North Korea: reforms at work

North Korea, which has taken Iraq's place as "the evil empire" in movies, is no longer as closed to outsiders as it used to be, especially if they come from Russia, China or South Korea, the closest neighbours of the last communist country on earth.

The international airport of Pyongyang is empty as a mausoleum, which comes to life only with the sounds of flights from and to the nearest Russian and Chinese cities, though some businessmen and tourists cross into the country by land.

During my previous visit to Pyongyang, which lasted barely a day, I met at least 50 Russian school students there, who came from Vladivostok to the warm seacoast of North Korea. This time I stayed at a hotel where my neighbours were the troupe of the famous Moiseyev Dance group from Moscow and many people in lifts spoke Chinese.

I hope readers will not protest against my using the classic trick of comparing impressions of several visits to a country, the more so that the last time I visited North Korea in the summer of 2002, the country was launching a history-making economic reform.

However, the reform was soon overshadowed by the "nuclear scandal," which broke out in the autumn. I mean the statement by the US State Department that North Korean diplomats had admitted to Assistant Secretary of State James Kelly in October 2002 that the country was working on nuclear weapons. North Korean diplomats say they did not make any such admission. At any rate, since then the "nuclear" subject has become nearly the only word that turns up on the Internet when you run a search for North Korea. The word "reform" no longer gets a look in, which is a shame.

The point is that the nuclear crisis, which resulted in the termination of US fuel oil deliveries to the North Korean thermal power stations and froze the construction of a nuclear power station, did not cut short Pyongyang's economic reforms. I could see the evidence even during my short visit there.

Pyongyang at night, which used to be pitch black two years ago, now gleams with rare lights. It is nothing like the night sights of Tokyo or Seoul, yet windows in residential blocks are lit and people queue in even lines to trolleybuses.

Fuel oil now comes mostly from China. The agenda of the six-party talks on the North Korean nuclear problem, which involve Moscow, Beijing, Washington, Tokyo, Seoul and Pyongyang, includes a proposal on resuming energy supplies to North Korea, to be paid for not by the US but by South Korea and Japan. Electricity will most probably come from Russia. The giant Bureya hydroelectric power station that was recently commissioned in Russia changed the situation in the Russian Far East, which used to suffer from blackouts. Moreover, the plant produces enough electricity for exports to South and North Korea. The idea is being discussed independently of the six-party talks.

There are cars in the once empty streets of Pyongyang and one can say that there are many of them - by North Korean standards. The streets are decorated with traffic police girls in their snow-white uniforms, beautiful as supermodels. They leave their posts at the crossroads only when it is extremely cold or hot, when electricity-consuming traffic lights are turned on. But the first cases of auto hooliganism and the first car accidents, as well as street advertising have been registered in the North Korean capital. The advert in question shows the Heiparam (Wind Whistle), a car designed jointly with South Koreans on the basis of an Italian Fiat.

The country now has its first mobile telephones - the project was undertaken by the Chinese, whose rip-off charges are $1,500 for subscription and €3.75 for a minute of airtime. China and France have demothballed a world-famous project in Pyongyang - a giant 105-storey skyscraper in the form of a pyramid. Apart from that megaproject, there are many other, more modest construction sites all over Pyongyang, where housing is built manually, without any resort to cranes and other equipment.

One more obvious result of the reforms is the brighter clothing in the streets. It is a result of Chinese trade, which will gain the most from the reforms, whose essence is the appearance of money and the first sprouts of a trade and commodity markets in North Korea.

The trouble of that country of classical communist distribution system was that it had too many kinds of money: wons for the common people, wons for bosses and big bosses, and a special kind of money for foreigners. The system copied the classical examples of the Soviet Union and China at the peak of their communist economies.

The first stage of the reforms in North Korea entails a rise in salaries and a drop in prices. There is now only one type of wons for everyone and euros for the lucky few. The country changed from US dollars to the euro two years ago, "so as not to support the economy of a hostile state." Both exchange bureaux and cashiers in shops will accept dollars at the dollar/euro rate. But South Korean wons are not accepted anywhere.

Those who live in Pyongyang permanently claim that currency exchange is not a problem, but it is rumoured that there are black market exchange centres that cater to an established clientele alone at a rate that differs from the official 174 wons per €1. But these people mostly work with the currency of neighbouring China, which is officially not in demand.

The average salary in North Korea is about 6,000 wons, while a kilo of rice costs 200 wons and leather shoes, 20,000 wons. But the people mostly wear cheap rubber-soled fabric shoes and rubber boots in rainy weather. The main difference is that, unlike in the past, nobody asks North Koreans where they got their wons or euros or even such luxury as leather shoes.

There are many vendors under fabric canopies in the central streets of the city, which reminded me of the Soviet Union during Mikhail Gorbachev's first experiments. There were kiosks in Pyongyang in 2002, too, but there are many more of them now. The traders are private owners, who became, along with peasants in outdoor markets, the first private owners in North Korea, and salesmen from state shops (it is their first trade initiative).

A large outdoor market was established in Pyongyang in 2003 which even foreigners are allowed to enter. In the past, "foreign devils" had to buy essentials in several specialised shops where locals were not allowed. Traders at the market mostly sell food and very cheap clothes and footwear from China. The same is true about the shops. Economists have noted a certain levelling off of prices at the market, in kiosks and in state shops. This is pleasant difference from the Soviet Union and China that can be explained by the fact that everything happens very slowly in North Korea.

There are 187 "hard currency" shops open to everyone in Pyongyang, which has a population of two million. One of them, Rakwon Department Store, sells not just the bare necessities but also ostrich eggs (ostriches are grown at special farms), Spanish olive oil, local hard liquor and wine made from wild grapes, which has a distinct taste of plum and cherry pits. There was also a nice collection of brandies, tequila, flat screen televisions, and many other luxuries.

The reforms have boosted the country's foreign trade, mostly owing to growing imports. Finding one's way through North Korean statistics is a hard job, but experts say North Korea's trade with China is about $1 billion a year, with a major tilt in favour of Beijing. Trade with Russia accounts for only $130 million. South Korea is not unlike Russia in terms of trade with Pyongyang, because it is involved not so much in trade with its northern brother as in joint projects, including the Kaesong industrial zone (the construction of factories is in the groundbreaking stage) and Kumgangsan, the famous Diamond Mountains.

Russia-North Korean joint projects are located in Russia, where up to 4,500 North Koreans mostly fell timber. However, Alexander Shuruburin, the new trade adviser of the Russian Embassy in Pyongyang, says North Koreans are not just highly disciplined but also well educated and trained workers. North Korea supplies computer equipment of commendable quality to the Russian Far East.

These notes form a useful background for those who want to find their bearings in the underwater streams at the six-party talks and the positions of parties. Neighbours think North Korea offers good economic possibilities whose results may be seen in the not too distant future.

How will the North Korean reforms end? Nobody can tell, but the country is changing visibly, though at first glance it may seem the same as it did years ago. There are slogans on the roofs of houses, speakers disgorge loud marches that remind me of second act from Verdi's Aida, and the American aggressor on posters is pinned to the earth with the North Korean bayonet. But forget about bare windows - there are lace curtains in them. As for floor to ceiling mirrors behind which secret agents sit with their recording equipment, as guidebooks used to write, I had one in my room in Hotel Koryo. Understandably, I did not see the agents behind it. But this time I was staying in the 47-storey Hotel Yanggakdo, which has an almost empty restaurant turning around in the clouds at the top. I can assure you that there was no room for such archaic spy equipment behind the mirror, which simply hung on the wall.

So, the nuclear crisis has not ended reforms in North Korea, though the speed of reforms in that last communist country largely depends on its settlement.