Almost-Free Enterprise

Korea times
Andrei Lankov
7/12/2005

In 1997, when the North Korean economy began to crumble and the public distribution system ceased to function, the inhabitants of Yognchon County received a special gift from the Dear Leader: everyone was given a pair of nylon socks. Not luxurious goods, of course, but getting something in such a hard time was unusual. Few people knew that those socks were not actually provided by the government. The socks were donated by a Chinese Korean businesswoman, known to us as Mrs. Hwang.

But why did she do it? Why was it necessary for her to provide more or less the entire population of the county with socks?

It is increasingly difficult to see North Korea as a socialist state. The traditional Stalinist economy of the mammoth steel mills, railroads and coal mines, died a painful death in the mid-1990s. Nowadays, the North Korean economy depends on foreign aid, but most actual economic activity is made possible through the efforts of small-scale businessmen and businesswomen.

In order to be successful one has to have access to money. In other ex-Communist countries it is the former bureaucrats and party cadres who were best positioned to start a business simply by stealing the property they once managed as government-appointed officials. The property might be as large as an oilfield or as small as a corner shop, but an ex-bureaucrat always has many more chances to take over than an outsider.

But in North Korea the government is undecided on these issues. It has not (yet?) given the green light to large-scale privatization schemes along the Soviet or Chinese lines. Thus, it is other groups of people who are in position to make money. Paradoxically enough, they often come from groups once were seen as suspicious: repatriates from Japan or China, or local ethnic Chinese and Koreans who have close relatives overseas, preferably in China or Japan.

In this regard, Mrs. Hwang is a very typical case. Recently, Kwon Chong-hyon, an energetic Chinese-based correspondent of the Daily NK paper, interviewed her and got her to relate her life story and exploits. I believe that this is a story worth re-telling, since people like Mrs. Hwang are increasingly common these days.

Mrs. Hwang was born in China, in a mixed marriage, her father being Han Chinese, her mother an ethnic Korean. Like many other China-based families of Korean origin they fled from Mao’s “Cultural Revolution” in the 1960s and moved to North Korea. These days, when people are escaping from the North in their thousands, it is a little difficult to imagine that but a few decades back North Korea was often seen by the Chinese as a land of stability and affluence!

In recent years, Mrs. Hwang has lived in Yongchon County, not far from the border. Like many other Koreans with “Chinese connections” Mrs.Hwang began a cross-border trade business in the 1990s, when government control began to wane. Unlike many others, she had no need to resort to smuggling: having immediate relatives in China she can travel there legally, and in recent years this has become a lot easier. Of course, getting a travel permit might be troublesome, but her money allows her to smooth over the procedure with few kickbacks.

And, of course, her publicity stunt with “Kim Jong-il’s socks” did help a lot. She bought 100,000 pairs of socks wholesale and presented them to the local government for distribution. In doing so the local authorities could win some praise from above and improve their political standing, and in return Mrs. Hwang received powerful political support. And the common people got their socks!

Mrs. Hwang explained her survival strategy to Kwon Chong-hyon: “I know a lot of people in the foreign affairs department of the state security police in North Pyongan Province. Since I have a travel permit [to China], I can go there without trouble as long as I get it stamped by state security. If you have good relations with state security, it’s easy to get travel permits; if you have good relations with police, it’s easy to fight off the criminals; if you have good relations with the Party, it’s easy to do trade”.

The reference to criminals is not incidental. There is a growing lawlessness in the borderland areas, and businesspeople have to pay for their security. Mrs. Hwang said: “The criminal police and state security love tobacco, liquor and good dress very much. Now there are so many thieves and mobsters in North Korea, but once I give a phone call to the police officials whom I know, they always come [to protect me and my merchandise]. ”

Currently, Mrs. Hwang has two houses: one in North Korea and another in China. She prefers to deal with used and second-hand goods, items people in China do not buy any more. Such goods are cheap to buy in China, but when sold in North Korea they bring hefty profits measured in the hundreds of percent!

One of her most successful recent deals took place in late 2004. Mrs. Hwang bought 5,000 pairs of cheap working shoes in China, at 4 yuan a pair. She then re-sold the shoes to North Korean retailers for the equivalent of 13 yuan.

Mrs. Hwang is married, but it seems that her husband is less prominent in business than she. Indeed, the social changes of the last decade have greatly changed the balance of gender roles in the Korean families. But that is another story…

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2 Responses to “Almost-Free Enterprise”

  1. […] origins of these gifts are mixed.  Some are donated by foreigners.  Some are imported by the Leadership.  Others are made domestically by the people […]

  2. […] some gifts are manufactured domestically by the people,  others are donated by foreigners.  Expensive gifts are imported by the […]