Archive for the ‘Switzerland’ Category

Swiss authorities question U.S. counterfeiting charges against North Korea

Tuesday, May 22nd, 2007

McClatchy Newspapers
Kevin Hall

Swiss police who closely monitor the circulation of counterfeit currency have challenged the Bush administration’s assertions that North Korea is manufacturing fake American $100 bills.

President Bush has accused North Korea of making and circulating the false bills, so perfect they’re called supernotes, and in late 2005 the U.S. Treasury took measures to block that country’s access to international banking. North Korea subsequently halted negotiations over dismantling its nuclear weapons program, a process that remains in limbo because of the dispute.

The Swiss federal criminal police, in a report released Monday, expresses serious doubt that North Korea is capable of manufacturing the fake bills, which it said were superior to real ones.

The Swiss report includes color enlargements that show the differences between genuine bills and counterfeit supernotes. The supernotes are identical to U.S. banknotes except for added distinguishing marks, which can be detected only with a magnifying glass. In addition, under ultraviolet or infrared light, stripes appear or the serial numbers disappear on the supernotes.

The Bundeskriminalpolizei didn’t hazard a guess as to who’s been manufacturing the supernotes, but said experts agreed that the counterfeits weren’t the work of an individual but of a government or governmental organization.

The U.S. Secret Service, the lead federal agency in combating counterfeiters, declined to provide details or respond to the Swiss report. But spokesman Eric Zahren said the agency stood by its allegations against Pyongyang.

“Our investigation has identified definitive connections between these highly deceptive counterfeit notes and the North Koreans,” Zahren said. “Our investigation has revealed that the supernotes continue to be produced and distributed by sources operating out of North Korea.”

The Swiss report says the Secret Service has refused to provide any information about its investigations. It notes that if the United States produced concrete evidence to back up its allegations, “it would have a basis for going to war.” Under international law, counterfeiting another country’s currency is considered a cause for war.

But if the U.S. has a reason to go to war, against whom?

The Swiss police noted that before charging North Korea with counterfeiting, U.S. officials had mentioned Iran, Syria and East Germany as possible manufacturers. North Korea’s capacity for printing banknotes is extremely limited, because its banknote printing press dates from the 1970s. Its own currency is of “such poor quality that one automatically wonders whether this country would even be in a position to manufacture the high-quality `supernotes,’ ” the report says.

For years, analysts have wondered why the supernotes – which are detectable only with sophisticated, expensive technology – appear to have been produced in quantities less than it would cost to acquire the sophisticated machinery needed to make them. The paper and ink used to make U.S. currency are made through exclusive contract and aren’t available on the open marketplace. The machinery involved is highly regulated.

In theory, if North Korea were producing the notes, it could print $50 million worth of them within a few hours – as much as has been seized in nearly two decades, the report said.

“What defies logic is the limited, or even controlled, amount of `exclusive’ fakes that have appeared over the years. The organization could easily circulate tenfold that amount without raising suspicions,” says the Swiss police report, which also says Switzerland has seized 5 percent of all known supernotes.

Moreover, it noted that the manufacturer of the supernotes had issued 19 different versions, an “enormous effort” that only a criminal organization or state could undertake. The updates closely tracked the changes in U.S. currency issued by the Federal Reserve Bank.

The fact that the Swiss are questioning the veracity of the U.S. allegations against North Korea carries special weight in the insular world of banknote printing.

“The producers of the most sophisticated products used in banknote printing are Swiss or at least of Swiss origin. That goes for the (specialty) inks and that goes for the machines,” said Klaus Bender, a German foreign correspondent and the author of “Moneymakers: The Secret World of Banknote Printing.”

“Can the North Koreans do it, are they doing it? The answer is couched in diplomatic language, (but) the answer is clearly no,” Bender said.


“According to the US Secret Service, $50 million worth of `super-fakes’ were confiscated worldwide over the past 16 years, only a small portion of them within the United States. Measured against the US annual counterfeit damage of $200 million, the damage from $50 million worth of `super-fakes’ is not that significant. The Federal Reserve Bank produces genuine $100 dollar bills mainly for the foreign market. On their return to the U.S., the issuing bank after examination can easily distinguish the `supernotes’ from originals using banknote testing equipment, due to altered infrared characteristics. For this reason, the United States over the years has hardly suffered economic damage due to the `super dollar.’

“A (banknote) printing press like the one in North Korea can produce $50 million worth of bills in a few hours. Using its printing presses dating back to the 1970’s, North Korea is today printing its own currency in such poor quality that one automatically wonders whether this country would even be in a position to manufacture the high-quality `supernotes.’ The enormous effort put into the making of the 19 different `super-fakes’ that we know of is unusual. Only a (criminal) governmental organization can afford such an effort. What defies logic is the limited or even controlled amount of `exclusive’ fakes that have appeared over the years. The organization could easily circulate tenfold that amount without raising suspicions.”


N. Korea, Switzerland try new bank program to help N.K.’s farmers

Monday, April 30th, 2007


Years of efforts to cultivate North Korea’s mountainous farmland is beginning to yield results, and Swiss and Korean officials are testing a bank credit program for the farmers in the Asian country, a Swiss aid office said on Sunday.

North Korea is showing “many promising signs of changes in progress,” including the emergence of consumer markets that are now established as part of the country’s economic system, Adrian Schlapfer, assistant director-general of the Swiss Agency for Development and Cooperation (SDC), said on the agency’s Web site.

Schlapfer was comparing the current situation to that during his previous visit to Pyongyang four years ago.

“The farming land in which the starving people started to work back then is now recognized as providing scope for agricultural initiative,” he wrote.

“The SDC, together with North Korea’s Central Bank, is therefore in the process of testing a micro-credit program to encourage farmers to base their investment decisions on economic feasibility considerations — an innovation for North Korea,” he said.

But North Korea still suffers from food scarcity, and aid is still essential, he said.

The SDC, an agency of the Swiss Foreign Ministry, has maintained an office in Pyongyang since 1997, focusing on agricultural programs to improve food production and on supporting domestic reform. The Swiss government started providing humanitarian assistance to North Korea in 1995.

Schlapfer described North Korea as the most little-known and enigmatic partner of the SDC, and acknowledged there are constant doubts on whether Swiss engagement there will yield results.

“Are there any meaningful approaches for long-term development partnership in this country with its planned economy, backwardness and secretiveness? Given the context, is it at all possible to initiate change?” he asked.

Pyongyang is “not an easy partner,” he said. “The key values, priorities and methods of Switzerland’s development cooperation have to be repeatedly insisted upon.”

“However, the projects implemented over the past 12 years are encouraging,” Schlapfer added.


Swiss banking association denies any dealings with Kim Jong-il

Saturday, February 10th, 2007


An official of Switzerland’s banking industry denied accusations that the country’s banks are involved in dealings with North Korea’s leader Kim Jong-il, saying such involvement would taint the industry’s image, a report said.

“There is no way a Swiss bank would be running a bank account for Kim Jong-il knowing that he is a dictator. The reputational risk is simply too high,” James Nason, a spokesman for the Swiss Bankers’ Association, told Washington-based Radio Free Asia (RFA) on Friday.


Food aid key to N Korea talks

Thursday, February 8th, 2007


As six-party talks on North Korea’s nuclear programme resume in Beijing, the BBC’s Penny Spiller considers whether food shortages in the secretive communist state may have an impact on progress. 

Negotiators for the US, North Korea, China, Japan, South Korea and Russia are meeting in Beijing amid signs of a willingness to compromise.

While the last round of talks in December ended in deadlock, bilateral meetings since then have brought unusually positive responses from both North Korea and the US.

Such upbeat noises were unexpected, coming four months after North Korea shocked the world by testing a nuclear bomb.

The test brought international condemnation and UN sanctions, as well as a significant drop in crucial food aid.

South Korea suspended a shipment of 500,000 tonnes of food supplies, while China’s food exports last year were sharply down.

The World Food Programme has struggled to raise even 20% of the funds it requires to feed 1.9 million people it has identified as in immediate need of help.

Aid agencies warned at the time of a humanitarian disaster within months, as the North cannot produce enough food itself to supply its population. It also lost an estimated 100,000 tonnes-worth of crops because of floods in July.

‘Queues for rations’

Kathi Zellweger, of the Swiss Agency for Development and Cooperation in Pyongyang, said the present food situation in the country was unclear.

No figures are yet available for last year’s harvest, and it was difficult to assess what impact the lack of food aid was having on supplies, she said.

However, the UN’s Food and Agriculture Organisation estimated the country was short of one million tonnes of food – a fifth of the annual requirement to feed its 23 million people.

South Korea-based Father Jerry Hammond said there were signs of shortages – not only in food but also in fuel – when he visited the North with the Catholic charity Caritas in December.

He described seeing long queues for rations, and ordinary people selling goods in the street for money to buy the basics.

“You do expect to see more shortages during the winter time,” the US-born priest, who has visited North Korea dozens of times in the past decade, said.

“But I did see a noticeable difference this time.”

High malnutrition rates

Paul Risley, of the World Food Programme, said people in North Korea may still be cushioned by the November harvest and the pinch will be felt in the coming months.

“We have great concerns,” he said, pointing out that North Korea was now in its second year of food shortages.

He says “stabilising food security” in the country will be very relevant to the talks in Beijing.

“It is certainly the hope of all who are observing the situation in [North Korea] that imports of food can be resumed and returned to prior levels,” he said.

“Malnutrition rates are still the highest in Asia, and we certainly don’t want to see those rates rise any further.”

Father Hammond thinks Pyongyang may be persuaded to consider compromises in Beijing, but is unlikely to do so as a result of any pressure from the people of North Korea.

“People are very cut off from the outside world, and there is constant propaganda about national survival. Even if they go hungry, it will be considered patriotic,” he said.

There have been signs of possible compromise from both sides in the run up to the talks.

Washington has reportedly hinted at flexibility over its offer of aid and security guarantees, as well as showing a willingness to sit down and discuss North Korea’s demands to lift financial sanctions.

Meanwhile, North Korea reportedly recently told visiting US officials it would take the first steps to disband its nuclear programme in return for 500,000 tonnes of fuel oil and other benefits.

And South Korea is keen to resume its shipments of rice and fertiliser aid – if Pyongyang agrees to freeze its nuclear programme, the Choson Ilbo newspaper has reported.

As the nuclear talks resume, all sides will be looking to translate such pressures into progress.


WFP reports slight rise in N.K. aid but still wide gap with target amount

Monday, January 15th, 2007


International aid for North Korea has increased over the past few months, but is still far behind the amount needed to help the country in its recovery efforts, the U.N. World Food Program (WFP) said Monday.

A tally as of Sunday showed the relief agency received slightly more than US$16.25 million in assistance from donor nations, up from $12.7 million in November. But the total accounts for only 15.9 percent of the $102 million the WFP says it needs for its protracted relief and recovery operation (PRRO) in North Korea.

In November, the WFP received 12.43 percent of the target amount.

Russia remained the biggest nation donor with $5 million, putting up 4.9 percent of the desired aid.

Switzerland increased its offer to $2.57 million from $2.2 million in November, and Ireland to $640,000 from $319,000.

The collected assistance includes $2.3 million carried over from the previous operation.

Private donations stayed the same at $8,470, while multilateral donation increased from $1.2 million to $1.9 million.

The WFP has been the main organizer of food aid to North Korea who, for the last decade, have depended on international handouts to feed its people. Pyongyang asked the relief agency to leave at the end of 2005, so the WFP now maintains a low-scale presence and has switched its efforts from food to development and reconstruction projects.

South Korean civic organizations and informed sources say there is now a contagion of infectious diseases like scarlet fever and typhoid in North Korea.


North Korea: an upcoming software destination

Tuesday, October 10th, 2006

Paul Tija
GPI Consultancy
October 10, 2006

IN PDF: IT_in_NKorea.pdf

Surprising business opportunities in Pyongyang

Dutch companies are increasingly conducting Information Technology projects in low-cost countries. Also known as offshore sourcing, this way of working means that labor-intensive activities, such as the programming of computer software, are being done abroad. Asia is the most popular software destination, and Indian IT firms are involved in large projects for Dutch enterprises such as ANB Amro Bank, KLM, Philips or Heineken. More recently, we notice a growth in the software collaboration with China.

As a Dutch IT consultant, I am specialized in offshore software development projects, and I regularly travel to India and China. Recently, I was invited for a study tour to an Asian country which I had never visited before: North Korea. I had my doubts whether to accept this invitation. After all, when we read about North Korea, it is mostly not about its software capabilities. The current focus of the press is on its nuclear activities and it is a country where the Cold War has not even ended, so I was not sure if such a visit would be useful. And finally, such a trip to a farshore country would at least take a week.

Nevertheless, I decided to visit this country. This decision was mainly based on what I had seen in China. I had already traveled to China five times this year, and the fast growth of China as a major IT destination was very clear to me. China is now the production factory of the world, but China’s software industry has emerged to become a global player in just 5 years. Several of the largest Indian IT service providers, including TCS, Infosys, Wipro and Satyam, have established their offices in China, taking advantage of the growing popularity of this country. However, I also noticed that some Chinese companies themselves are outsourcing IT work to neighboring North Korea. And since my profession is being an offshore consultant, I have no choice but to investigate these new trends in country selection, so I accepted the invitation to visit Pyongyang, the capital of North Korea. I happened to be the first Dutch consultant to research the North Korean IT-sector ever, and the one-week tour turned out to be extremely interesting. Quite surprisingly, the country offers interesting business opportunities for European companies.

Korea Computer Center
My study tour was organized by KCC (Korea Computer Center), the largest IT-company in the country. Established in 1990, it is state-owned and has more than one thousand employees. It is headquartered in Pyongyang and has regional branches in eleven cities. My accommodation has been arranged at the KCC campus, which comprises of several office buildings. It also has iown hostel, with a swimming pool, for foreign guests. These guests are mainly Asian (during my stay, there were Chinese delegations), so I had to get used to having rice for breakfast. In the evenings, the restaurant doubled as a karaoke bar, and some of the waitresses appeared to be talented singers. The campus is located in a rather attractive green area, and the butterflies flying around were the largest I had ever seen. It also has sporting grounds, and basketball was during my one-week visit the most popular game among KCC staff. An internal competition takes place during lunch hours.

Korea Computer Center is organized in different specialized business units. Before their representatives started with presentations, I received a tour through the premises. As is the case in India and China, the programmers at KCC also work in cubicles. KCC develops various software products, of which some are especially designed for the local market. Examples are a Korean version of Linux and translation software between Korean, Japanese, Chinese and English. They also produce software for Korean character and handwriting recognition and voice recognition. Other products are made for export, and North Korean games to be used on mobile phones are already quite popular in Japan. There are also games for PC’s, Nintendo and Playstation; their computer version of Go, an Asian chess game, has won the world championship for Go games for several years. The games department has a display showing all the trophies which were won during international competitions.

For several years, KCC is active as an offshore services provider and it works for clients in China, South Korea and Japan. For these markets, North Korea is a nearshore destination, and quite a few North Korean IT-staff do speak Chinese or Japanese. KCC also has branch offices in various Chinese cities, including Beijing and Dalian. It works for both foreign software product companies and end user firms, such as banks. For these clients, different types of applications have been developed, for example in the field of finance, security or Human Resources. Europe is a relatively new market for the North Koreans, and some of their products have been showed for the first time at the large international IT-exhibition CeBIT, in 2006 in Hannover, Germany.

The level of IT-expertise was high, with attention to quality through the use of ISO9001, CMMI and Six Sigma. KCC develops embedded software for the newest generation of digital television, for multimedia-players and for PDA’s (Personal Digital Assistants). Surprisingly, it also produces the software for the mobile phones of South Korean Samsung. I was shown innovative software which could recognize music by humming a few sounds. In less than a second, the melody was recognized from a database of more than 500 songs. Also applications for home use were developed, such as accessing the Internet by using a mobile phone to adjust the air conditioning. KCC also Photo: KCC campus in Pyongyang made software to recognize faces on photographs and video films. They gave me demonstrations of video-conferencing systems, and applications for distance learning. There was a separate medical department, which made software to be used by hospitals and doctors, such as systems to check the condition of heart and blood vessels.

Supply of IT-labor In countries such as The Netherlands, the enrollment in courses in Information Technology is not popular anymore among the youth, and a shortage of software engineers is expected. This situation is different in many offshore countries, where a career in IT is very ‘cool’. Also in North Korea, large numbers of students have an interest to study IT. I visited in Pyongyang the large Kim Chaek University of Technology, where there are much more applications, than available places. Although my visit took place during the summer holiday, there were still students around at the faculty of Informatics. In order to gain experience, they were conducting projects for foreign companies. I spoke with students who were programming computer games or were developing software for PDA’s. A large pool of technically qualified workforce is now available in North Korea. Some of the staff is taking courses abroad and foreign teachers (e.g. from India) are regularly invited to teach classes in Pyongyang.

Business Process Outsourcing
Some companies in Pyongyang are involved in activities in the field of BPO (Business Process Outsourcing), an areas which includes various kinds of administrative work. Because of the available knowledge of the Japanese language, the North Koreans are offering back-office services to western companies engaged in doing business with Japan.

In order to get an understanding of this type of work, I visited Dakor, which was established 10 years ago in cooperation with a Swiss firm. This joint venture is located at the opposite side of Pyongyang, across the Taedong river. It works for European research companies, and it receives from them scanned survey forms electronically on a daily basis. It processes these papers and returns the results within 48 hours to their clients. The company is also conducting data-entry work for international organizations such as the United Nations and the International Red Cross. Their data, which is stored on paper only, is being made available for use online. Dakor is also offering additional services, such as producing 2D and 3D designs for architectural firms, and it is also programming websites.

North Korea is already famous as a production location for high quality cartoons and animation. Staff of the American Walt Disney Corporation described the country as one of the most talented centers of animation in the world. The specialized state corporation SEK Studio has more than 1500 employees, and works for several European producers of children films. New companies are being founded as well, and I visited Tin Ming Alan CG Studio. This firm was set up in early 2006, and is located in a new office building in the outskirts of Pyongyang. Its main focus is in Computer Graphics and in 2D and 3D animation it uses the latest hardware and software, including Maja. Some of the staff of Tin Ming Alan speak Chinese and the company has a marketing office in China. They are hired by Chinese advertisement companies to make the animation for TV-commercials. It also works on animation to be included in computer games.  Several employees of this young company come from other animation studios and have more than ten years of experience in this field.

The North Korean IT sector seems to be dynamic, where new firms are being established, and where business units of larger organizations are being spun-off into new ventures. I visited the Gwang Myong IT Center, which is a spin-off from Korea Computer Center. It is specialized in network software and security, and it produces anti-virus, data encryption, data recovery, and fingerprint software. This firmis internationally active as well; it has an office in China and among its clients are financial institutions in Japan.

Issues of country selection
My study tour revealed that North Korea has specific advantages. The local tariffs are lower than in India or China, thus giving western firms the option of considerable cost reductions. The commitment of North Korean IT-firms is also high, and the country is therefore also an offshore option for especially smaller or medium sized western software companies. Outsourcing work to North Korea could also be used to foster innovation (e.g. developing better products or new applications). This country can be used for research as well (from Linux to parallel processing).  Based from my interaction with Korean managers and software engineers, I do not believe that the cultural differences are larger than with China or India. My communication with them, both formal and informal, was pleasant. Communicating with North Koreans is clearly less difficult than with Japanese.

The North Korean companies have experiences with a wide range of development platforms. They work with Assembler, Cobol, C, Visual Studio .Net, Visual C/C++, Visual Basic, Java, JBuilder, Powerbuilder, Delphi, Flash, XML, Ajax, PHP, Perl, Oracle, SQL Server, MySQL, etc. They can do development work for administrative applications, but also technical software, such as embedded software or PLC’s. North Korea is very advanced in areas such as animation and games, and I have seen a range of titles, including table tennis, chess, golf, or beach volley. The design of many of their applications was modern and according to the western taste.

Over the recent years, North Korea is opening up for foreign business. This process makes offshore sourcing easier, and even investing in an own software subsidiary or joint venture can be considered. This does not mean that North Korea is potential software destination for every user of offshore services. The country is a subject of international political tensions. In addition, a number of circumstances require specific attention, such as the command of the English Language.  As is the case with China, the North Korean IT staff are able to read english bu thtey do not speak it very well.  Another issue is the relative isolation of the country, and in order to arrange an invitation, a visa is required.  The limited number of direct flights is another disadvantage; one can only travel directly from Beijing or Moscow.  If projects will require a lot of communication or knowledge transfer, it might be recommended to do some parts of the work in China, by the Chinese branches of the North Korean companies. Executing a small pilot project is the best way to investigate the opportunities in more detail.

North Korea has a large number of skilled IT professionals, and it has a high level of IT expertise in various areas.  The country is evolving into a nearshore software destination for a growing number of clients from Japan, China and South Korea. An interesting example of their success is the work they are doing for South Korean giant Samsung, in the field of embedded software for mobile phones.

North Korean IT-companies are now also targeting the European market, and the low tariffs and the available skills are major advantages.  Smaller and medium sized software companies can consider this country as a potential offshore destination, and should research the opportunities for collaboration or investment in more detail. Taking part in a study tour, as I have done, is an excellent way to get more insight in the actual business opportunities of a country – not only in the case of North Korea but for all nearshore and farshore destinations.

Paul Tija is the founder of GPI Consultancy, an independent Dutch Consultancy firm in the in the field of offshore IT sourcing. E-mail: [email protected]
GPI Consultancy, Postbus 26151, 3002 ED Rotterdam
Tel: +31-10-4254172 E-mail: [email protected]


Swiss foreign aid to DPRK

Thursday, August 17th, 2006

From Yonhap:

Swiss aid for North Korea totals US$4.2 million last year

Switzerland gave over 5.2 million Swiss francs (US$4.2 million) worth of relief aid to North Korea in 2005, a U.S. radio station reported Thursday.

The Washington-based Radio Free Asia based its report on documents from the Swiss Agency for Development and Cooperation and the State Secretariat for Economic Affairs.

Agriculture was the top priority in the Swiss aid, with about 1.7 million francs spent only on the extermination of vermin and the introduction of new breeds, the report said.

The two Swiss government agencies said the rest of the money went to non-agriculture sectors, including 900,000 francs for administrative management, 300,000 francs for social overhead capital facilities, 1.1 million francs for economic development, 700,000 francs for humanitarian aid and 500,000 francs for others, it said.

With its economy in tatters, North Korea has been relying on international handouts since the mid-1990s to help feed its 23 million people.


DPRK officials to get econ 101 in Switzerland

Tuesday, July 11th, 2006

From the Korea Times:

A group of North Korean officials will receive training on multilateral diplomacy and market economy in Switzerland this summer, a Swiss research institute said Tuesday.

The North Koreans, whose number was not immediately known, are slated to enroll for the training from Aug. 21 to Sept. 22 at the Geneva-based Center for Applied Studies in International Negotiations, center officials said.

The Swiss think-tank, founded in 1979, has been running a short-term training course for North Korean officials every year since 1997. Its program is financed by the Swiss Agency for Development and Cooperation, a governmental body which last year earmarked 5 million franc ($3.1 million) to help North Korea.

In 2004, 14 North Korean officials benefited from the center’s program.

During their stay in Switzerland, they visited the European Union, headquartered in the Brussels, Belgium, and met with members of the European Parliament in Strasbourg, France.


Light from the North?

Sunday, August 11th, 2002

Donald MacIntyre

Richard Savage kneels in the rich brown earth of a field on the outskirts of Pyongyang and reverentially spreads out the broad, green leaf of a young paulownia tree. The saplings have been in the ground for only a month but already they are a meter high; the first harvest could take place in just five years. Eyes shaded by his black cowboy hat, the Singaporean native gazes down the rows of juvenile trees, each worth thousands of dollars at maturity, with a satisfied grin. The experimental lumber crop has survived the harsh North Korean winter and is flourishing in the loamy soil. “The paulownia loves this,” he says. Glancing at another leafy plant, a new hybrid, he confides, “We’re going to let the Dear Leader name it.”

Hermit state, international pariah, charter member of the “axis of evil”?North Korea is hardly an obvious place for long-term investments like tree farms. The decrepit Stalinist economy depends on international handouts to prevent widespread starvation. The Dear Leader, strongman Kim Jong Il, runs the country like a medieval fief. But Savage is confident that his $23 million, 20,000 hectare Paulownia plantation south of Pyongyang will pay off. His Singapore-based company, Maxgro Holdings, is investing $5 million in North Korea this year, and he even has plans to build a resort there, complete with a 70-room hotel, horseback riding, trout fishing and all-terrain vehicles. “This is a mega-growth area,” he says. “If you don’t move now, you will have missed the boat.”

Whether Savage has boarded the Titanic remains to be seen, but there are increasing signs that North Korea at last may be opening its barbed-wire gates, economically and diplomatically. Last month, the authoritarian leadership increased food prices, set artificially low by the government, by as much as 50 fold, while increasing miners’ and scientists’ salaries by almost as much. Many observers say the reforms, including the elimination of some manufacturing subsidies, signal that Kim is edging toward a market economy instead of perpetuating a system in which North Koreans rely on virtually free handouts from the government.

Just as intriguing is the sudden burst of sunshine out of Pyongyang diplomats, the normally reclusive North Koreans are now clamoring to talk to Seoul, Tokyo and Washington all at once. Senior North Korean government officials are scheduled to travel to Seoul this week for ministerial-level talks, the first such tete-a-tete in nine months. Says Yim Sung Joon, a senior advisor to South Korea’s President Kim Dae Jung: “This is a very important moment for the two Koreas.”

On the agenda: everything from reunions of separated families to rebuilding a railway across the heavily mined dmz dividing North and South. In a surprise move, Pyongyang has already agreed to send athletes to the Pusan Asian Games next month, the first time North Koreans will take part in an international sporting event in the South. Japanese officials head to Pyongyang next week for talks that will include the awkward issue of Japanese nationals allegedly abducted in the 1970s and ’80s, Japan wants them back before the two countries can normalize relations. Meanwhile, North Korean Foreign Minister Paek Nam Sun met with U.S. Secretary of State Colin Powell for a 15-minute chat on the sidelines of the asean meeting in Brunei two weeks ago, the highest level encounter between the two sides since George W. Bush became President.

Is this the same country whose navy six weeks ago shelled South Korean patrol boats off the west coast of the peninsula, killing five sailors? It is, say observers, who speculate that the naval battle may have been an accidental clash rather than a deliberate provocation. The country’s recent reforms and overtures are, in fact, in keeping with an agenda dating back to the late 1980s, when the Soviet Union unraveled and left its client state, North Korea, without a dependable source of oil and food. The conventional wisdom has been that Kim is too scared of losing control to risk reform. But a devastating famine in the mid-’90s made it clear the country could not go it alone–that it must, to some degree, join the international economic community.

Frequent business visitors to Pyongyang say the North Koreans have been overhauling their investment laws and welcoming international trade delegations in the hope of attracting foreign capital. Government connections are still essential, but there are fewer layers of bureaucracy than in China, say experts on North Korean business practices. Once a joint venture is signed, getting things done is no tougher than in other developing countries. “I find it very refreshing to be here,” says Savage. “The guys are very straight.”

But North Korea’s agricultural output has fallen dramatically and its infrastructure is crumbling. Most of its factories have shut down and its electric power system is in shambles. The country has one of the worst credit ratings in the world and its currency, the won, is not convertible. Building the basic services that might make North Korea alluring to more foreign investors will take billions of dollars in loans from international lenders like the World Bank.

Lending cannot take place without assent from the U.S., and Washington won’t approve until North Korea allows inspections of all its nuclear weapons facilities. The country froze its nuclear program under a 1994 agreement with the U.S., in return receiving oil imports and a commitment–backed by South Korea and Japan–to build two light-water nuclear power plants in North Korea. Ground has been broken for construction of one in the port city of Kumho. But under the agreement, North Korea must allow the International Atomic Energy Agency to assess whether Pyongyang is living up to its promise to come clean on all of its nuclear programs, a process that could take several years. The U.S. and its partners want to begin soon. So far, Kim has refused to allow inspections to resume, and the standoff goes on. Says a Western diplomat: “The North Koreans are going to have to be viewed as extremely clean.”

Nevertheless, a few brave pioneers have set up shop in North Korea in anticipation of better times. Swiss data-processing company has run a joint-venture data-entry center in Pyongyang since 1997. Some South Korean companies have launched joint ventures in areas like animation and computer software. And Chinese traders do a booming business back and forth across the China-North Korea border. Robert Suter, who heads the Seoul office of Swiss power generation company ABB Ltd., says his firm is staking out a position in North Korea, “It is the same as it was in China years ago. You had to be there and you had to build trust.”

The question on many minds is whether Kim Jong Il, who has a history of trading friendly relations and empty promises for monetary assistance, is merely giving the world another head fake. His market reforms, according to skeptics, are designed not to liberalize the economy but to control the informal black markets that burgeoned during the famine, when the government could not feed everybody.

If North Korea is indeed serious about reform, it will begin by rebuilding its decimated manufacturing sector. The country needs to export goods if it is to earn hard currency to pay for the food and fertilizer it cannot produce itself. Cutting off subsidies to deadbeat factories is just a first step, and there is no evidence the government has a blueprint for moving further. “They aren’t scrapping the socialist system,” says Koh Hyun Wook, an expert on North Korea at Kyungnam University near Pusan. “These are makeshift moves to overcome the current economic crisis.”

Savage, the tree farmer, believes otherwise. He will be in North Korea with his Israeli irrigation engineers this week, setting up greenhouses and touching base with his North Korean partners. But he acknowledges his venture will require patience. The country “may be a bit backward,” he concedes, “but so what? If you are prepared to help, it will take off like a bloody bullet.” Or a paulownia tree.