Financier George Soros has established a pilot project to help support North Korea's first moves to a mixed economy.

A group of seven North Korean graduate students are studying law, economics and international relations on a specially tailored six-month course at the Soros Foundation-endowed Central European University in Budapest.

The project, which has taken more than a year of delicate negotiations to set up with North Korean authorities, is jointly funded by Soros and the United Nations Development Programme, according to sources in Hungarian higher education.

The project is still at a very early stage, but it is understood that the North Koreans, all in their late 20s and early 30s, were handpicked by a member of the university staff with connections in the secretive Communist state, apart from two who were state appointees.

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The all-male group is involved as administrators in the development of North Korea's first free economic zones, the Communist state's gradualist approach to moving beyond a strictly command economy, modelled on China's successful reform programme.

The zones will allow for a measure of free enterprise and are expected to excite considerable interest in the international business and commercial world.

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The students, all of whom speak English, arrived in January and are expected to stay until June. Further stages of the project are still undecided, but Soros is said to be keen to establish projects in North Korea and other countries in Asia, such as Burma, where his style of educational economic aid has yet to be felt.

A key component of the CEU courses for the North Koreans is to encourage them to challenge both accepted Communist economic paradigms and those of the free market.

"A couple of the North Koreans are probably official 'minders' sent to keep an eye on the others, but tutors have found ways to see students on their own to minimise their influence," a Hungarian university source said.

Sophia Howlett, director of external programmes at CEU, confirmed the North Koreans were studying at the university, but refused to comment further. The project was at an early stage and details were still being worked out, she added.

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