By Caroline Gluck BBC correspondent in Seoul

Changes are happening in North Korea. But analysts are divided about how to interpret them, and how deep-rooted the shifts will prove to be.

In the past few weeks, the Stalinist North has raised food prices, bringing them more into line with the black-market price of goods sold in markets where farmers are allowed to sell their own produce.

This is the first real acknowledgement by the authorities that the system is broken

A Pyongyang resident

The wages of workers have been significantly hiked, by as much as 18 times their previous level, according to diplomats based in Pyongyang.

The United Nations Under-Secretary General for Humanitarian Affairs and Emergency Relief, Kenzo Oshima, told journalists after making a five-day visit to the North that the price of rice had gone up by 30 to 50 times.

Yet UN staff were unclear about how North Koreans were coping with the changes.

"While it is too soon to make an evaluation of the impact on improvements in economic performance, I believe this move is a recognition by the DPRK [North Korean] authorities of the economic condition the country finds itself and the need for reform," Mr Oshima told a press conference in Beijing.

Sceptics unmoved

But not everyone is convinced that the price hikes represent the beginning of real reforms inside the tightly controlled society or that the economic changes represent a more fundamental internal political change inside the world's most secretive state.

Tensions with the South may be easing

One South Korean Government official said: "I'm not optimistic that these are the first steps towards moving to a free market economy.

"It seems to me that these changes are more of an attempt by the North Koreans to regulate and reinforce the socialist market economy, by increasing the government's grip on the non-formal economic sector."

Diplomats who were briefed by North Korean officials on the changes are also unclear just how far they will go.

A Pyongyang resident, however, was more certain: "This is the first real acknowledgement by the authorities that the system is broken and something needs to be done to fix it - that represents change."

Hazel Smith, a Korea analyst who formerly worked for the World Food Programme in Pyongyang, believes that institutional change may not be too far off.

"The next steps can be crucial. A changed internal regulatory system for economic activities can bring about more freedoms," she said.

"It's a critical juncture. External actors can promote positive changes. For example, the European Union and the DPRK authorities have already begun a human rights dialogue," she said.

Diplomacy too

The economic changes in recent weeks have been paralleled by diplomatic overtures.

Ministerial talks with neighbouring South Korea - suspended since last November - get underway in Seoul next week.

North Korea has also said it wants to restart high-level talks with Japan and the United States. Relations with the US have been largely stalled since President Bush took office last year and later labelled the regime as part of an "axis of evil".

Professor Shin Ji-ho, of the South Korean Government-funded think-tank, the Korea Development Institute, said: "I think it's inevitable that we are seeing these economic and diplomatic changes before the end-of-year presidential elections in the South.

Kim Jong-il may be trying to prop up his regime

"North Korea is likely to face the worst scenario if the opposition Grand National Party's presidential candidate, Lee Hoi-chang, wins and makes a conservative alliance with Japan's Prime Minister Junichiro Koizumi and President Bush.

"North Korea is running out of time and wants to create a cushion to fall back on, in case they become diplomatically isolated in the future," he said.

Like many sceptics, Professor Shin believes the economic changes were adopted by the authorities in the North to ensure the regime survives - rather than as an attempt at genuine reform.

Ultimately, it is too soon to tell. Detailed information about the North is hard to access.

But many regard the changes - whatever factors may have prompted them - as positive signs that should be encouraged by the international community.

Substantive reforms may be slow and painful. But many believe that at least the recent moves represent steps in the right direction.