The boom largely stemmed from increased North-South cooperation at Kaesong, where three South Korean companies have begun operation during the past six months. Twelve other companies are scheduled to start up by the end of the year. South Korea, which is North Korea's second-largest trading partner, is also pressing ahead with agreements for new road and rail links to help boost trade over the heavily fortified border.
North Korea's economic ties are particularly hot with China, its largest trading partner and long-time political benefactor. Bilateral trade nearly doubled between 2002 and 2004 to $1.39 billion, according to KOTRA.
North Korea's trade with Russia grew faster over the same period, from $80.7 million to $218.4 million. Among North Korea's top trading partners, only Japan, siding with the United States, has scaled back economic ties.
Supporters of engagement with North Korea argue that the Bush administration might have avoided the growing political crisis had it been willing to compromise with the Pyongyang government, either by providing more explicit security guarantees or by outlining more fully what the United States is prepared to offer the North in exchange for disarmament.
Nevertheless, East Asian diplomats who favor closer ties with North Korea say it would be difficult to defend trade and business investment in North Korea if Kim decided to conduct a nuclear test.
South Korea and China have not said how they would react to a North Korean nuclear test.
North Korea's neighbors -- with the exception of Japan -- share a vital strategic interest not shared with the United States. The Bush administration would welcome tough economic sanctions that led to Kim's fall. But a sudden collapse of the government in North Korea is considered potentially catastrophic to its neighbors because millions of destitute North Korean refugees might flood across the borders.
While South Korean military analysts say North Korea's 1-million member army is still the most serious threat, most South Koreans no longer view the North as a dangerous enemy. A public opinion survey in January by Research & Research, one of South Korea's largest pollsters, asked this question: "Which country is the most threatening to South Korea?"
Of the 800 respondents, 39 percent named the United States, which maintains 37,000 troops here. North Korea came in second, at 33 percent.
"We have lots of reasons for wanting to do business in North Korea; the labor costs are lower than in South Korea or China and a North Korean worker pretty much does what he is told," said Oh Jung Min, executive director of El Canto, a shoemaker that became one of the first South Korean companies to cross the border when it invested in a Pyongyang factory in 1997.
"But stronger relations with North Korea is also good for South Korea's future," he said. "The last thing we want is for them to be our enemies."
Meanwhile, North Korea said Wednesday that it had completed the removal of another batch of spent fuel rods from its main Yongbyon nuclear complex in a key step toward building more nuclear weapons.
North Korea's official KCNA news agency quoted a Foreign Ministry official as saying the country had "successfully completed" removal of 8,000 fuel rods from the five-megawatt reactor at the center of its Yongbyon complex, which is located about 60 miles north of Pyongyang.
If cooled for several weeks, the rods can be reprocessed into weapons-grade plutonium -- the step North Korea is believed to have taken with a similar batch of spent fuel rods in 2003. The announcement suggested that the country is prepared to do so again.
Intelligence officials in Washington and Seoul had noted that North Korea's main nuclear facility at Yongbyon had been shut down since last month, raising concerns that the North was extracting the rods.
