By Ju-min Park
SEOUL, July 27 (Reuters) - Talk that North Korea's young leader plans to reform the broken economy is already having an impact. It's helping send rice prices even further out of the reach of most families in one of the world's most under-fed societies.
Seo Jae-pyoung, a defector who now lives in South Korea, spoke this week to a friend in the secretive North who had furtively called him by mobile phone from a mountain-side to plead for cash to be smuggled across to help.
"He couldn't cope with the high prices, saying rice prices had shot up ... and he is running out of money," Seo told Reuters.
"It shows that the economic situation is seriously worsening...I feel that...(it) has already reached the critical point and (leader Kim Jong-un) may know that without reform or openness, the regime is not going to last long."
One of the reasons he and others gave for the price increase was rice hoarding by middlemen hoping that talk of reform would materialise into a chance to turn a profit.
A source with ties to North Korea and its chief backer, China, told Reuters last week that the North is gearing up to experiment with economic reforms.
Evidence is hard to come by in the almost hermetically sealed and suspicious state, where casual contact with outsiders can mean imprisonment. And because it usually takes defectors many months to make their way out of the North to a country where they can speak openly, information can be out of date.
But some of the defectors Reuters spoke to in Seoul said they were in clandestine contact with people inside the North. Reuters also spoke to foreigners who had gone to North Korea in recent months under government-sponsored visits.
The overall impression was that in the about seven months Kim Jong-un has been in office, there have been few tangible changes inside a country which is now, since Myanmar's decision to open up, Asia's last pariah state.
"I've not heard anything to suggest any improvement for the rank and file there. And in some sectors, things continue to slide," said one Christian activist with Helping Hands Korea, which works with refugees fleeing the North.
Kim, thought to be in his late 20s, is the third generation of a family dynasty that has ruled North Korea since its founding. He took over when his father Kim Jong-il died in December.
With international sanctions over weapons programmes, and the insistence of the Kims on food and resources going to the military first, the general population has been on the edge of starvation for decades.
The effects of such prolonged meagre diets is one of the startling images of North Korea, making the chubby leader Kim stand out even more against his subjects.
"What's strikingly obvious is peoples' stunted growth, they're all very short for their age," said one humanitarian worker who visited the North earlier this year.
"There's always going to be a food shortage, The problem is, what they can produce, the best always goes to the best (top of society)." That elite refers especially to the military, estimated at 1.2 million out of a population of 25 million.
According to North Korean defectors who still keep in touch with family and friends and Daily NK, which monitors conditions in the reclusive state, the price of 1 kg (2.2 pounds) of rice in the market was estimated to be at least one month's salary.
But that, said one defector, is meaningless because the cash-starved state, the main employer, rarely pays salaries.
"Even if you are employed by the state, you do business in the market. If you are an office worker, you do business in the market in the afternoon ... There's no way other than this to make it there," said the woman, in her 30s, who asked not to be identified because she feared reprisals against family members still in the North. She fled the North late last year.
"Basically, many people are doing restaurant business or selling things on credit and pay off credits later. There is a huge gap between the rich and the poor. Pyongyang has enough supplies but other areas fall short. So it is completely up to an individual's effort. If you try hard to make money, you can survive. But if you don't, you struggle," she said.
She and other defectors said the authorities had been tightening their watch on the border with China, about the only route for escape. The dangers of crossing the border are compounded by the very high risk of being sent back to the North by Chinese authorities to face imprisonment or even execution.
FEAR OF REFORM
North Korea has dabbled with reforms over the years but never stuck to them, forced to rely increasingly on China to prop up a rusting industry and broken infrastructure.
Most recently, in 2009, it orchestrated the re-denomination of the currency, a move deemed so catastrophic that the official who initiated it was reportedly executed.
None of the defectors Reuters spoke to believed the leadership would dare allow reforms that damage its grip. Some thought the Pyongyang elite had been scared by the disastrous 2009 experiment.
Analysts say this fear of reform explains why the Kim dynasty has stuck so rigidly with a system that ensured the country was excluded from any benefit of being at the centre of the world's most rapidly growing region -- China, Japan and South Korea.
While their economies have surged, North Korea's has shrunk. Once wealthier than the South, its economy is now less than three percent of South Korea's. Its population is half the size.
"I think even if it loosens up, it would only be partial. If it fully opens, the regime will collapse. People began to not trust the regime after the currency reform in 2009," said the woman defector who said she fled because she could no longer tolerate the constraints on her life.
Kim Yong-hwa, a defector who heads the NK Refugees Human Rights Association on Korea, was equally dismissive.
"Is North Korea is planning to reform and open up? I think the foreign press is over-reacting. The only thing Kim Jong-il left to Kim Jong-un is debt. He has no funds to run the regime." (Additional reporting by Jack Kim and Choonsik Yoo in Seoul, and reporters in Beijing, Bangkok and Singapore, writing by Jonathan Thatcher; editing by Raju Gopalakrishnan)