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On the contrary, the Soviet-supported communist regime in the north adopted an autarkic, command economy based on the isolationist principle of “juche,” or self-reliance. It had a rich supply of minerals and a strong electricity-based infrastructure to build on.
At stake for both was how to win much-needed hard currency to push forward their own development models. Whereas the South opened its doors to foreign investors, the North designated only a small special zone on its northern tip for foreign investment, isolated from the rest of the country.
Six decades later, South Korea has emerged the world's ninth-biggest exporter, with annual per capita income jumping to US$20,000 from $100 in the 1960s.
But North Korea has become one of the world's poorest countries, with an average per capita income less than US$1,000. Since the mid-1990s it has been compelled to swallow its pride in the much-touted juche philosophy and appeal for international handouts to feed its people.
The evident failure of its isolationist economic formula has finally forced the impoverished nation to learn from its arch-rival South Korea, which Pyongyang has long called "a puppet of U.S. imperialists to be crushed."
The North decided earlier this week to set up its first State Development Bank to attract foreign funds, emulating the South's state-run Korean Development Bank, which played a key role in the country's economic development in the 1960s and 70s.
The country's highest decision-making body, the National Defense Commission chaired by leader Kim Jong Il, has ordered the State Development Bank to be set up "to provide investment on major projects to be carried out according to the state policy," according to Pyongyang's official Korean Central News Agency.
The bank will be based in Pyongyang and will be "equipped with advanced banking rules and system needed for transactions with international monetary organizations and commercial banks," it said.
The country has also designated Pyongyang-based Taepung International Investment Group to be responsible for attracting funds from overseas for the bank.
Taepung is a multilateral agency set up by the North's Second Economic Committee in charge of defense economy and the External Economic Cooperation Promotion Committee, according to sources in Seoul. It has offices in China and Hong Kong.
The group’s role is to "ensure the induction of investment and finances for the State Development Bank," the KCNA said.
The group will be headed by Kim Yang Gon, the North's spy chief and pointman on Seoul, an indication that the group's campaign would be largely focused on South Korea. Senior officials from the NDC, the Cabinet and other top government bodies will make up the board for the group.
Kim Yang Gon, one the closest aides to Kim Jong Il, is responsible for inter-Korean economic projects. He traveled to Seoul last August to mourn the death of former President Kim Dae-jung, who provided massive economic aid to the North under his "sunshine" policy of engagement. Kim Yang Gon is also considered Pyongyang's pointman on China.
"The appointment of Kim Yang Gon as the chief of the group indicates its capital-winning activities would be focused on South Korea and China," said Hong Ik-pyo, a researcher at the Korea Institute for International Economic Policy, a government-run think tank in Seoul.
In another effort to induce foreign investment, the North has recently upgraded the status of its failed free-trade zone near its border with China and Russia, and allowed the first joint venture with a South Korean company there.
The North created the Rason free economic and trade zone in December 1991 by merging its northeast port cities of Rajin and Sonbong and mapped out an ambitious development program to build the area into a base for the high-tech industry, the processing of export goods and the transit of international freight and tourists.
The North has enacted about 50 laws and enforcement decrees, such as the Law for Foreign Enterprise. It expanded the areas of the free-trade zone to include the Tumen River basin, where the borders of North Korea, China and Russia converge.
But the zone has remained bleak, with little foreign investment due to poor infrastructure, rigid management and central government interference. The North had aimed to attract US$7 billion in foreign investment, but has induced just $140 million, mostly from Chinese hotel and casino operators, according to South Korean officials.
In a bid to revive the zone, Kim Jong Il made an inspection visit to the zone last month for the first time since its foundation. During the visit, Kim demanded a greater focus on the zone's development, calling it "one of the important centers for foreign trade," according to the North's media reports.
"North Korea's recent moves indicate that it is trying to learn from the South's rapid economic development," said Lee Jo-won, who teaches the North's economic development in Seoul's Chung-Ang University.
But Lee and other analysts say no bid by the North to win foreign capital can bear fruit without addressing international concerns about its nuclear weapons and reforming its rigid central planning system.
According to an annual survey conducted by the Wall Street Journal and the Heritage Foundation, North Korea was ranked as the world's worst country in terms of economic freedom in 2009 for the 16th straight year.
