The central bank said the North's economy edged up due to the market liberalizations Pyongyang introduced last summer. But a government source recently challenged that statistic, saying that the North Korean economy had been "braindead" for several years, and that from a capitalistic standpoint it should have collapsed already. And an intelligence source claimed that the North's manufacturing industry shrank 26 percent last year after contracting 28 percent the year before.

North Korea experts agreed that the economic situation was dire, calling last year's reforms unsuccessful and saying the country has been unable to cope with supply shortages and the cessation of foreign capital due to the nuclear crisis.

According to food production data, however, the agricultural situation has improved; last year's production reached 4.13 million tons, up 4.6 percent from 2001, but still more than 2 million tons short of the country's needs. What's worse, the deliveries of 500,000 tons of heavy oil the United States had been providing on a monthly basis were cut off last November, provoking an energy crisis. A local think tank, the Korea Unification Institute, said in April said that the cutoff meant North Korea's electricity production would fall by up to 15 percent.

Since the new economic system was introduced last July, Pyongyang's news reports say that wages have shot up; but according to defectors, many people are not being paid and nearly all are suffering from high inflation. A woman named Kim who defected last October said that the wages were not being paid, despite being hiked, and that there were growing fears that the country was sliding back to the dire situation it was in from 1995 to 1997.

A North Korean miner and smuggler who makes frequent trips to China and back complained that life was getting very difficult because rice prices and taxes on products were rising; he said he started smuggling again to avoid starving to death.

Another worker from a military factory in Hamhung city said that he was getting paid but that people at other factories had been denied paychecks for five months, and that while rice distributions have stopped. (Kang Chol-hwan, nkch@chosun.com )