Published: Monday, 21 Sep 2009 | 6:53 AM ET

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North Korea has shut down its largest wholesale market because of its apparent concern that big markets spread capitalist influence, a South Korean monitoring group said Monday.

Authorities closed the Pyongsong market on the outskirts of the capital of Pyongyang in mid-June and set up two smaller markets in nearby districts, the Seoul-based Network for North Korean Democracy and Human Rights said in a newsletter provided Monday.

The move is believed to be an attempt by the totalitarian regime to "control an excessive spread of markets" while still allowing hungry people to seek food on their own at small markets, said Kim Yoon-tae, secretary-general of the group.

Kim said Pyongsong was the North's biggest wholesale market with some 30,000-40,000 stalls.

The group regularly issues a newsletter on developments inside the North, citing information collected from sources it does not identify inside the country.

North Korea is one of the world's most closed nations, keeping tight control over its 24 million people without tolerating dissent or independent media.

South Korea's Unification Ministry, which handles Seoul's relations with the North, said it cannot confirm the report.

Street markets have been allowed to spring up in communist North Korea in recent years as a way for hungry people to seek food and other necessities at a time when the central government is unable to adequately feed them.

But the regime has grown wary of capitalist influence resulting from the spread of markets where imported goods, including even DVDs of South Korean films and television soap operas, are sold, according to analysts, defectors and news reports.

The two Koreas technically remain at war since their 1950-53 conflict ended in a truce, not a peace treaty, and possession of goods from enemy nations such as the U.S. and South Korea is tightly controlled.

South Korea's mass-circulation Chosun Ilbo newspaper reported in January that North Korean leader Kim Jong Il had ordered a crackdown on street markets, and that all manufactured goods and imported items must be sold at state-run shops.

But analysts and North Korea watchers say the North can't close all markets because its central rationing system is not working.

"North Korea is in a dilemma," said Kim of the Network for North Korean Democracy and Human Rights.

"It does not want markets, but can't get rid of them either." Koh Yu-hwan, an expert on North Korea at Seoul's Dongguk University, also said that the North sees "negative effects" of markets, but cannot close them all because it could leave the hungry without any means to seek food or other goods.

North Korea has relied on outside food handouts since the mid-1990s, when the economy collapsed due to natural disasters and mismanagement as aid from the former Soviet Union dried up after its collapse.

The regime introduced economic reforms in 2002, including regular street and farmers' markets.

But the government backtracked in 2006 after the reforms failed to revive the economy and resulted in an influx of foreign goods.

Despite North Korea's current impoverishment, the country has tremendous potential and eventual unification with South Korea could make their combined economy one of the world's largest, Goldman Sachs said Monday.

"We project that a united Korea could overtake France, Germany and possibly Japan in 30-40 years," Goldman economist Kwon Goohoon wrote in a report, citing a potential unified country's gross domestic product in dollar terms.

North Korea's strengths include its relatively young population, well-educated labor force, rich mineral resources, potential investment from South Korea and the possibility of big productivity and currency appreciation gains that commonly occur in "transition economies," Kwon wrote.

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