Sino-NK

The Chilbosan Hotel in downtown Shenyang, one of North Korea’s most prominent “licit” enterprises. | Image: Destination Pyongyang/Sino-NK

Since at least the 1970s, the North Korean state and its many apparatuses (embassies included) have used illicit trade as a means to make ends meet and fill state coffers. But more recently, illicit activity in North Korea has taken a new turn. Outlined in scrupulous detail by Sheena Greitens in her latest report for HRNK, many of the operations to earn hard currency through illegal activities have been privatized.

But there is another side to the story. Just back from a foray into Northeast China (the Northeastern Provinces; 동북삼성), Christopher Green discusses the broader implications of Chinese-DPRK joint ventures (JVs) and normal business opportunities in the region. Buttressed by expertise on matters related to the post-’91 North Korean economy, Green offers a new way to think about the relationship between criminal networks and licit money making efforts by the DPRK regime. — Steven Denney, Managing Editor

Public-Private Partners: Rethinking North Korean “Command Criminality”

by Christopher Green

Narcotics! Supernotes! Counterfeit cigarettes! Trafficking in endangered species! These are the peaks of criminality in the netherworld of Suryeongism, North Korea’s pseudo-religious, instinctively totalitarianizing discourse of governance. But have we perhaps finally arrived at the end of the era of “command criminality” which shot these themes to prominence, thereby characterizing much of our popular understanding of post-Kim Il-sung North Korea? Have criminal networks, once organized directly by state institutions laboring under totally unfunded mandates, moved past the point of centralized Kimist dominance?

No Command, Limited Control | According to “Illicit,” a substantive report released recently by HRNK, the answer is: “Yes.” This working paper by Sheena Greitens alleges that criminal activity in North Korea has been, for want of a better term, “privatized.” To put it another way, elites have expropriated mechanisms of production and distribution of illicit substances and products from the central government.

If that were so, criminal networks would now lie within the purview of autonomous groups that may pay lip service and “revolutionary funds” to the center, but are in many other senses beyond Pyongyang’s direct control. Kim Jong-un, who has yet to publicly traverse the Yalu River, would thus be no puppet-master pulling the strings of organized crime in the Manchurian hinterlands. Unable to survey the northeastern Chinese terrain himself, and having unceremoniously dispatched the uncle who had been monitoring funds from that region, the Suryeong in Pyongyang would have been left with a sledgehammer, meaning that he would be able to smash criminal networks on his soil, but no scalpel with which to perform delicate surgery upon them.

However, the “privatization of command criminality” concept may be overstepping the mark somewhat. The answer should perhaps be: “Yes, sort of.” Anecdotal evidence of dodgy characters roaming the institutional hallways of Pyongyang suggests that, rather than privatization, it is better to envision a form of corrosive PPP (private-public partnership) structure between state agencies of various hues, individuals in the Central Committee, and a range of discrete criminal networks. The state gives tacit acquiescence as long as the funds keep flowing, the individuals provide the structural cover, and the pursuit of profit promotes new efficiencies and networks at lower levels.

When a Dollar is Just a Dollar | Moreover, it’s all too easy to forget that PPPs are not just about criminal undertakings; there is plenty of “licit” PPP business going on, too. Andrei Lankov elucidated something similar when he wrote for Sino-NK in June 2013:

It is interesting that North Koreans themselves appear to be at a loss when it comes to defining these ventures. When confronted with the question of whether the restaurant described above is a private or state enterprise, many give a nonsensical answer, calling it “a state-owned restaurant with a private investor.” This type of bizarre property relations (essentially private property described as state-owned) is remarkably common in North Korea today. For example, many shops are run by private merchants but are registered as state outlets. The owner pays sales clerks, makes sure that the shop is stocked, and makes all managerial decisions. As with restaurants, a significant portion of earnings are supposed to go to the state.

The same can be said of North Korea’s near abroad, a fact to which recent research amply attested. China, for all its manifest sins, is not North Korea, and while even the Chinese Communist Party itself admits that corruption is endemic, there are still more than enough ways to make money legally. Though Beijing’s remit does not reach out into the hinterlands on the rule of law alone, the domain consensus there covers the spread: (1) mostly normative, with (2) uncomfortably utilitarian undertones and (3) occasional spasms of undisguised coercion. Illicit businesses can surely flourish under such a system, and many do, but equally there are more than a few opportunities to earn money the legal way.

No hackers on the 5th floor; a view of the Chilbosan elevator. | Image: Adam Cathcart/Sino-NK.

Two Dreams in One Bed? | Of course, one cannot state with certainty that North Korea’s licit joint ventures with Chinese partners are not also fronts for illegality of one sort or another. However, it is abundantly clear that the Chilbosan Hotel in Shenyang, for instance, with its brightly lit marble entrance, coffee shop, Air Koryo booking office, Mansudae Studio sales outlet, and continental breakfast (with dreadful coffee), wants a slice of the mid-range accommodation market at the gateway to Manchuria.

Maybe a whole floor of this four-star hotel is indeed populated by computer hackers entering the servers of laughably ill-protected South Korean credit card companies more or less at will. But these folks are not visible to the naked foreign eye, whereas large groups of fee-paying Chinese and (albeit not in April) South Korean tourists certainly are.

Ask a Dongbei local (or half a dozen) about this hotel, then, and they will invariably mention its North Korean roots. This is not a whispered secret, for the flags of both People’s Republics flutter gaily outside, and hanbok-wearing staff and their business-suited Chinese colleagues openly share the work of satisfying the various needs of guests.

Local informants (not, it should be noted, zealous South Korean journalists) also describe another business activity known to bring in a significant percentage of Pyongyang’s licit hard currency earnings in this region: shellfish. Seafood is a major trade, albeit one that does not always result in happy bilateral conclusions. They also speak of DPRK restaurants doing business all across North Korea’s near abroad, forming a significant percentage of an estimated 60 such eateries worldwide. The visitor can see these for him or herself: big new homes for existing restaurants in Ji’an and Yanji, and a brand new outlet just opening in Changchun. The Chilbosan Hotel is not the beginning and end of North Korea’s interactions with luxury accommodation, either: Yanji has a new boutique hotel, run right out of Pyongyang.

In sum, while the actual profitability of all these businesses is very much open to question, it seems that the desire to be profitable is not.

Public-Private Partners | In conclusion, the contemporary sharp-thinking analyst ought to be in the process of reorienting his or her understanding of domestic North Korean criminality away from the command criminal model of the 1990s and onto a public-private partnership footing. At the same time, however, he or she might also wish to remain cognizant of the point that legitimate PPP economic activities exist, persist, and, in rare cases, even thrive on the broad Manchurian plain of the Kim regime’s back yard.

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