I participated in a panel on Informal Markets and Peacebuilding in North Korea at the United States Institute of Pace last Tuesday where we discussed remittances. There is no data available on how much remittance North Korea receives since the country does not publish remittance statistics.
However, remittances are being sent from South Korea and China through informal channels (hand carried to the border by informal operators or wired). According to the Ministry of Unification in Seoul, North Koreans living in Seoul remit around 10 million dollars per year. Other estimates indicate that the annual amount is within the range of $5-$15 million per year.
North Korea’s informal remittance transfer system is operated by Chinese-Korean individuals/companies residing in South Korea and China. The system relies on mobile phones. The majority of the transactions take place in the border because the Chinese cell works there. Transfers are fast and made with great efficiency. If the person lives close to the border, it can take 20 minutes to complete the transaction. However, the commission fee is between 20-40% since there are five people involved in the transaction from the time the remitter sends the money until the recipient gets the funds. All the transactions pass by China. The recipient gets the money in local currency. Most North Korean remittances are used for consumption purposes and followed by investment purposes to run small businessess. In certain cases, the funds are also used for family reunification purposes.
It is interesting to see some similarities between North Korea and Somalia on how private sector activities emerge in money transfer services in a controlled state economy and in a stateless conflict economy: i) both systems relied on telecommunications to make their transfers; and ii) both systems have not faced competition from the likes of Western Union and Money Gram which have not been set up in North Korea yet.
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