According to the official Central News Agency report on Friday, the northwestern city of Sinuiju, bordering on China along the banks of the Yalu River, has been designated a special economic zone.

It will be an autonomous enclave, under direct control of the central government in Pyongyang, meaning it also will have the additional status of being a special 'administrative' district encompassing Sinuiju and nearby towns and districts.

It is not the first time Pyongyang has tried to induce foreign help. In an earlier attempt, the special district of Rajin-Sonbong, on the northeastern tip of the Korean peninsula along the narrow corridors with Russia, was proclaimed fit for foreign investment.

That experiment ended miserably as foreign investors practically ignored it in the absence of agreements covering protection of investment or repatriation of profit.

But expectations are high this time as the government seems to be providing the necessary legal infrastructure.

The Sinuiju project also follows big changes in the economic management system, announced in July.

Under the changes, the North adjusted salary levels of workers and raised prices of daily necessities to real, open-market levels.

All of this is part of the 'new thinking' policy direction proclaimed by North Korean leader Kim Jong-il after his high-profile tour of Shanghai in January last year, where he studied China's opening of its economy.

What makes the Sinuiju project plausible is the element of Japanese aid.

It follows the summit between Mr Kim and Japanese Prime Minister Junichiro Koizumi, where the two agreed to put behind them many decades of animosity and start negotiations for reopening diplomatic ties.

Japan is offering a large aid package as compensation for its brutal colonial control of the Korean peninsula until 1945. Estimates for aid have ranged from US$5 billion (HK$39 billion) to US$10 billion.

Another cause for hope in the North's project comes from agreements with the South to reopen rail links between the two Koreas.

Sinuiju stands at the last point of the railway linking Seoul with Dandong in China.

A second railway is being reopened along the eastern section of the divided peninsula, linking South Korea with Russia by way of the Tumen River on the northeast.

In recent months Mr Kim has come under growing pressure over the project from Russia and China, his only remaining friends from the dark days of the Cold War era.

On meeting Mr Kim in Vladivostok, Russian President Vladimir Putin strongly urged him to help reopen the railways as Moscow stood to earn several hundred million US dollars for freight passage from Seoul via trans-Siberian railways.

For its part, China has intimated it wants no political unrest from neighbouring North Korea as it prepares to host the 2008 Olympic Games.

Sinuiju is becoming a showcase of North Korea's readiness to mend its ways.

If Mr Kim manages to pull out of the economic mess with help from Japan, it will have been no mean achievement.