credit ratings, it has a decidedly unappealing investment climate, given its leadership unpredictability and the secrecy of its economic data. Unable to sell its capital import and trade policy on its merits, Pyongyang appears to believe it has no option but to turn grimly inward and practice rigorous austerity. A sense of urgency was evident in Pyongyang's behind-the-scenes contacts with South Korean trading firms beginning in 1987--until then politically unthinkable in light of the North's public disparaging of South Korea's economic achievements. To make matters worse, the crumbling of the Soviet bloc proved devastating for the North's economy, which had depended on the former Soviet Union for half of its trade turnover. Ensuing economic dislocations led to negative economic growth in the 1990-92 period, estimates ranging from -2% in 1990 to -10% in 1992.1a In December 1991, the North announced it would set up a special economic zone. The following year, it sent an unprecedented government economic delegation to Seoul for first-hand observation of South Korean factories. Since then, the government has announced more steps to make the country's economic climate more attractive to foreign investors. Future prospects for North Korea's economic development are not encouraging, as Pyongyang seems opposed to internal reforms. For a command regime used to doing things its own way, economic reform could be very painful and possibly frightening, particularly given Pyongyang's stormy past relations with the world's major economic powers. Since North Korea's centrally planned, autarkic command economy has been an integral part of Kim Il Sung's vaunted infallible leadership, structural reform appears unlikely for now. Incrementally adjusting the system could unravel the DPRK, as happened to the socialist regimes of eastern Europe and the former Soviet Union. "For the Kim Il Sung regime," as one analyst put it, "the lessons of history are unequiv...
