. In fact, the mission of the Three Revolutions teams-not that they-will be in the zones-is to stimulate overproduction."

Indeed, a South Korean lawyer who was one of my companions on the trip marveled at the "naive, pure, unsophisticated" personalities of North Koreans he met. "These people know how to cooperate," he said. He noted the attentive hospitality and prompt service in hotels and restaurants, contrasting with the lackadaisical and even sullen behavior he had experienced in a communist neighbor, China. Irreverent Westerners might be tempted to credit lobotomies, or at least lifelong brain-washing, for the discipline displayed by North Koreans. But I reflected that true-believer cults everywhere do tend to produce devotees who exhibit sweet personalities-just think of the starry-eyed young cultists who, around that time, were accosting pa.s.sersby for contributions in Western cities. The Kim Il-sung cult was no exception.

Still, most outsiders reacted warily They were put off not only by the unlikely strategy of development without real change but also by Pyongyang's general profile-from its record of debt default to its reputation for aggression to doubts about political stability once Kim Il-sung should pa.s.s from the scene. Particularly unexcited were j.a.panese, who had the resources, the proximity and the history of interest in the Korean peninsula to become a major factor if they should-wish to do so. North Korea still had not paid its debts despite repeated reschedulings. j.a.pan had heard offers to repay its portion in fish and in gold, but nothing ever had come of those, either. The j.a.panese government in the 1980s made export insurance payments to companies left in the lurch. In the process, Tokyo refused to offer any more export insurance. Some j.a.panese suggested it would be hard to take Pyongyang seriously until it began paying off the old debts with some of the money that had been going for monuments and birthday bashes. (j.a.panese general contractors were an obvious exception to the usual caution. Contractors eyed the Rajin-Sonbong and Chongjin port-expansion projects hungrily. They figured that normalization of Tokyo-Pyongyang diplomatic ties would come before too much longer, and with it j.a.panese aid. Such funding would pay for expensive construction contracts, of which j.a.panese contractors could hope to win the larger share.) To those focused on the debt, Kim Dal-hyon asked for patience. "There is no reason we should pay these debts right at this moment," he said. "Creditor countries should understand the economic situation faced by socialist countries." Blood ties could go a long way toward producing the sort of understanding for which Kim Dal-hyon was pleading. In some periods there had been considerable talk of economic cooperation between North and South Korea. There were even reports of South Korean proposals to buy up some of the North Koreans' overseas debt, as a fraternal gesture.

South Koreans and their counterparts in the North had talked of cooperation in the past without much coming of it. In a July 7, 1988, special declaration, South Korean President Roh Tae-woo said it was time to improve North-South relations. As part of the process, he proposed introducing tariff-free North-South trade as if the two were a single country. a.n.a.lysts at the time doubted that immediate results would amount to much. Actually, Roh's economic olive branch to the North had been motivated in part by a wish to give China and the Soviet Union an excuse to betray their Pyongyang ally by stepping up economic and political ties with Seoul.

Predictably, North Korea-still smarting over the 1988 Olympics and loath to get involved in an exchange that would expose its economic inferiority to its own people-had immediately dismissed Roh's offer as "nothing new." But Pyongyang's long-term need remained. North Korea-with the collapse of communism elsewhere was thrown back on a form of juche of juche that was too truly self-reliant for comfort. Now forced to do without the vital resources it had been accustomed to receiving from its communist brethren, the North badly needed reunification from an economic standpoint. To Seoul business leaders, mean-while, the economies of North and South offered a complementary fit that was equally tempting, in a pure pocketbook sense. Transportation was one factor. Gaining rights to use North Korean rail-ways and to overfly the North could save substantial sums for the South as it expanded its continental markets, particularly in China and Russia. that was too truly self-reliant for comfort. Now forced to do without the vital resources it had been accustomed to receiving from its communist brethren, the North badly needed reunification from an economic standpoint. To Seoul business leaders, mean-while, the economies of North and South offered a complementary fit that was equally tempting, in a pure pocketbook sense. Transportation was one factor. Gaining rights to use North Korean rail-ways and to overfly the North could save substantial sums for the South as it expanded its continental markets, particularly in China and Russia.

For the South, labor was another key factor, more important than natural resources. After all, South Korea had done without Northern natural resources, going abroad to buy replacements. Resource-poor South Korea now had enormous experience and know-how in producing world-cla.s.s manufactured goods. But its very success had become a problem. By the 1990s, the South had encountered the typical rich-country problems of overpaid and complacent labor. Southern industrialists paid their workers ten times North Korean wages, while the picky Southern workers increasingly turned up their noses at jobs that combined the "three D's": dirty, dangerous and difficult. "Here we're trying to trade in our Hyundai Stellars," a Seoul resident said to me in 1991. Mean-while in North Korea, he noted, the latest catchy public campaign slogan was, "Let's watch the stars while we work." The South's need for a cheap, hard-working labor force to continue its "economic miracle" sparked a revival of economic interest in unification.

Industrialists from the South could see considerable attraction in a polite, well-behaved population and a labor force that was low-paid for the moment and, apparently, highly disciplined. When we visited Pyongyang's Eguk Moran Garment Factory, the general manager, Jon Song-won, said of his employees: "They don't even know the word 'strike.'" His factory made suits for ethnic Korean buyers in j.a.pan in exchange for materials and management costs plus a flat labor charge of $10 a suit. Someone asked Jon if he would be surprised to learn that the j.a.panese merchants buying the suits marked them up ten-fold or more before sale. Jon, almost as naive as his workers, replied: "I don't think they-would do such a tricky thing."

For South Koreans, argued Kim Duk-choong, investing in the North was "less risky than investing in Southeast Asia. You're investing in your own country, in the long run." He was pleased that Kim Dal-hyon at his press conference remarked that he hoped South Koreans would be the first to invest in Rajin-Sonbong development, "because they are our own compatriots." Kim Duk-choong marveled: "It's the first time they expressed that: 'We welcome our brothers.' "

The fact that North Korea was playing up to prospective j.a.panese investors had helped-despite the unenthusiastic j.a.panese response-to trigger a compet.i.tive urge in the South to beat the former colonial master to the punch. The largest Southern corporate groups-Hyundai, Samsung, Daewoo, Lucky-Goldstar-had been excited enough by the long-term prospects to race each other in establishing task forces that would try to increase indirect trade with the North via third countries, and prepare for the day when direct trade would become a reality. Finally, on October 17, 1988, the government in Seoul had authorized private companies to trade with the North and permitted businessmen's exchanges.

Hyundai founder Chung Ju-yung had been the first to take advantage of the new dispensation, traveling to the North in January 1989 and returning with a tentative agreement on a $700 million joint project: development of a resort on both sides of the border around North Korea's scenic Mount k.u.m-gang near the east coast. It was time to test Kim Jong-il's promise to China's Hu Yaobang that he would promote tourism. The k.u.mgang idea didn't sound totally preposterous. As Seoul architect-planner Kwaak Young-hoon told me, first-time visitors from the South tended to react to aspects of North Korea the way surveys showed first-time visitors reacting to Disneyland: Both were seen as "clean and friendly."

Political considerations had intervened, however. The collapse of East Germany in 1990 had triggered a major rea.s.sessment on both sides of the Korean Demilitarized Zone. The euphoria in Seoul had been palpable as some people predicted Korean reunification within five years. Southerners had licked their lips at what seemed the near-certainty that communism would self-destruct in North Korea without the South's having to lift a finger. As in Germany reunification would come through absorption of the former communist state by the victorious capitalist state. Only then would the South invest in the North.

As a bonus, mean-while, news of the demise of European communism had nipped in the bud the leftist radical movement in the South, in which Pyongyang had placed some hopes for the eventual peninsula-wide victory of Kim Il-sung's revolution. The idea of doing anything that could feed money into North Korea and help prolong its separate existence had become anathema in Seoul, especially to government officials. For two years after Chung Ju-yung's 1989 visit to Pyongyang, no other top-ranked South Korean businessman had followed in his footsteps.

Members of the North Korean elite had gone into shock upon hearing the fate of their East German counterparts. In the new, unified Germany, Easterners initially seemed to have no claim to leadership and its perquisites-or even, in some cases, to decent jobs. That precedent had been as horrifying to Pyongyang as German unification had been inspirational to Seoul. Indeed, avoiding "absorption" had become an obsession in Pyongyang.17 By early 1992, Pyongyang's panic over the prospect of absorption seemed to have abated slightly. The regime might have felt that a campaign to frighten any wavering members of its elite cla.s.s and unify them around the Kim Il-sung and Kim Jong-il leadership was succeeding. As part of the campaign, North Korean television broadcast a doc.u.mentary showing former East German officials looking for jobs and peddling hot dogs on the street.18 No doubt another cause for at least momentary relaxation in Pyongyang was a shift of opinion in South Korea so drastic that it appeared, for the moment, that the interests of the Northern and Southern regimes might actually overlap. German unification had proven so expensive that many South Koreans who had looked forward to a quick, German-style reunification of Korea now came to hope for a more gradual process, one that would allow time for the North to build up its economy so it would represent less of a burden to a prospective merger partner.

"German reunification is a good example of the worst case," said Park Young-kyu, a scholar at Seoul's Research Inst.i.tute for National Reunification and one of the South Koreans on the trip. South Korea's Finance Ministry estimated that the price tag, if the South should have to absorb the Northern economy before the year 2000, would be $980 billion-more than three times the South's then-current gross national product of $280 billion.19 Such estimates took into account the needs for worker retraining, improvements in infrastructure such as roads and ports, social welfare benefits for Northerners and costs for environmental cleanup and administrative integration. One South Korean government-sponsored think tank reported that some 70 percent of East German firms would fail to survive reunification, and 20 percent of East Germans would lose their jobs in the process. As the North Korean economy stood then, the post-reunification job loss there would be far greater, on the order of 50 percent, said the Korea Inst.i.tute of Economy and Technology. Such estimates took into account the needs for worker retraining, improvements in infrastructure such as roads and ports, social welfare benefits for Northerners and costs for environmental cleanup and administrative integration. One South Korean government-sponsored think tank reported that some 70 percent of East German firms would fail to survive reunification, and 20 percent of East Germans would lose their jobs in the process. As the North Korean economy stood then, the post-reunification job loss there would be far greater, on the order of 50 percent, said the Korea Inst.i.tute of Economy and Technology.20 Many economists feared that the gap in incomes and living standards had grown too wide to permit splicing the two Korean economies together. The South was approaching a $7,000 per capita income, while the North was declining from a high that might have approached the $1,000 level.21 A consensus was building in South Korea that Seoul must help Pyongyang close that gap-and in the process help prop up the North Korean economy. As a theoretical bonus, prosperity presumably would make Pyongyang easier to deal with. A consensus was building in South Korea that Seoul must help Pyongyang close that gap-and in the process help prop up the North Korean economy. As a theoretical bonus, prosperity presumably would make Pyongyang easier to deal with.

Mean-while, soaring labor costs had punched the export-based South Korean economy in the solar plexus-driving home the humbling lesson that a relatively scrawny Seoul would be much harder pressed than heavyweight Bonn to avoid the consequences of a sudden reunification. In their nightmares, Seoul residents saw their capital overrun by dest.i.tute Northern cousins fleeing south to pursue dreams of the good life. The Finance Ministry proposed severe limits on cross-border travel in the initial post-reunification period--with an exception for the divided families whom the South sought to reunite.22 One Western diplomat with long experience studying Korean society painted for me an even more forbidding picture. "Abrupt unification along the lines of East and West Germany would be a disaster," he told me in August 1991. "If they-were to reunify today, the South Koreans would take over everything. North Koreans would be the underlings-the guys sweeping, or wiping the babies' a.s.ses." Unlike the people from South Korea's Cholla provinces, who previously had taken such menial roles in Seoul, North Koreans "are not stoic," the diplomat said. "They wouldn't take it. They'd get real violent real quick." One Western diplomat with long experience studying Korean society painted for me an even more forbidding picture. "Abrupt unification along the lines of East and West Germany would be a disaster," he told me in August 1991. "If they-were to reunify today, the South Koreans would take over everything. North Koreans would be the underlings-the guys sweeping, or wiping the babies' a.s.ses." Unlike the people from South Korea's Cholla provinces, who previously had taken such menial roles in Seoul, North Koreans "are not stoic," the diplomat said. "They wouldn't take it. They'd get real violent real quick."

Seoul's Korea Inst.i.tute of Economy and Technology, among others, argued that the South should help develop new, more compet.i.tive industry in the North before before reunification to minimize such disruptions. The message went over expecially well with one particular group of South Koreans. Shin Woong-shik, a Seoul lawyer specializing in legal dealings with Pyongyang, went on the trip and told me that much of the Southern interest came from among the millions of South Koreans who hailed from the North. Before and during the Korean War people from the North, many of them from the upper socioeconomic groups purged by the communists, had migrated to the South. Himself the grandson of the operator of a gold mine in what became North Korea, Shin said many rich, Northern-born South Koreans had sentimental reasons for helping to develop their home region. Topping the list were Daewoo Group Chairman Kim Woo-choong and Hyundai founder Chung Ju-yung-the latter an unsuccessful candidate for president of South Korea, in the December 18, 1992, election. reunification to minimize such disruptions. The message went over expecially well with one particular group of South Koreans. Shin Woong-shik, a Seoul lawyer specializing in legal dealings with Pyongyang, went on the trip and told me that much of the Southern interest came from among the millions of South Koreans who hailed from the North. Before and during the Korean War people from the North, many of them from the upper socioeconomic groups purged by the communists, had migrated to the South. Himself the grandson of the operator of a gold mine in what became North Korea, Shin said many rich, Northern-born South Koreans had sentimental reasons for helping to develop their home region. Topping the list were Daewoo Group Chairman Kim Woo-choong and Hyundai founder Chung Ju-yung-the latter an unsuccessful candidate for president of South Korea, in the December 18, 1992, election.23 In May of 1991, Daewoo's Kim Woo-choong had gone to Pyongyang and discussed both commodity trade and joint manufacturing ventures in such fields as textiles and electronics. The South had traded rice for North Korean coal and cement later that summer-directly, without routing the ship through a third country as in past trade arrangements. That was a third-flag ship, to be sure, but the South had begun to study the possibility of opening a regular shipping service between the two Koreas. Also under study were a proposed settlement account between Seoul's Export-Import Bank and Pyongyang's Foreign Trade Bank, to clear payments once direct trade should become active, and eventual issuance of soft loans to North Korea. In August of 1991, the South's President Roh himself had registered his government's support for joint ventures, not just the trade that had been encouraged in the past. Negotiations resumed on joint tourist development around Mount k.u.mgang. Besides such projects and joint development of North Korean natural resources, there had been some talk of joint fisheries zones and of joint ventures in third countries-specifically, using North Korean labor in construction and development projects overseen by South Korean contractors in places like Pakistan and the Middle East and in logging schemes in Russia.

Up to the time of our visit, Daewoo Group had made the closest thing to an actual investment deal. Chairman Kim Woo-choong (-whose brother, Kim Duk-choong, was on our trip) had gone to Pyongyang at Deputy Premier Kim Dal-hyon's invitation in January 1992. While there, he had signed a contract for a joint venture in which the Northern regime would provide the land and the labor for a big industrial complex at the west coast port of Nampo--which Pyongyang would designate as another free trade zone. Daewoo would provide capital and technology and help operate nine factories, making textiles, garments, shoes, luggage, stuffed toys and household utensils. The Daewoo chairman was on record as expressing confidence that the factories could export $10 billion worth of goods a year.

In view of such developments, it was tempting during much of 1992 to foresee that investment in North Korea might proceed according to what might be called the China pattern. When China a decade before had set out to reform its economy and