(490) Shuttle Merchants
By Andrei Lankov
Back in the mid-1990s every visitor to a large Korean wholesale market would notice the powerful presence of the ``Russians" (actually, these were people from many of the successor states to the Soviet Union).
These people were everywhere: They went from one shop to another, bargained hard and bought sacks of merchandise, paying in impressive inch-thick wads of U.S. banknotes.
Their prominent but short-lived presence was a result of the severe economic crisis which followed the collapse of the USSR.
Actually, two things led to this remarkable outbreak of business activity. First, around 1990 it became possible for Soviet citizens to go overseas without too many formalities.
Contrary to what many Westerners believe, even non-privileged Soviet citizens could and did go overseas from the 1960s, but such trips were rare, demanded a lot of difficult paperwork and some people could be denied the right to go overseas without any explanation.
And, of course, they could exchange only a token amount of money.
Second, there was a simultaneous decision to de-criminalize currency exchange. In earlier years it was a very serious crime to change Soviet rubles into foreign currencies, and big-time moneychangers, if caught, faced a real risk of being executed.
Finally, the collapse of the old Soviet economy meant that people had to survive in an entirely new environment. The crisis produced a lot of despair, but also awoke some entrepreneurial spirit in the hitherto unremarkable state employees.
The early 1990s was the time of empty shops. By no means a famine, but a serious shortage of pretty much everything. Hence, those people who could deliver some merchandise from overseas could re-sell it and garner exorbitant profits.
Thus, untold thousands of small-time importers emerged from the post-Soviet states. They largely went to countries where consumer goods and garments could be bought cheaply i.e. China and Turkey, but also Korea.
These people came to be known as ``chelnok'' (shuttle) in Russian, since most of them traveled the same route every month or even more frequently.
Out of all the major chelnok countries, Korea was seen as the most elite destination, since it was a place to purchase more expensive, but also better goods.
Most of the merchants were women, often with a good education and always with a formidable entrepreneurial spirit. Koreans were shocked to learn that some of their Russian partners were schoolteachers or medical doctors by training.
Neither of these professions was seen as particularly well-paid in the Soviet Union, but after its collapse these people whose paychecks came from the then bankrupt state coffers, sometimes literally had nothing to eat.
Still, Koreans were shocked since for them the social distance between a humble market vendor and respected medical doctor was too great to comprehend such a transformation.
The economic situation allowed chelnoks to make good money. Around 1993 or 1994, cheap blue jeans bought in Korea for $5-7 apiece would be sold wholesale for $15-20 or more. In those days, 100-150 percent of pure profit was seen as the norm.
It is sufficient to say that many merchants borrowed money privately (there were no real banks in the ex-USSR in those days), and interest of 15 percent a month was seen as moderate. Nonetheless, most people had no difficulty in repaying their loans.
Typically, a group of chelnoks bought a tour. Coming in groups was cheaper and safer even though eventually more people began to travel on their own. Upon arrival, the professional shoppers rushed to the markets, with the huge Dongdaemun complex in central Seoul being their favorite.
They knew what they wanted to buy, since they followed the then current fashion and consumer trends. Eventually, they began to order things to be produced in Korea in accordance with the then dominant Russian (Ukrainian, Kazakh etc.) tastes.
The Russian banking system was not trustworthy, and the merchants did not want to advertise their worth in those days of rampant corruption. So, they took cash.
Around 1993, a typical chelnok would arrive in Seoul with $10-15,000, and in later years $50,000 in cash was not an unusual amount.
Once the goods were delivered, the chelnoks rushed to a cargo transportation company and paid for air delivery to Moscow or some other large ex-Soviet city.
It was slightly different in Busan where the majority of merchants came from Vladivostok and surrounding areas, so they could afford to use sea transportation since freight back to their native city did not take much time. From Seoul however, the air cargo service was the only realistic option.
Then the merchants returned home, arriving ahead of their cargo, and arranged the customs clearance. After that, the goods were sold to wholesalers and soon appeared at the huge, unruly, and merchandise-hungry markets.
Meanwhile, the chelnoks were already on their planes, flying back to Korea again.
The chelnok business went to decline after 1996 when the situation in post-Soviet countries began to improve. This meant that profits began to shrink. Some chelnoks were squeezed out of business.
Those who survived gradually switched to more standard mode of export-import operations. Some of them are still present in Korea and have their semi-permanent offices in the Dongdaemun neighborhood.
But they do not move sacks of merchandise on their backs any more, and use bank transfers instead of truckloads of cash. In other words, that is another story, that of a more ``normal" business.
Prof. Andrei Lankov was born in St. Petersburg, Russia, and now teaches at Kookmin University in Seoul. He has recently published ``The Dawn of Modern Korea," which is now on sale at Kyobo Book Center and other major bookstores. The book is based on columns published in The Korea Times.