World's Riskiest Market; Investors are growing more cautious, but an intrepid few still bet on North Korea.

Byline: Rana Foroohar (With B. J. Lee in Seoul, Akiko Kashiwagi in Tokyo and Barrett Sheridan in New York)

Emerging markets have taken a hit over the past couple of weeks, as global market wobbles have prompted a flight from risk. So it's surprising that North Korea--a country that stretches the very definition of emerging market--has been in the news as a target for foreign investment. For example, Egyptian conglomerate Orascom recently spent $115 million to buy a 50 percent stake in a North Korean cement company. The Egyptians are by no means the only ones piling into Pyongyang these days. Since North Korean dictator Kim Jong Il began a program of pseudo-reforms in July 2002, outside investment has increased from places as diverse as Britain, Germany, South Korea and China. Pyongyang's announcement a few weeks ago that it had shut down North Korea's sole nuclear plant in order to comply with an aid-for-weapons deal has only increased the buzz among investors, who view the country--so far off the standard investment grid--as beyond the usual emerging-market dynamics. While dicey accounting makes concrete figures hard to come by, the Seoul-based Korea Trade Promotion Corp. puts South Korean investment at $800 million, and Chinese FDI at nearly $135 million and rising fast. Other trade experts say European investment (in areas like gas, pharmaceuticals and manufacturing) is certainly in the tens of millions of euros, if not more.

Small figures, but significant considering the risk profile of the country. Investors are willing to take the bet because "this is the last frontier," says Ken Frost, a director of U.K.-based Phoenix Commercial Ventures, an investment firm that brokers deals between North Korea and the West. Current plans include a joint venture to produce DVD players and another to create software and animation. Frost cites untapped resources--the country is rich in a number of commodities, including coal, copper and precious metals--and a highly skilled work force (the literacy rate is 99 percent) as just two of the big draws. Then ...