Monday, Feb. 19, 2001

Hard-Line Software

By TIM LARIMER Seoul

You're on a nearly empty plane to Pyongyang, the capital of mysterious North Korea, and the only other passengers are a nuclear nonproliferation expert and a foreign-aid donor. What are you?

A. A Michelin restaurant reviewer?

B. A dotcom boss looking for high-tech computer software?

C. A retiree in search of a summer home?

Before you can say "None of the above," the answer, surprisingly, is B. Hermetic, borderline-sociopathic North Korea is going into the high-tech export business—and customers are buying. True, the trade is tiny and all the purchasers are from South Korea. But it's a start for a nation that was on the verge of mass starvation a couple of years ago. And if North Korea is going to make it economically, South Korea is the partner that matters. "We speak the same language and share the same culture," says Park Young Hwa, who is executive vice president of South Korea's giant Samsung conglomerate and runs the company's business with the North. "It's a logical place for us to find new talent."

In the past, North Korea's main exports were missiles—either shipped surreptitiously to other rogue nations or shot off launch pads to scare Japan and the rest of the world. The missile industry could well be shut down if North Korea's Dear Leader Kim Jong Il cuts a deal with the worried West; former U.S. Secretary of State Madeleine Albright tried to hurry along such a pact during her visit to Pyongyang in October. In 1994, North Korea mothballed its nuclear weapons program in exchange for oil, aid and a pair of nuclear power reactors from the U.S., Japan and South Korea. A similar trade-off would make it necessary to find new ways to earn cash.

North Korea may actually possess world-class expertise. It takes a lot of engineers, technicians and software whizzes to develop nuclear weapons and missile technology. That talent is being put to commercial use in an attempt to spin off a high-tech industry in a decidedly low-voltage nation. "The rocket fired over Japan in 1998 required software capability," says Kim Jin Mook, an Internet entrepreneur in Seoul with North Korean business contacts. "That's proof of their capability."

A few South Korean businesses—ranging from entrepreneurial cowboys to staid conglomerates—are testing the waters. Several now employ Korean Computer Center (KCC), a state-owned enterprise in Pyongyang, to write software. Its specialty is Mission Impossible-type programs such as voice recognition and fingertip identification. Seoul-based Deshine.com, meanwhile, is importing animated films.

Asian nations have tended to follow the Japanese export model of development, starting with labor-intensive manufacturing of low-cost items like shoes and garments, then moving up the high-tech ladder to refrigerators, TVs, vcrs and, eventually, computer components and software. North Korea doesn't have that luxury: it has no cash for capital investments and no private sector. South Korea has a unique opportunity to pump up North Korea's economy. Despite years of animosity, it is probably in the South's interest to facilitate the North's economic growth. "If North Korea collapses and forces premature unification, both sides would be completely ruined," says Dong Yong Seung, an economist who concentrates on North Korean issues for Samsung's Economic Research Institute. "Seoul can't support both economies."

For now, North Korea is focusing on software. "There is money in IT," says Cho Myung Chul, a researcher at the Institute for International Economic Policy who defected from the North in 1994. KCC, established in 1990 by the late Great Leader Kim Il Sung, is the primary source. It has about 800 employees who appear to have an average age of 26, according to people who have visited the firm.

Much of these software exports go through KCC's Beijing office. South Korean businessman Joo Young Su paid a visit there last year and was struck by a program called Golden Horse. The software scans fingertips and then attempts to diagnose a person's health. Joo paid $1 million for the program, which he is marketing to herbal medicine shops that have computers. Samsung, meanwhile, paid $730,000 for five KCC programs, which it is loading onto its PCs. They include cooking software, a chess game and a reading program for children. "Their programmers don't have a lot of access to the outside world," says Samsung's Park, "but their fundamentals are very strong."

The thaw between the two Koreas is opening up avenues to trade. Last year Seoul eased restrictions on the import of cultural goods, which  allowed Baik Soung Ook, president of Deshine.com, to buy the rights to seven animated films produced at Pyongyang's 425 Studio. "Everybody thinks these films must be tainted by ideology," says Baik. "Actually they are very educational." Some are obvious parables of Kim Jong Il's life, but one features an apolitical silver rabbit that Baik hopes to merchandise in South Korea. "My hope is that children in North and South Korea can share the same movies and cartoons," says Baik. "Then they will have something in common to help build a unified Korea." That's a goal long-range missiles could never reach.