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Submitted by D, A. Phillips on

This is a useful paper for sure. But it has been known for a long time that the recorded rate of growth of remittances is distorted by under-recording. Indeed recorded Sub Saharan African remittances may still be half of the actual flows, even less. For example the Bank of Ghana has been recording remittances at only 15% of the actual level shown in micro-surveys. The IMF has recently introduced new Balance of Payments classifications to rectify this. So the Sub Sahara African remittances ‘surge’ may continue for a while.
But how far does this data affect our understanding of economic development prospects? As I emphasize in my book “Development Without Aid: The decline of development aid and the rise of the diaspora” (Anthem Press) the answer is “not much.” Even if Sub Sahara Africa’s remittance flow turned out to be double that which is recorded the probable amount of investment out of those remittances would contribute less than one half of one percent to economic growth. On the other hand the potential annual investment impact of the return of flight capital (which two IMF researchers have estimated at the best part of one trillion dollars) combined with the redeployment to Africa of the savings accumulated by migrants in host country bank accounts could far exceed the investment out of remittances if Africa can make its business environment more attractive.
And this is not all. Even more important probably are the social capital assets – skills, business knowhow, and entrepreneurship – which returnees may bring back with them. Classic examples of this dynamic are probably Koreans from Japan in the 1940s and Indians from the US in the 2000s. In Africa now the Somali diaspora is engaged in a recovery effort in their homeland which started years ahead of the arrival of the development aid agencies, consisting of remittances and entrepreneurs.
So the main issue is not remittances. To some extent they are a sideshow which has consumed a disproportionate amount of aid donor time and attention. It is what those remittances mean in terms of the much wider dynamic of diaspora engagement that is critical to future development and aid policy.