Just five years ago, Mr. Kim (not his real name) was a member of a new social group in North Korea known as “tonju,” or “masters of money.”
This term describes the country’s new rich, whose fortunes now often reach six-digit figures, who actively invest in the fast-growing market sector of the economy and who are a driving force behind the minor consumption boom so noticeable in North Korean cities nowadays.
Some tonju began their rise to power in the late 1980s, but the majority constitute those who found ways to profit from the social and economic chaos of the 1990s.
Those years of disaster were a time when a ruthless, hard-working, manipulative, determined and, of course, lucky person had a good chance of success. Some began at the very bottom of the society, but many more used the social capital they already possessed when Kim Il Sung’s hyper-Stalinist utopia began to fall apart in the early 1990s.
Mr. Kim is a rare example of an entrepreneur who first succeeded and then chose to leave the country. In most cases, businessmen who cross the border do so because they are fleeing trouble, but in Mr. Kim’s case it was his age which was the major factor: he considered himself too old to continue the risky, if rewarding, life of a quasi-legal businessman in North Korea.
Unlike many of his peers, some of whom might eventually even become the founding fathers of future North Korean chaebol (if North Korea survives as a separate state, of course), Mr. Kim is now free to talk about his business and the origin of his wealth.
For many years Mr. Kim was a naval officer, but in the mid-1990s he retired from the navy and began to look for business opportunities. Once a rather typical “loyal soldier of the Leader and Party,” in the last years of his service Mr. Kim became linked to hard currency-earning activities of his unit and was exposed to the world of business and trade. He had some ideas about how to make deals – and he had connections.
In most cases, businessmen who cross the border do so because they are fleeing trouble
In the mid-1990s seafood was North Korea’s main export – the time of mineral exports was yet to come. Mr. Kim’s naval past had taught him a thing or two about the sea and the seafood trade. So, naturally enough, he decided to begin with the seafood industry.
This was the height of the “Arduous March,” and most fishing boats, due to the shortage of fuel, were stuck in ports. Mr. Kim approached a state-run fishing company and suggested that he would buy four small fishing vessels which had long rested idle.
The company manager saw no chance that the ships would be of any use in the foreseeable future and agreed to a deal, but on one condition: Mr. Kim would pay him in kind, providing his company with a few tons of diesel fuel. A deal was struck.
Mr. Kim had some money of his own, but it was not enough, so he had to borrow money from a local police officer. He did not know exactly how the policeman had amassed this large amount of cash, but presumed that it was bribery. At any rate, he took the money and used it to buy fuel and necessary provisions for his fishing expedition.
Of course, it was risky: had Mr. Kim failed to return the loan, his life would become miserable, and, perhaps, short – it is not wise to cheat North Korean police officers.
But he had a major advantage, and knew it: he could use his connections in the navy to secure access to the seafood-rich coastal areas which remained off-limits to common fishermen.
Nobody but a handful of well-connected people could fish there, and Mr. Kim successfully secured access to the area where at the time the catch was at least twice the usual level – and he made most of it. The fish was then sold to Japanese trade representatives.
In a month, Mr. Kim fully repaid the debt to the police officer, even though the daily interest rate on this loan was an astonishing 1%. In a few more months, he had some USD$20,000 of profit, and also four more fishing ships.
The ships were small, with wooden hulls and weak engines (12-28 horsepower), but it was a large flotilla in the world where Mr. Kim operated – and, of course, USD$20,000 was good money in the famine-stricken North Korea of the mid-1990s. The breakthrough was a result of exclusive connections, luck and a willingless to take risks.
Mr. Kim’s naval past had taught him a thing or two about the sea and also the seafood trade
Equipped with money and ships, Mr. Kim took the next step. He applied for a permit to establish a foreign trade base which would be subordinate to a foreign trade company.
These companies, which began to proliferate in the mid-1990s, operate with a great degree of autonomy, and as such they always provide a good cover for private businesspeople who want to make their business semi-legal.
Usually the new rich invest their money in such companies, and in exchange they have their property registered and their activities largely legalized. The investors operate almost freely, as long as a politically useful fiction of state control is maintained.
But in the late 1990s when Mr. Kim started his business, things were somewhat different. While foreign trade companies, established by the different branches of the government, were quite eager to receive private capital (they had little, if any, alternative), the state still looked at such activities with great suspicion and frequently harassed companies which crossed the limits. Mr. Kim said that the usual response was to run a cover company for few years, and then shut it down, only to re-invest in its new incarnation under a different name.
So Mr. Kim, again using contacts from his time in the navy, approached the headquarters of a large military unit located in the area, and made a deal. The foreign currency earning section of the unit agreed to take Mr. Kim and his four ships under its wing.
In practice, this meant that Mr. Kim was expected to provide a certain amount of money (paid in cash) to the foreign currency section, who issued all the papers he would need to continue his activity with as little harassment as possible.
His affiliation with the military was helpful, since state inspectors and police were reluctant to be persistent and demanding when dealing with military-registered boats.
Mr. Kim began his fishing operations. He used his near-exclusive access to the closed areas around naval installations, so the catch tended to be better than usual.
TAKING CARE OF BUSINESS
He also took good care of his workers: as he admits, not because he felt responsible for their well-being, but largely because well-paid workers would be more likely to value their jobs and refrain from theft.
The fish was then sold to Japanese trade representatives
Indeed, crew members often stole a part of the catch, in order to resell it at the port. To prevent or, rather, diminish theft, Mr. Kim took all possible measures.
From time to time he went to sea himself, to have a general idea of how large a catch was likely to be. He planted paid informants, and encouraged workers to clandestinely report theft committed by their peers. He kept wages high, so for his workers it would make more sense to keep the job rather than risk it for a price of few stolen squid. Still, he admitted, the problem could not be solved completely.
Mr. Kim’s business faced another problem as well: when in the late 1990s the North Korean fishermen again had enough fuel to sail, soon the sorry results of overfishing became obvious.
While the state had regulations aimed at protecting fish stock, these regulations were completely ignored, and inspectors were willing to look the other way for a small bribe. Hence, by 2000 the depletion of the fish stock along the border began to be felt. Steadily diminishing returns were one of the reasons why Mr. Kim abandoned fishing.
However, by the time of his voluntary and well-planned withdrawal from the fishing industry, Mr. Kim was quite rich, and had enough investable capital.
He invested this capital in a number of other ventures, and continued his businesses for over a decade, until he decided to quit for good, and leave the country for South Korea, to spend his old age in relatively modest but secure circumstances.
Edited by Oliver Hotham
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Featured Image: IMG_3605 by nknews_hq on 2016-06-15 07:24:55