Defectors remit US$10m a year to DPRK

UPDATE 3 (2/23/2011): According to Yonhap:

A recent survey of North Korean defectors in South Korea showed Wednesday that a large number of them use part of their resettlement money from the government here to help their families in the North.

In the survey conducted in November by the Organization for One Korea, a group run by unification activists, 71 percent of 350 respondents said they have sent money back to the communist country before. About 66 percent of the cash remitters said that they used part of their money received from the South Korean government.

In an effort to buffer the initial costs of resettlement, the government here provides each defector with a subsidy of 6 million won (US$5,330) and partly finances their housing.

More than 20,000 North Korean defectors have arrived in South Korea since the 1950-53 Korean War ended in a truce. The number does not account for the estimated tens of thousands hiding in China.

According to the survey that had a margin of error of 3.59 percentage points, about half of the cash remitters said brokers took away 30 percent of their money sent to the North as a fee, while only 65 percent believed the remainder was entirely delivered.

North Korean defectors are 17 times likelier to depend on government allowances, according to the Unification Ministry. Over 50 percent of defectors depend on a universal welfare program that pays them about 400,000 won (US$355) a month.

Defections began to accelerate after a massive famine swept through North Korea in the mid-1990s, killing an estimated 2 million people. North Korea considers defectors criminals punishable even by death.

Read previous recent stories about remittances below.

UPDATE 2 (2/13/2011): The Korea Herald has also chimed in with a second story about remittances:

Nearly half of North Korean defectors here have remitted money to their families in the impoverished communist nation under U.N. sanctions, a poll showed Sunday.

According to the survey of 396 North Korean defectors residing in South Korea, aged 15 or older, 49.5 percent said they have sent money to their families in the North, while 46 percent said they have not and 4.5 percent said that they have no family there.

The survey was conducted from Dec. 14-31 last year by the Database Center for North Korean Human Rights, a Seoul-based private group.

The findings mark the first confirmation of widespread speculation that North Korean defectors provide financial help to their families facing chronic hunger in the North.

More than 20,000 North Koreans have defected to the South since the end of the 1950-53 Korean War. The defections have taken place mostly since the 1990s, and the border between the two Koreas remains heavily fortified.

The North’s economic hardships have apparently deepened due to U.N. sanctions for its missile and nuclear tests.

“North Korean defectors here, although they also suffer financial problems, want to help their families in the North. They think ‘How can I live well here by myself.’ Thus, it would be hard to prevent them from sending money to the North through the U.N. sanctions,” said Lee Yong-hwa, a senior researcher at the center.

Lee added that such remittances prompt many people in the North to yearn for the capitalist South.

With regard to the amount of money remitted last year alone, 31.7 percent of survey respondents said they sent 510,000 won ($450) to 1 million won, while 16.7 percent sent from 1.04 million to 2 million won and 12. 5 percent more than 5 million won.

The amount 1 million South Korean won is reportedly worth six months of living costs in the North. South Korea’s per capita income reaches $20,000, while many international organizations report that of the North sits at just $1,000.

The average monthly income of North Korean defectors with jobs here was 1.04 million won and 38 percent of them were part-timers, the survey showed.

UPDATE 1 (2/13/2011): The Korea Herald offers more information on remittances:

A 43-year-old North Korean defector who has taken asylum here since 1997 believes that his and other defectors’ remittances to their relatives in the communist state help enlighten them about the free, democratic and capitalist South.

“When we make remittances to our loved ones in the North, we talk to them over the phone to ensure the money was properly sent. Through such talks, a wave of news about the capitalist society flows in and spreads there,” Kang sad, refusing to give his full name to protect his family remaining in the North.

“Such circulating news forms the public opinion there, enabling North Koreans to come to terms with how they have been fooled (by the regime). Some in the backwaters, of course, yearn for life in the South.”

The families in the cash-strapped state that have relatives in the South have now become the “tacit” subject of envy among those who do not have any, he said.

“As the families have been financially supported by the defectors here, they don’t have worries about where their food will come from tomorrow. Some even wish that they could have family members in the South,” he said.

“I annually send about 1 million won ($890) to my aunt ― enough for a family of five to live on in the North. We defectors send the money, not because we have much money, but because we know better than anyone else about their economic ordeals and hardships.”

Kang explained that North Korean defectors usually send their money through the ethnic Chinese here, who ask their Chinese relatives or acquaintances inside the North or near the North Korea-China border to deliver the money. The brokers take 30 percent of the total remittances, he said.

“As North Korean authorities are rarely harsh in dealing with Chinese nationals, the brokers with Chinese nationality can operate in the North to deliver the money from us here,” Kang said.

North Koreans prefer to receive the remittances in Chinese currency in the wake of the currency reform debacle in November 2009, Kang added.

“They want to receive the remittances in Chinese currency as it is safer and can be exchanged in the black markets there. They are reluctant to deal with North Korean currency as it could be reduced to just scraps of worthless paper,” Kang said.

According to a survey by a private Seoul-based group, nearly half of North Korean defectors here have sent money to their families in the North. More than 20,000 North Koreans have defected to the South since the end of the 1950-53 Korean War.

The survey by the Database Center for North Korean Human Rights found that 49.5 percent said they had sent money to their families in the North, while 46 percent said they had not and 4.5 percent said that they have no family there.

The findings confirmed the widespread rumors that North Korean defectors financially support their families in the North. The survey was conducted on 396 North Korean defectors residing in the South, aged 15 or older, from Dec. 14-31 last year.

Regarding the amounts sent, 31.7 percent of the respondents said that they sent between 510,000 won and 1 million won last year while 16.7 percent said that they sent 1.01 to 2 million won. Those who sent 2.01-3 million won made up 12.5 percent, while another 12.5 percent sent 5 million won or more.

Seoul officials assume that North Korean defectors’ annual remittances amount to $10 million. They are studying the possible ramifications of the remittances.

Some officials say the remittances could raise expectations among North Koreans about the affluent life south of the heavily fortified border.

Others, however, are concerned that the money could get into the wrong hands in the notoriously autocratic regime. The North has sought the development of nuclear arms and other weapons of mass destruction, which has put it under tough international sanctions.

The increased number of defectors means a rise in the amount of information delivered to the tightly controlled society, Kang said.

“One of the most serious headaches for the North Korean regime is to sort out those seeking to flee the country,” Kang said.

“The regime feels frightened as the increasing number of defectors talk to their relatives in the North regularly and inform them of how life is better in the capitalist society. The North is said to have installed a German-made high-tech machine designed to block all telephone signals.”

Kang added that sending money to starving citizens in the North should not be seen with suspicion as the practice could facilitate the spread of good information about the outside world and help speed up the process of reunification.

“Some say the remittances are illegal and we should be punished for sending money to our families. It does not go to the regime, but to the people and through the increased contacts, we could accelerate the unification process,” Kang said.

“Egyptian people were able to realize they had been living in a wrongful society and took to the streets for the successful protests because they had access to information from the outside world.”

Kang fled the North in 1991 due to an “unbearable ordeal” his entire family suffered after his grandfather became a political prisoner for openly criticizing textbooks containing “warped history.” He came here in 1997 after hiding in China for six years.

ORIGINAL POST: According to the Choson Ilbo:

North Korean defectors settled in South Korea are sending secretly some US$10 million a year to their families in the North.

A senior government official on Sunday said, “We estimate that the amount of money North Korean defectors are sending to their families back home has reached $10 million a year. It has increased with their number, and ways of sending money have diversified.”

Some 3,000 to 5,000 of 20,000 defectors settled in South Korea are sending W1-5 million (US$1=W1,117) each to their families back home through middlemen every year, the government and defectors’ organizations believe. The North could import about 18,500 tons of Thai rice ($540 per ton) or some 43,000 tons of corn ($230 per ton) for $10 million.

The money is believed to be a mainstay of the North Korean underground economy. Since South Korea suspended trade with the North last May, the only cash that is officially funneled from the South into the North is about $50 million South Korean firms at the joint Korean Kaesong Industrial Complex pay in wages.

A security official said the defectors’ money has created a lively economy in the North Korea-China border area.

A member of a defectors organization said middlemen take commissions of about 30 percent. This means that if W1 million is sent, only about W700,000 reaches a defector’s family in the North. That is equivalent to 1.86 million North Korean won.

The DPRK government has historically encouraged remittances from Japanese-Koreans to their family members in the DPRK.  In fact they even built stores that sold Japanese goods at exorbitant prices to recapture that revenue for the state. I am not sure if these remittances are still flowing today since the Japanese government has essentially ended all economic exchanges between the two countries, but it would not surprise me if some positive value of remittance funds are now flowing through alternate channels from Japan to the DPRK.

Of course the politics of allowing remittances from South Korea are much more complicated.  Before South Koreans could feel comfortable sending them, the DPRK would have to credibly commit to not punishing and/or extorting the families of defectors and that remitted funds (minus an official service charge) would indeed be kept by the intended recipients.  As a reward for making this happen, the DPRK government could expect to officially earn at least USD$1 million per year, assuming the DPRK levied a 10% service fee; that the Choson Ilbo’s estimate of the volume of funds remitted is correct; and the volume of remittances did not increase following legalization.  My suspicion is that the DPRK could pocket much more if such transactions were made legal since volume would drastically increase.  The only people who would lose out are the moonlighting security officials who currently take 30% off the top for facilitating illicit remittances.  Two economic lessons apply: Centralized corruption is preferable to decentralized corruption, and it is better to take a small part of a growing pie than a big part of a small one.

Read the full story here:
Defectors Send $10 Million a Year to N.Korea
Choson Ilbo

Remittance to N.K. helps enlighten about South Korea: defector
Korea Herald
Song Sang-ho

Half of N. Korean defectors send money to their homeland: poll
Korea Herald

Read the full story here:
Defectors use gov’t subsidy to help families in N. Korea: poll


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