Coming Out Party

Park Jie won slipped aboard the China-bound flight like a spy on a covert mission. A cover story (routine medical tests) masked his disappearance from the office, and at Seoul's Kimpo International Airport, an air reservation under an alias threw potential snoops off his trail. So when South Korea's Culture minister deplaned in Shanghai on March 17, he was alone and free to tackle a historic assignment: cutting a deal with communist North Korea. At the Hyatt Hotel he met Song Ho Kyong, a senior Pyongyang negotiator, and over the next 22 days the pair drafted a North-South summit accord announced to great fanfare last week. Their work done, the two Koreans hit a Beijing club and traded whiskey-and-beer shots called "bomb drinks." "Song really liked them," Park joked after returning to Seoul. "It seems that all Koreans were born for bombs."

The two Koreas could be trading more bombs in the near future--from bottles, not bombardiers. On June 12, if all goes according to script, the leaders of the rival states will sit down in Pyongyang for the first inter-Korean summit talks since civil war ended in stalemate in 1953. The meeting between North Korea's reclusive strongman, Kim Jong Il, and South Korea's Kim Dae Jung could tear down the cold war's last wall. South Korea's conglomerates are gearing up for northward expansions. Diplomats from Rome to Canberra are reaching out to Pyongyang. Foreigners based in Pyongyang have seen an increasing openness. "There's much more understanding, much less suspicion and better communications," says David Morton, the United Nations Development Program's chief representative in North Korea, "all of which make it easier to talk about sensitive things."

Is North Korea, long known as the world's weirdest Stalinist state, coming out of its cocoon? In the past, Pyongyang has sponsored kidnappings and terrorist attacks. The society remains fanatically loyal to Kim Jong Il, and propaganda trucks patrol the streets, extolling the achievements of his late father. The country has been so isolated that few foreigners have any detailed knowledge of daily life, much less the inner workings of the cult-driven political system. But North Korea watchers say Kim Jong Il's willingness to play statesman can only be interpreted one way: as a plea for help. North Korea remains a famine-ravaged pariah state. Its centrally planned economy has shrunk by half since 1990. Most factories sit idle, and the national power grid is crumbling. The only solution is one Pyongyang fears mightily: open to the outside world. "They need engagement," says Peter Hayes, co-director of the Nautilus Institute for Security and Sustainable Development in Berkeley. "Otherwise, there's no-where to go but downhill."

Pyongyang seems to hope it can get help--in the form of investment--from foreigners without changing its authoritarian political and economic systems. Pyongyang is hanging onto its ideology of self-reliance, or Juche. But a near total collapse of the economy in parts of the country already has forced the government to allow grass-roots capitalism to spring up on farms and in markets. The planners' latest schemes include a cast of former enemies--South Korean industrialists, American mining companies, Chinese traders and moneymen from "imperialist" institutions like the World Bank. Pyongyang hopes to corral these outsiders into development zones, where they can be controlled. "We're seeing the revival of a 19th-century-type concessions economy, not the opening of the whole market," says New Jersey-based consultant K. A. Namkung, a frequent visitor to North Korea.

Nonetheless, the reversal is dramatic. When the North's Kim took power after his father's sudden death in 1994, he inherited a bankrupt industrial economy dependent on a Soviet empire that by then had imploded. When floods ravaged his Stalinist hermitage a year later, famine killed at least 1 million people (roughly one North Korean in 20). In Seoul, the government forecast that the North would crumble like East Germany. Instead, Pyongyang brandished nuclear weapons and long-range missiles to make the world take it seriously--and got the world's attention. In 1994, after international monitors caught Pyongyang diverting fuel from a tiny atomic reactor, Washington agreed to build North Korea two light-water nuclear reactors (which yield little weapons-grade waste) for its pledge to freeze nuclear-bomb fuel production and close its old reactor.

The real impetus for change has come from outsiders prying their way in. Last year Washington, Seoul and Beijing joined in a delicate effort to pressure Pyongyang to open up. Former U.S. Defense secretary William Perry visited Pyongyang and persuaded the North to shelve its long-range missile program; in exchange, Washington would lift trade sanctions (a concession the United States has not yet delivered). Japan reopened negotiations to establish formal diplomatic relations that could lead to $5 billion in wartime reparations payments.

Nobody has pushed harder for rapprochement than Kim Dae Jung. Despite Asia's financial crisis, he steadfastly advocated expanding contact across the demilitarized zone. His "sunshine policy" aims to increase inter-Korean trade, investment and cultural and athletic exchanges--contacts that he believes could promote freedom and democracy. Initially, says one Korea-watcher, "Pyongyang took the overture as an insult because it implied, correctly, that the North is a very bleak place." Nonetheless, when South Korea's conglomerates, the chaebols, came calling (bearing gifts of cash and, in one case, cattle), Pyongyang cracked opened the door. More than 200,000 southerners have since visited North Korea--most on Hyundai's sea cruises to Mount Kumgang. The group is paying $1 billion for the right to develop tourism. Last year's inter-Korean trade of $340 million was a 50 percent surge from 1998.

There are signs that Pyongyang's agreement to meet with the South is more than just a money grab. The summit accord seemed like a response to an important policy speech by the South's Kim during a state visit to Germany in March. (Kim praised West Germany's cold-war effort to coexist with the East and offered Pyongyang government-to-government assistance to help solve its economic crisis.) But in recent years, the North has sent technocrats abroad to study market economics. Pyongyang's freshest slogan, "Prosperous Country, Strong Military," suggests a strong desire to build the economy. State media recently stopped warning citizens to raise "mosquito nets" against decadent imported values. "The silence," says Lee Jong-Heon, who monitors the North Korean media for the Yonhap News Agency in Seoul, "indicates a changing position on reform and openness."

Motivated by patriotism--and cheap labor--Korea Inc. is looking to the North. After last week's summit announcement, the Federation of Korean Industries called for bilateral economic cooperation and pledged to send an "investment feasibility study mission" to North Korea. Seoul's central bank is drawing up a plan to settle crossborder payments. Hyundai plans to construct a city-size industrial zone somewhere along the North's western coast. Samsung, Daewoo, LG and other chaebol have begun assembling everything from golf bags and clothing to computers and consumer electronics in the North.

Hundreds of small South Korean firms are exploring ventures north of the DMZ, too. Even the Rev. Sun Myung Moon's Unification Church is floating a deal to build sedans in the northern city of Nampo. On April 1, Seoul's state-run tobacco monopoly launched the first inter-Korean cigarette, called Hanmaum, or One Mind. Manufactured in Pyongyang, the cigarettes blend tobacco from both Koreas. Managers think their product holds great promise--but only after they shave shipping costs, train inefficient Northern workers and find ways to cope with Pyongyang's frequent blackouts. "These cigarettes help unite the two Koreas," says Lee Chol Soo, who set up the venture. "We regard this as a unification business rather than a moneymaking business."

American investors are poised to jump in too. NEWSWEEK has learned that even before Washington has lifted economic sanctions, a group of Americans is planning a major mining project. Encouraged by Pyongyang, the group plans to take control of gold, copper, zinc and magnesite mines in Hamgyong, a planned mining zone on North Korea's rugged east coast. Says K. A. Nam-kung, the New Jersey-based consultant: "Our project has been highlighted in official [Washington-Pyongyang] talks and has had a very special importance from the start."

Those most skeptical of North Korea's moves are the international aid agencies. They've often struggled in vain to track their own relief supplies. Official intransigence has prompted groups like Medecins Sans Frontieres, Oxfam and CARE to pull out (box). And yet, there is progress. One United Nations agency has launched a microcredit scheme that loans money to families to breed pigs, chickens, goats and rabbits. Another has introduced crop-diversification techniques that liberate counties from Pyongyang's agricultural planners. The Berkeley-based Nautilus Institute is bringing power to a rice-growing village wiped out by a 1997 tsunami. The group has built windmills to power a clinic, a kindergarten and 60 households.

One signpost toward the future is rising on a construction site on North Korea's east coast. There, the Korean Peninsula Energy Development Organization, or KEDO, is building a $4.6 billion nuclear power plant; it was mandated by the political deal that froze Pyongyang's nuclear weapons program. The primary contractor is South Korea's nuclear-power monopoly; top managers are from Japan and the United States. At the site, hundreds of South Korean workers once indoctrinated about "Northern devils" now labor alongside local crews. Pyongyang, worried about ideological "infection," initially forbade inter-Korean contact. Workers had to communicate through the Americans. These days workers interact through Korean foremen. Employees have celebrated holidays together. When officials meet KEDO's top brass for project reviews, Koreans from both sides huddle for friendly chats during smoking breaks and sing karaoke together after hours.

Social and economic contacts won't bring down the Stalinist system any time soon. Pyongyang could still slam the door in Kim Dae Jung's face. But the precedents suggest that historic change may be underway. China in the late 1970s also tried to manage a gradual opening; capitalism swept the country. In North Korea, the forces unleashed by economic collapse are already hard to channel: starving refugees, black markets, illicit border trade, and now, go-go industrialists from the other side of the border. The government won't ever say this is capitalism, but 'our style socialism'," says Kim Myong Chol, head of the pro-Pyongyang Center for Korean-American Peace in Tokyo. "The real question is: what's socialism?" In June, perhaps, the world will see if Kim Jong Il has an answer.

June 1994: Jimmy Carter eases tension by brokering a summit between South Korean's Kim Young Sam and North Korea's Kim Il Sung.

July 1994: Kim Il Sung dies a few weeks before a meeting with his South Korea counterpart. Relations sour, and nuclear tension escalates.

August 1998: North Korea launches its Taepodong missile in the ocean near Japan, threatening security around East Asia.

June 1999: A naval clash in the Yellow Sea causes dozens of casualties.

April 2000: The two sides announce a June 12 summit between South Korean President Kim Dae Jung and North Korea's Kim Jong Il.