COLUMN ONE : N. Korea Trolling for Dollars : The isolated Communist nation now seeks foreign investment. It's not an ideal place for capitalists, but payoffs could include helping to stabilize an unpredictable regime.


On normal days, the train crossing the rickety wooden bridge over this muddy boundary stream carries key shipments of coal, rice, wood and workers between North Korea and Russia. But one sunny day last week, a special express bore a rarer and more unusual cargo: 145 business executives, scholars and journalists, most from the United States, Japan and South Korea.

They braved a bumpy ride to the Tumen River area and three seaports, and three days without showers, to witness Pyongyang's most elaborate attempt yet to sell North Korea--and its staunch Stalinist system--as an inviting prospect for foreign investment.

As the Communist leaders here have discovered, not even North Korea, perhaps the most isolated nation in the world, has been able to shield itself from the aftershocks of the Soviet Union's collapse and the ensuing destruction of socialist markets. The new world order has meant that a country that trumpets its juche ideology of self-reliance is scrambling for new partners to rescue its shaky economy.

And though its ideological rhetoric still decries the evils of capitalism, American imperialists and Japanese colonial masters, North Korea is turning to all three--among many others--for help.

"The Cold War and socialist market have disappeared from this globe," said Deputy Prime Minister Kim Tal Hyon at a Pyongyang news conference. "The world is changing and times progress. We welcome foreign investment from any side."

Bringing North Korea out of its isolation could yield far more than economic benefits. It would help stabilize what many American officials regard as an unpredictable, dangerous regime headed by Kim Il Sung. He and his government, among other things, are accused of secretly developing nuclear weapons and sponsoring state terrorism.

But however compelling those stakes may be, Pyongyang's proclamations of change will not be enough to dissolve the considerable global doubts about its credibility. North Korea is plagued with a miserable credit record, a near-absence of legal protections for foreign investors and long memories in Japan, Europe and elsewhere of investors having been burned once before.

In the early 1970s, Pyongyang made similar appeals for Western capital and technology. Many of those who responded are now sitting on piles of bad debt. Deputy Prime Minister Kim pegs the nation's foreign debt at $1 billion, but others estimate it at $4 billion or higher.

And though Pyongyang itself is an impressive city of towering monuments, tree-lined roads and gracefully landscaped parks, the nation's overall system of airports, roads, bridges, electricity and telecommunications falls far short of what is required to feed a modern industrial system.

There are no labor strikes. But keepers of political correctness--the "Three Revolutionary Groups" founded by the nation's No. 1 son, Kim Jong Il--disrupt factory operations with political meetings and other ideological activities. "They can do anything in the name of juche ," said one Asian analyst.

In a region awash with more aggressive Asian economic tigers, then, why would anyone choose North Korea? The answer: Not many are, at least not yet.

"Not many companies are serious about the idea of investing in North Korea," said a Japanese executive, whose firm is still owed money by Pyongyang. "There are still too many risks, and so many other countries to invest in instead."

Still, strapped for cash and trading partners, North Korea has little choice but to plunge ahead.

In recent months, officials have declared the Tumen River region, where the borders of North Korea, Russia and China meet, and three northeastern seaports an economic and free-trade zone. They have joined a six-nation (North Korea, South Korea, Russia, China, Japan, and Mongolia) Tumen development project as part of Pyongyang's first real attempt at regional economic cooperation. And they have applied for membership in the Asian Development Bank and launched efforts with the U.N. Development Program to find overseas business partners and to learn modern management.

At every forum that they can, North Korean officials offer a pitch for their nation's well-disciplined, 99% literate population of 25 million, who work for an average wage of $70 a month--one-tenth the cost of South Korean labor. They also boast about the more than 100 joint ventures that have been established in the last eight years.

The Italian bankers, German garment makers, Hong Kong hoteliers and other foreigners on the receiving end of Pyongyang's lobbying profess to be interested in new contracts. Although North Korea is more than a decade behind China and trails even Vietnam in vying for foreign capital, Pyongyang's recent measures mark what U.N. official Nirmala R. Williams calls "remarkable progress" in opening up.

The recent Tumen River tour was a prime example of North Korea's sales efforts. The participants included representatives of Daewoo of South Korea, Bank of Tokyo, journalists from the major American and Japanese newspapers, foreign diplomats and East Asia scholars.

Never mind the 40-hour train ride to hell, as it was quickly dubbed; the high-spirited tour participants learned to ignore the shortage of toilet paper, the absence of hot water, the relentless revolutionary music and the inescapable odors of cigarette smoke and kimchi. Why? Because, overall, for this visit Pyongyang had pulled out all the stops.

Tour members were treated to a lovely picnic on a beach closed off by an electrified fence. They were stuffed with jellied pig, ginseng wine and other banquet delicacies. They were overwhelmed with odes to the "Great Leader" Kim Il Sung in colorful operas and mass gymnastic games created in honor of Kim's 80th birthday last month.

The North Koreans even arranged controlled visits to model factories, apartments and schools. There, they allowed reporters to conduct interviews--confident, perhaps, that the state's rigid indoctrination, said to begin at age two for most North Koreans, was so thorough that even impromptu questions would yield no embarrassing responses. They did not.

Still, there were cracks in the performance. A row of what seemed to be shiny new apartment buildings, built for Kim's birthday and the subject of official boasts, turned out to have no running water or electricity; when reporters tried to stroll into the town of Chongjin to talk to people, security guards refused to let them leave the enclosed dockyard.

Despite assurances by Deputy Prime Minister Kim that North Korea faces no catastrophe, few outside Pyongyang believe him. "We have listened to their speeches for three years and it's always (asserted) that they've made tremendous achievements and this year will be brilliant. . . ," said one foreign diplomat. "But they are facing a hard economic crisis."

Just consider the traffic over the Tumen River. Until last year, 12 trains chugged over the bridge every day: six from Russia laden with coal, oil and wood; six from North Korea holding rice, apples and workers. But since last year, traffic has plunged to only one or two trains daily, illustrating the precipitous drop in commerce with what used to be North Korea's most important trading partner.

Ever since Russia began demanding hard currency in January, 1991, North Korea has been increasingly pressed to pay for the goods it needs, and bilateral trade has dropped by as much as 60%, Pyongyang-based diplomats estimate.

During a visit to the northeastern seaport of Chongjin, the North Koreans proudly explained the port's capacities and towering industrial complex of smokestacks and steel mills. But the more experienced eyes among the South Korean and Japanese visitors noted that the port was far too clean, indicating that "nothing is going on, in terms of trade," as one industrialist said.

The North Koreans admit as much. "Because of the quick destruction of the socialist markets, we are facing difficulties. We can't import oil and other resources in time, and we can't export our goods," Deputy Prime Minister Kim said, in unusually candid remarks. He would not respond to requests for economic data, saying, "We are not clever at figures."

But foreign analysts in Pyongyang and abroad say factories are running well below capacity.

Meanwhile, Russian oil shipments have dried up to zero this year, down from 700,000 tons in 1989 and 40,000 tons last year, diplomats said. Only the willingness of China and Iran to continue barter trade, supplying more than 1 million tons of oil a year, has saved North Korea from disaster.

Food also is said to be in short supply. North Korea was forced to import rice last year, mostly because of weather-related crop failures; the government, according to those who saw the propaganda posters, was forced to launch a public campaign calling on citizens to eat two meals a day.

But glimpsed from a passing train, conditions in the countryside did not appear desperate. Rows of neatly kept brick-and-mortar homes dot wide expanses of rice and vegetable fields; the morning and evening smoke from chimneys indicates the presence of at least some fuel.

There was, though, a jarring sight--acres and acres of mountains stripped of trees, reportedly the product of an attempt to coax more food from the exhausted land by terracing hillsides. The attempt, South Korean sources said, has led to increased erosion and flooding.

In Pyongyang itself, the scene seemed cheery enough: People strolled the streets wearing new clothes given to them by the Great Leader on his 80th birthday April 15; they lined up for ice cream, filled the local noodle shops, cruised the department stores and, when asked, cheerfully insisted that life is fine.

Still, their nation's mounting difficulties have pushed North Korea's leaders to search for alternatives.

Enter the capitalists--the most eager of whom may well be Koreans in the south and in Japan. For them, supporting the north is a matter not only of business but of brotherhood. An estimated 80% of the nation's joint ventures are with pro-north Koreans in Japan, although most of the enterprises are relatively small and confined mainly to services such as restaurants; one Japanese expert said most are unsuccessful because of ideological meddling.

But a visit to the Patriotic Peony Factory in Pyongyang illustrates the potential payoffs. Since 1990, the factory has churned out men's suits using imported Japanese fabric and $1.2 million of modern Juki sewing machines--a gift of a pro-North Korean company in Japan.

The North Korean company exports 90% of its production to Japan for a consortium of 17 firms. Last year, the North Korean firm shipped 120,000 suits and received a payment of $1.2 million--$10 per suit. Factory manager Jon Song Won did not know the suits' retail prices in Japan; they are generally more than $100, so there is a sizable profit margin.

In contrast to labor strife in South Korea, factory manager Jon says North Korean workers "don't even know the word strike "--music to the ears of business managers.

Such advantages have attracted the eye of South Korea's vast chaebols, or conglomerates. Daewoo may be the leader, having agreed to set up eight projects producing leather, textiles, garments and shoes in the Nampo region, 25 miles southwest of Pyongyang. Kim Duk Choong, Daewoo's former chairman and now executive counselor, said the firm decided to invest in the north because of its similar language and culture, short distance from the south, favorable deals (including offers of free land) and a generally industrious work force.

But Japan--the regional titan of technology and capital--is far less enthusiastic about North Korea as a place for investment.

At one level, there are still anti-Japanese slogans in North Korea. Pyongyang, however, also has made it clear that it is eager to attract Japanese support. And though they don't like to recall it, the northerners' nearly 100-year history of industrialization is largely attributable to their former Japanese colonial masters, who constructed the northeastern port of Najin, built the steel complex at Chongjin and put up much of the nation's other infrastructure.

The Japanese, though, were burned in the 1970s by Pyongyang and are not eager to have that happen again. In particular, a group of Japanese between 1972 and 1974--when North Korea was beginning a new seven-year plan and sought capital and technology--supplied equipment for 20 enterprises that quickly defaulted on their payments; they still owe $700 million, the Japanese say.

Still, it will probably fall to the Japanese government to infuse North Korea with capital. As part of their ongoing talks on normalizing relations, Japan is likely to pay the north wartime "reparations," as it did with the south; Pyongyang probably will not get money, but loans or grants for industrial development.

Despite the problems, most observers agree, many nations will eventually line up behind North Korea simply because the alternatives are bleak. "If you can convert this sea of military conflict into a zone of economic cooperation," said scholar Lee Jay Choy of the East-West Center, "imagine what an achievement that would be for the human race."

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