North Korea's charm offensive

Behind the diplomacy, huge economic problems remain

By Caroline Gluck BBC correspondent in Seoul

Communist North Korea, better known for its reclusiveness and prickly behaviour towards the outside world, has in the past week embarked on a new diplomatic drive.

It is re-engaging its southern neighbour with talks this weekend, to pave the way for Cabinet level discussions after its surprise expression of regret for a fatal naval clash in June.

Kim Jong-il appears to be making reforms

The North has also offered to restart dialogue with the United States and Japan, while other reports say important economic changes are taking place which many believe could herald the start of free-market reforms.

At this week's Asian security meeting in Brunei, North Korea's top diplomat, Paek Nam-sun, stole the limelight.

During his 15-minute meeting with US Secretary of State Colin Powell, the two sides agreed to renew high level dialogue, stalled after President Bush took office and then labelled the North as part of an "axis of evil".

However, US officials have made clear that they will watch the outcome of this weekend's inter-Korean talks before making any decision about sending a delegation to the North.

But the developments are seen as positive signs that the isolationist state wants better relations with the rest of the world.

Many, like Jung Ro Kim, spokesman at the South's Unification Ministry, believe economic hardship in the North is driving the change.

Lone state

"It seems now that North Koreans realise that without having outside help, they are not able to rebuild their economy. But without improving relations with South Korea, it will be very difficult for the US to improve relations with North Korea," he said.

North Korea's children may grow up in a different society to their parents

Even more intriguing are recent reports from Pyongyang suggesting the state is taking tentative steps to reform its economy, including raising wages and relaxing price controls for the first time.

New reports suggest further changes: that family-owned companies and farms are being established and that the central leadership has transferred responsibility for managing economic production to local authorities.

Deok Ryong Yoon of the government-funded Korea Institute for International Economic Policy has been analysing the developments.

Hot and cold

Analysts say North Korea cannot survive as it is

"North Korea has had the command economy. It has distributed important resources with plan and command. But now it's changed the system. North Korea will distribute important resources with money. Now money will run or manage the economy; that's a great change. I think it's a big step towards the market economy," he said.

The North has proved highly unpredictable and its relations with the outside world wax and wane.

Yet Deok Ryong Yoon believes that the changes underway are genuine and part of a longer process.

"I don't think that the reform is cosmetic reform, because North Korea doesn't have any alternative. All of the old socialist countries are taking the market mechanism and north Korea cannot survive alone," he said.

The extent of the changes within North Korea - the world's most secretive country - are still unclear.

But any attempt by the isolationist state to open up and take its place on the international stage can only be welcomed, however slow the process may prove.