Gunter Unterbeck's eyes mist as he describes an outsourcing market that really excites the imagination. Skills are high, labor cheaper than in India or China. Best of all, Unterbeck seems to have this dreamland all to himself. The only downside: it's North Korea.

Unterbeck has unusually warm ties to the isolated dictatorship, where he lived for two years as an exchange student from East Germany in the 1970s. He also spent more than a decade there as a diplomat. He insists there's a smart case for Internet business in North Korea: "You have hundreds of trained computer programmers, and they're really good. Already they are doing programming for Japan and Korea, but that's only the start. We could use their skills on special projects like film digitalization for anyone."

Unterbeck is betting on it. He is vice president of KCC Europe, a firm founded by a fellow German, Jan Holtermann, to deliver Internet service to North Korea. Holtermann first visited the country in 2000, when he helped arrange a tour by German musicians. One gig led to another, and in January he announced a contract to provide Internet service in partnership with the state-run Korea Computer Center. The Germans have since invested an estimated $1 million in computer equipment and a satellite link to Internet servers in Berlin. The link works, but so far Pyongyang has not yet opened it to the public.

Why wait? North Korean dictator Kim Jong Il has said that the three great fools of the 21st century are smokers, those who don't appreciate music and those who don't understand computers. He astonished the then U.S. Secretary of State Madeline Albright at the end of her 2000 visit to the DPRK by asking for her e-mail. Few people even realized North Korea had e-mail. It did, but only over phone lines reserved for the Pyongyang elite.

Pyongyang has so far provided average North Koreans with a walled-off Net typical of its obsession with "self-sufficiency." In 1990 it set up the Korea Computer Center, which has created a national "intranet" much like the closed networks of big corporations. I was given a rare peek at this Kwangmyong ("light") system during a recent visit to the Grand People's Study House, Pyongyang's showpiece library. Dozens of young Koreans tapped away in a censored cyberspace filled with endless musings from the late Great Leader Kim Il Sung. But guide Kim Mong Lam insists that "in the near future, we will have real Internet, too."

Perhaps. Deals similar to the one with KCC Europe have unraveled before. A few years ago South Korea's BIT Computer Corp. ballyhooed a five-year exclusive satellite contract that never got off the ground.

Unterbeck extols the po-tential of outsourcing software programming and other service jobs to North Korea. But that will be tough without live Internet connections. In one recent deal, Hanaro Telecom of South Korea produced a cartoon called "Pororo the Penguin" in partnership with North Korean animators. With no Internet links, the partners had to shuttle files on compact discs back and forth via air cargo through Beijing (the only city with direct flights to North Korea).

Still, there are signs that North Korea is entering the Information Age. Global Aid, a Canadian charity, has been teaching English to computer programmers in Pyongyang since 2002. Instructors hail North Korea's enthusiasm but are cautious about its potential. "They need everything," one notes. Global Aid hopes to begin taking North Koreans to Canada for training and exposure to a real geek culture, but won't elaborate, citing the regime's sensitivity.

North Korea remains fickle, and wary of technology that could let the world into its sealed republic. Pyongyang lifted a ban on cell phones in late 2002, only to end the experiment this summer, unannounced. Authorities confiscated mobile phones from me and a Nigerian diplomat at the airport, and returned them as we depart-ed. Unterbeck still insists that "North Korea is just ready to take off. Change is really happening." Of course, just not always for the better.