Chair: James Mulvenon, RAND Corporation

The countries of socialist Asia seem either on the brink of or in the midst of significant economic and political changes. Changes appear imminent or already underway in army to party-state ties, and in relations between the military and society.

Sometimes overlooked when considering such transformations are the extensive economic roles played by soldiers in Asia’s socialist states. The amount of the defense budget or size of the armed forces cannot simply be used as a measure of the economic impact of these militaries on their respective countries. It is significant that China, North Korea, and Vietnam possess three of the largest armed forces in the world, but, more importantly, these militaries are both major economic consumers and producers. Soldiers in each country are also involved in commercial activities, and the armed forces have significant investments in various for-profit ventures.

What are the implications of the considerable political and economic clout of the military for Asia’s socialist states in the 21st Century? What are the costs and benefits of military involvement in economic activities for these countries? While all of these countries confront similar challenges, each faces a different domestic situation. China’s leaders made the decision in 1998 to divest their army of its economic holdings. Vietnam’s armed forces on the other hand remain deeply involved in entrepreneurial activities. In North Korea, meanwhile, the military dominates virtually all economic and political activity.

Carlyle A. Thayer, Asia Pacific Center for Security Studies

The Vietnam People’s Army (VPA) has been continually engaged in economic activities since it was founded in 1944. The nature of the Army’s economic activities changed radically after the adoption of doi moi or renovation by the Vietnam Communist Party (VCP) in the late 1980s. In 1989, for example, in line with legal reforms in the state sector, army units engaged in economic activities were transformed into legal activities. They were put on the same footing as state-owned enterprises and were granted the authority to seek foreign investment through joint venture agreements with overseas partners. This paper traces the commercialization of military-owned enterprises in subsequent years.

In January 1994 at the first mid-term conference of the VCP, the party adopted the twin goals of industrializing and modernizing the national economy. The VPA was now tasked with developing a national defense industry and producing dual-use technology. The VPA therefore became heavily engaged in electronics, computing and telecommunications. By 1995 there were 335 military-run enterprises employing one-sixth of the standing army involved in economic and commercial activities. As a consequence the VPA has emerged with distinct commercial interests and a new avenue to influence policy in Vietnam’s one-party state. This has taken the form in increased representation at the highest echelons of the party’s hierarchy. Unlike China, however, party authorities in Vietnam have not moved to curtain the VPA’s economic and commercial interests completely.

Hideshi Takesada, National Institute for Defense Studies, Japan

The Korean People’s Army (KPA) may be the most influential political organization in the country and the most dominant presence in the national economy. Certainly Kim Jong Il appears, for the time being, to be firmly in control of the political, economic and military affairs of the Pyongyang regime. The armed forces seem to have eclipsed the Korean Workers’ Party (KWP) as the most powerful and important force in the country. The KPA appears to have only gained in power and stature since the death of Kim Il Sung in 1994. Significantly, the younger Kim’s most important position seems to be Chairman of the National Defense Commission rather than Secretary General of the KWP. Moreover, in terms of its consumption of resources as well as its output of industrial and agricultural goods the KPA may be second to none. Since the mid-1990s as North Korea sank deeper and deeper into protracted economic crisis, the clout of the military only seems to have increased. Known as the "second economy," the KPA’s economic empire encompasses not only munitions plants but also farms, factories producing civilian goods, and numerous other enterprises.

Does the KPA represent a "first" or a "second" political and/or economic force in North Korea? What role is the military likely to play as the country enters the 21st Century?

Andrew Scobell, U.S. Army War College

Under the leadership of Jiang Zemin, China’s defense establishment recently embarked on a remarkably bold and multi-pronged restructuring process. Many of these initiatives have tended to be highly controversial ones that face considerable opposition from elements within the influential People’s Liberation Army (PLA). Moreover, their outcomes remain uncertain. These efforts are all the more remarkable because few observers have pegged Jiang as a bold reformer and/or a leader with strong military backing. China’s current paramount leader tends to be given low marks on both fronts, particularly because he is inevitably compared to his dynamic predecessor Deng Xiaoping.

Jiang ordered a force reduction of half a million soldiers, removed the PLA from full control of the weapons development and procurement process, and directed the PLA to divest its for-profit enterprises—estimated to provide the military with revenue worth billions of U.S. dollars. Any one of these moves would be viewed as significant but taken together they represent nothing short of a major overhaul of the defense establishment.