JEAN CHUNG / ONASIA FOR TIME

TRADE: A North Korean shows her travel documents. More residents are being allowed to visit relatives in China; many return with goods to sell

Going into Business
	The state can't feed its citizens, but cautious economic reforms have led to a growth of enterprise, markets and trade. Can the regime keep a lid on the changes?
	By Donald MacIntyre | Seoul

Posted Monday, February 14, 2005; 20:00 HKT
As a crumbling vestige of Stalinist economic planning, North Korea is one of the last places on earth where you would expect to find a bustling central market. But the city of Hoeryong, located beside the Tumen River on the border with China in the northeast of the country, has just such a venue, and it is helping its inhabitants improve their lives. In the 1990s, untold numbers of locals starved to death during a North Korean famine that may have killed some 2 million or more nationwide. Life under the country's dictator Kim Jong Il remains brutal for Hoeryong's estimated 100,000 residents, but at least they no longer need to depend completely upon the state and foreign donations for food and a few simple pleasures. Today, according to interviews with more than a dozen smugglers, traders and migrant workers who routinely slip between China and North Korea, and with many refugees from the North now in South Korea, the market teems with shoppers' inspecting sacks of rice and corn, boxes of apples, bananas and tangerines. On wooden tables under makeshift awnings, pork and fish are on sale; so are Japanese TVs and VCRs, South Korean cosmetics, fashionable sportswear from China, illegal imported sex videotapes—and if you know who to talk to, North Koreans say you can even purchase a home, an outrageous capitalist sin in a country where private property is anathema. "You can buy anything and everything in the market," says Park, a Hoeryong trader who sells televisions she brings in from China. (Like all North Koreans TIME talked to for this story, Park spoke on the condition that her real name not be used.) "Everybody wants to be in business."

That image of entrepreneurialism in flower is very different from the conventional view of a destitute, desperate Hermit Kingdom. Since the end of the Korean War, the North's borders have been almost entirely closed to Westerners, so learning what's going on inside Kim's black box is difficult. Yet this knowledge is vitally important to diplomatic efforts designed to persuade Pyongyang to abandon its nuclear weapons program. In Washington, Tokyo, Seoul and Beijing, negotiating strategies remain polarized. There are those, like some hawks in Washington, who believe the rotting economy of the North is close to a complete breakdown that would topple Kim—and that his demise can be hastened as long as the regime is not propped up with donations of money, food and oil, which Kim in the past has demanded in exchange for peace. But others doubt that the North is on the edge, and argue instead that Kim can be coaxed into abandoning failed command-economy policies and begin a slow transition to capitalism. South Korea's President Roh Moo Hyun is in the latter camp. On a visit to Warsaw in December, Roh stated that economic pressure was a waste of time. "There's almost no chance North Korea is going to collapse," Roh said.

The tales from Hoeryong's traders suggest neither camp has got it exactly right. In 2002, Pyongyang implemented cautious economic reforms. Strict price controls on staples such as rice were relaxed, factory bosses were ordered to start earning profits, and workers were encouraged to perform longer hours to earn more pay. But the reforms had consequences that went far beyond what the government planners seem to have intended. Black-market prices for rice and corn soared by more than 10 times, while salaries, fixed by the state, stagnated. To make up the shortfall, North Koreans started trading among themselves, setting up bakeries, tailor shops and makeshift gasoline outlets. An unofficial market of smugglers and loan sharks, whose services were now much in demand, is flourishing while bureaucrats look the other way—or go into business themselves.

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