Yet where conventional wisdom has clearly failed on the Korean peninsula, tourism may well succeed. Or at least it may be helping to reduce the risk of outright conflict.

The catalyst for Hyundai's massive project took place six summers ago, when the company's founder, the late Chung Ju-yung, sent 500 cows from South Korea, through the demilitarised zone, as a donation to the famine-stricken people of North Korea.

According to company legend, when the North Korean-born Chung was a teenager he stole money from his father - cash his parents had been saving to buy a cow. The young Chung took the money to Seoul in the hopes of earning his fortune there. But the Korean war began before he could return home, and the unpaid debt haunted him ever since.

In the six years since the first few South Koreans stood on the slopes of 1,700-metre Mount Gumgang, more than 760,000 tourists, 99 per cent South Korean, have serenely travelled through the heavily mined DMZ into North Korea, to the mountains revered on both sides of the border.

This month the North's rubber-stamp legislature approved the development of real estate properties in the Diamond Mountains and will even allow South Koreans to buy condos there. The road through the DMZ is expected to be widened to allow South Koreans to drive their own cars through.

Once inside the 40-square kilometre complex, which Hyundai has leased for 50 years, visitors spend several days trekking in the rugged mountains, soaking in hot spring spas, and generally pinching themselves that they're actually on the soil of a certified member of the 'Axis of Evil'.

The ambitious project hasn't been without serious setbacks. When Hyundai brought in the first adventurous tourists by sea, in 1998, company chairman Chung said the venture was 'the vanguard of a new era in our country'.

Using leased ships, which sailed from the South Korean port of Sokcho and anchoring in a new port - built and financed by Hyundai - the company was able to eschew the sensitive issue of having to physically cross the DMZ.

But that first year only 10,500 customers signed up, and the ships were leaving with less than half their cabins booked. Hyundai had cut its US$500 package price in half to keep the project afloat. Things got to the point where the conglomerate had to ask the North Korean regime to accept delays in instalments for the US$942 million to be paid to it by 2005.

But when a floating hotel became available (which visitors to Ho Chi Minh City in the early 1980s will recognise), and Hyundai completed the first road ever to cut through the DMZ last winter, business began to pick up. A second hotel has just opened, a 167-room property complete with marble lobby, bar and swanky gift shop: these, together with two youth hostels, provide 1,600 beds.

Future plans are resolutely ambitious. Three more hotels are planned for next year, adding 1,000 more rooms. There is already a sizeable hot spring spa, as well as a chalet-styled shopping complex, boasting a dozen different sales outlets selling everything from ice cream and Samsung radios to European cigarettes and Kodak film. Arrival figures soared from 5,500 per month in January to 43,000 in August.

Last week, Korea National Railroad (Korail) began offering twice-weekly trains, each carrying 350 people, from Seoul Station to Kangwon province just south of the DMZ; passengers still need to transfer to Hyundai buses to cross the border, but by summer a rail link will run right through the DMZ to the resort.

Korail says train reservations for November are full, and Joo Im-sun, a manager at the Gumgangsan.com travel agency in Seoul, insists: 'You need to book as far ahead of the travelling date as possible if you want to visit before autumn is over.'

Once the novelty of merely being in North Korea wears thin, Hyundai plans to promote the property as a 'four season' resort. An 18-hole golf course opens next summer, and plans are set to build ice rinks, ski lodges and a sledding slope. A beach resort is in the works.

But this being Korea, a location which newspaper headline writers like to refer to as 'the cold war's last hot spot', the project has been marked by both large tragedies and small absurdities. Several years ago, tours were briefly cancelled by the North when a visiting South Korean woman reportedly asked a North Korean why the North's ruler Kim Jong-il was the only fat man in the country.

And 14 months ago, Chung Mong-hun, the son of Hyundai's late founder, threw himself out of his 12th-floor office when it was revealed he'd paid the North US$200 million as an (illegal) incentive to allow Hyundai's tourism plans to proceed.

Despite such tribulations, Hyundai executives and the South Korean government, which has invested at least US$100 million in the project through its Korean National Tourism Organisation, are cautiously optimistic. Everyone knows that continued growth will mean far more than mere corporate profits, of which there are none yet. It could mean a real toehold of genuine change in how the North looks at its own near-comatose economy, and that in turn might slowly lead to economic and social enlightenment.

'They have learned the power of money,' says Dan Byun, a senior manager for international investment with Hyundai. He has great hopes that his work, in a small way, will eventually bring the two Koreas together, a national dream for generations. Smiling broadly, Mr Byun says: 'Whenever I come here now, the North Korean customs people ask: 'Have you brought more foreign investors with you?' People feel like this is China in the 1980s.'