September 2008

I was in Vienna last week to attend an impressive event called the Public-Private Partnership on Remittances, organized by my colleagues Massimo Cirasino and Peer Stein. Amid the technocratic, technical, and tactical treatise on payment systems, a high point for me was the launch of Remittance Prices Worldwide, a new World Bank remittance price database.

For the first time there is one database, painstakingly gathered and meticulously organized with the lay user in mind, dedicated to the cost of sending remittances in over 120 important remittance corridors. Transparency is expected to help educate consumers and generate competition among remittance service providers. Indeed a few stats are eye openers: it costs less than $8 to send $200 from Spain to Brazil (less than 4%). By contrast, sending the same amount from Germany to China can cost nearly $50 (or 25%)!

Leaders have been talking about reducing remittance costs since 2004, if not earlier. Yet, until now, there were no real indicators of how costs are falling. Mexico began putting out remittance cost data from about 13 US cities to several Mexican cities, and we saw a 56% decline in remittance costs between 1999 and 2004. The hope is that the new database will have a similar cost reduction effect. That would reduce the drain on poor migrants' incomes and increase their ability to send more help home.

So, what is this sweet little Aztec girl doing in Vienna's city center, right next to St. Stephen's Cathedral (I took this photo using my cellphone while I was there last week)?

On this beautiful September evening, this girl has just completed a traditional Aztec ritual dance with her elders, all wearing gorgeous traditional feather crowns, some of them sitting on a puma skin, a man blowing conch shell and a woman lighting a bowl of incense. They are here in Vienna, far away from their ancestral land, apparently to plead for the return of Montezuma's feather crown that was allegedly brought to Austria a few centuries ago.

But perhaps they are here for the same reason as the Hungarian breakdancers who have just performed bone-breaking contortions to what almost sounded like classical music: to earn a living. That would be understandable.  If one could climb 343 steps of the Gothic Cathedral for a breathtaking view of Vienna, I suppose one might travel six thousand miles crossing a desert and an ocean for a better life. As the dancing stops and drums go silent, the little Aztec girl sits down on a puma skin. A little Austrian boy accompanied by a Filipino nanny approaches and puts a coin in her fishy bank.

Nearly one out of 6 in Austria is a migrant. They send out about $1.5 billion in remittances. But Austria also has a lot of emigrants to neighboring Europe and the Near East. Every country is both a sending and a receiving country. They say: migration is a part of our lives.

(Zhimei Xu contributed to this post)

Oil prices increased from $26/barrel in early 2001 to over $130/barrel in June 2008, vastly enriching some countries flush with natural resources. Rising prices may affect migration patterns from origin countries in South and Southeast Asia, most noticeably away from the United States and towards the oil-rich Middle East countries.

We’ve noted some evidence that seems to support this view, at least for the few countries for which remittances data is available by source country, such as Bangladesh and Pakistan, which track flows from the US, Europe, and the Gulf Cooperation Council (GCC) countries.

The numbers from Bangladesh and Pakistan reveal that remittances from the US and Europe have increased but at a slower pace than remittances from the GCC countries. 

Interestingly, the increase in remittances from the GCC countries mirrors the rise in the oil price for Bangladesh and Pakistan.