Going out of business : divesting the commercial interests of Asia's socialist soldiers

Publication Date: January 2000

Publisher: East-West Center

Author(s): Andrew Scobell

Research Area: Business; Military and defense

Type: Report

Coverage: China Vietnam Korea (North)

Abstract:

Massive, institutional military involvement in a nation's economy appears to be a hallmark of civil-military relations in socialist states. There have been three main motives for this: pragmatic, ideological, and financial. While real benefits can accrue from military participation in the economy, the author argues that armed forces have no business owning or managing for-profit ventures. He contends that commercial involvement (1) has a detrimental impact on combat readiness, (2) has a negative effect on civilian control and the chain of command, and (3) damages morale and the military's standing in society. The destruction caused is most immediately obvious in the emergence of rampant corruption while the above three effects only gradually become evident. The author examines the current status of the military's commercial activities in China, Vietnam, and North Korea and provides recommendations on how to proceed in divesting the armed forces of their economic assets. The task of getting the military out of a nation's business is a daunting one that only China has initiated. Announced in mid-1998, this process remains incomplete as of late 1999. Vietnam is currently grappling with the challenge of the military's business empire and may be poised to follow China's example. North Korea, certainly the most militarized state on earth, stands as a special case. While little reliable information is available on the vast economic holdings of the Korean People's Army, divestiture will likely only be successful if instituted as part of a larger process of structural reform.