JIM LEHRER: Now, a look inside North Korea. Western journalists rarely are allowed to visit that secretive nation, but special correspondent Martin Himel traveled there recently and here's his report.
MARTIN HIMEL: The Min Jo Shik Tang Restaurant in Pyongyang. South Koreans, Chinese and other foreigners meet the privileged elite here. It's a place for deal making. North Korea is testing the waters of change, but very slowly and cautiously. South and North Koreans sing songs about reunification here. For now, it means flirting with each other in business relationships, ventures that have the potential of opening up the economy of this communist state. Cha Yong Sik is one of those officials probing business options with the outside world. He is a deputy director in the people's trade ministry.
CHA YONG SIK: Our nation is one. The song means... every song means that our nation is one. (Applause) It's our people, our parents, our sisters, you know, our family. If you have, how can say, to promote economic projects between South and North.
MARTIN HIMEL: Cha is meeting with Mihail Kocavic, a Serb businessman. Kocavic has arranged a grant of medical aid for the North. He also brokered with Cha an opportunity for me to see some of the problems facing this country. Cha opened the door for me to go beyond the socialist symbolism so prevalent here as in this facade of North Korea -- the monuments of communism, the quotes from the founding leader Kim Il Sung seen in public places throughout the capital.
While getting this closer glimpse of North Korea, we were always accompanied by government representatives and taping was limited.
MARTIN HIMEL: This is Pyongyang's central hospital. It's one of North Korea's most advanced facilities. But conditions are difficult. Seven to eight patients are sandwiched into beds, which stretch wall to wall. There are acute shortages of essential medicines. Modern equipment taken for granted in western hospitals are nonexistent. In the Ophthalmology Department, there is no digital technology, few, if any, computerized instruments. Resident doctors like Tang Chol So are always improvising. There are no spare parts for the old examining tools. They often fix the instruments themselves, trying to make them perform beyond their original design. Dr. Tang treated eye injuries during the recent rail explosion that claimed more than 100 lives.
DR. TANG CHOL SO (Translated): We don't have the proper medicines to treat people. If we just have some equipment, I could have helped them. If only I had the medicines, we could cure these people. I could have opened their eyes.
MARTIN HIMEL: There is a need to treat 20,000 cataract patients a year in this hospital. But according to Dr. Tang, they can only help 5,000. There's even a shortage of sanitary gloves for operations. Doctors here blame the United States for a shortage of medicines and facilities. They claim American sponsored sanctions, which were tightened because of the current nuclear crisis, are aggravating the medical problem.
DR. TANG CHOL SO (Translated): We are blocked in our dealings with other countries. We want to trade with western and advanced countries. But we have a problem with the system and with sanctions. Experts cannot visit us and we cannot visit them.
MARTIN HIMEL: Education is very important in Korea, just like in any other country. It's considered the future for its citizens. At Pyongyang Medium School, they face unusual challenges. In this chemistry class, there are no labs, no experiments, no computers for basic research. And if there were computers, the Internet is banned in the country. Textbooks are not replaced or advanced. There is an acute lack of notebooks. It all stems from a serious shortage of paper supplies. This prestigious foreign language school shows another side of the experiment to open up the country a little.
STUDENT: My name is Linda.
STUDENT: My name is Sue.
STUDENT: She's my mommy.
STUDENT And she's my wife. (Laughter)
MARTIN HIMEL: Students are encouraged to master English and other languages.
STUDENT: Tomorrow is a holiday. We are going on a picnic.
STUDENT: Oh, great. We have to get up early.
STUDENT: That's great.
MARTIN HIMEL: But since they are barred from outside television, the Internet and unauthorized contact with the outside world, their English is literal, not conversational.
STUDENT: I'm going to have a picnic in Italy.
STUDENT: In Italy? It's very nice.
STUDENT: The landscape in Italy is very beautiful, indeed.
STUDENT: That's very nice.
MARTIN HIMEL: On the one hand, North Korean officials say the country needs a new generation that can interact and trade with the outside world.
STUDENT: Water is becoming a lot deeper.
MARTIN HIMEL: But at the same, time, these students are limited by restrictions imposed on their contact with foreigners. Ma Gun Hai is one of the school's finest pupils. She would like to talk to foreign students to ease their concerns about her country.
MA GUN HAI: People feel afraid of things because they don't understand us, and if they understand, well... it's understanding comes from sharing and experiencing. Teacher says "seeing is believing." If people come in and spend some time with us and get to know our culture more better and get to know our people more better, they will know that we can be very good group. I would say that that would create relationships and, like, friendly relationships.
MARTIN HIMEL: All around, even a guided visitor can see why North Korean leaders are ready to try some economic experimentation. This is a poor country. A visitor sees very few private cars. The official stores have few quality goods. Pyongyang depends on old Russian electric generators, which cannot meet demand. At night, the city is unusually dark. Only the Ju Che Tower commemorating the philosophy of Kim IL Sung remains bright.
We were only allowed to record pictures of the impoverished countryside from our vehicle. There are very few tractors to maintain rice fields. Labor is back breaking. The highways have little or no traffic. After facing several years of starvation, the situation has improved somewhat. Foreign aid has made up much of the shortfall but there is still a gap of 400,000 tons of grains. The government is trying to make up the shortfall by allowing farmers to select which crops to grow and to sell part of the produce privately in sanctioned capitalist markets like Tong IL We visited the Tong IL market but we were not allowed to film there, so we filmed the Pyongyang International Market. Unlike the official stores, Tong IL is full of merchandise and shoppers, but only a small number of North Koreans have the hard cash to buy there. North Korea is slowly beginning to understand it must have market exposure like Tong IL
Another sign of this experimentation is this international exhibition where the Peace Motor Company is promoting its new jeep. Another co-venture with Fiat has produced this vehicle for sale. For now, it's being offered locally as a potentially first middle class car. The cost is far beyond the reach of most North Koreans. But the biggest and possibly most ambitious project is Hyundai's industrial park. Hyundai is one of South Korea's leading automotive industry producers. In this conference room, Senior Vice President Jae Won Shim is managing the Industrial Park Developments, which is now breaking ground just inside the North Korean side of the demilitarized zone.
CHA YONG SIK: We are coming a lot of economic companies from South Korea and we are build together some joint economic zone straight away on the demarcation line.
MARTIN HIMEL: Hyundai and its associates will invest $20 billion over seven to ten years to build 16 factories to produce cars, trucks and parks. The infrastructure could provide jobs for up to 300,000 North Koreans. The cheap labor would benefit Hyundai, and the massive investment could be a model for transforming North Korea's closed society and economy. The numerous photos of North Korean leader Kim Jung IL with the Hyundai management demonstrates official support for the project.
This industrial park is symbolically located next to Korea's ancient capital, Kae Sung. It was the first capital of the Koryo Dynasty. These kind of ventures have been promoted by the South Korean government. It hopes to use the country's vastly superior wealth to moderate the north's xenophobic policies. Some South Koreans remain cautious and advocate conditions for that assistance. While many in the North Korean elite want to gently open the gates to their country and increase investment from South Korea, there are few signs that this desire has changed North Korea's basic view of the world, especially its nuclear ambitions. At the demilitarized zone, North and South Korean soldiers still face each other down. It hasn't changed in a half a century. Major Phack Myong Chol guides us in the demilitarized zone. We were told not to ask him questions.
SPOKESPERSON: (Translated): That is the American post.
MARTIN HIMEL: That just paved the way for him to make a carefully crafted and approved political statement reaffirming North Korea's self-prescribed need for a nuclear weapons defense.
MAJOR PHACK MYONG CHOL: (Translated): America's Bush strengthened his aggressive policy against us. He declared our state as part of the axis of terror. He intends to attack us with nuclear weapons. We do not hide the fact that we have our own nuclear deterrents. There is no war in the Korean Peninsula. There is still an armistice because we have this power.
MARTIN HIMEL: That hard-line overshadows the efforts by some North and South Koreans who hope for unification, an aspiration echoed in their song and verse. The North Korean government desperately needs the investment from the south. But it fears that if it opens the gates too quickly, that will undermine its power.
JIM LEHRER: The U.S., North and South Korea, Japan, China, and Russia completed talks this past weekend aimed at curtailing North Korea's nuclear program. Those talks are expected to resume in September.