Dilip Ratha's blog

With Sanket and Ani

We have just released Migration and Development Brief 11 (see accompanying presentation) reporting latest data on remittance flows. Newly available data show that officially recorded remittance flows to developing countries reached $338 billion in 2008, higher than our previous estimate of $328 billion. Based on monthly and quarterly data released by some central banks and in line with the World Bank’s global economic outlook we estimate that remittance flows to developing countries will fall to $317 billion in 2009. This 6.1 percent decline is smaller than our earlier expectation of a 7.3 percent fall.

By now it is clear that existing migrants are not returning even though the job market has been weak in many destination countries; instead they are staying on longer and trying to send money home by cutting living costs. New migration flows are lower due to the economic crisis, but they are still positive. We maintain our expectation of a recovery in migration and remittance flows in 2010 and 2011, but the recovery is likely to be shallow.

Climate change has historically pushed people to migrate. There is widespread belief - fear? - that rising sea levels will force millions of people to migrate out of Bangladesh and Vietnam. If that happens, these migrants will spill into neighboring countries many of which are unlikely to be ready to take on migrants. Many will also sooner or later spread into far away countries in Australia, Asia, Europe and North America.

What concerns me more is that this simplistic viewpoint has very little factual analytical backing. Data on migration trends over time are bad. Data on climate change as they relate to migration are even worse. What is worse, migration experts are not necessarily talking to the experts on climate change.

Photo © Dilip Ratha/ World Bank

I was in Sindhekela (India) last August. "Home again," as Jason DeParle put it after our last trip to Sindhekela together. It was hot and humid. There were more mosquitoes than I have ever seen. But with the monsoon came a season of festivity. For the first time in decades I was home for Ganesh Puja and Nuakhai.

Ganesh Puja offers homage to the Hindu God of wisdom, so wise that He has the head of an elephant. When I visited my school, I noticed that unlike other years, the students did not install the statue of Ganesh inside a classroom. A few days earlier, an old beam supporting the roof had come crashing down while a class was in progress. Miraculously no one was hurt - thanks to Lord Ganesh! But they did not take another chance, and installed the statue on the veranda. 

Dubai is a must for any one working on migration and remittances. One of the seven Emirates, but one that depends more on trade, finance and real estate than oil and gas, Dubai is a wonder in the desert. It has a large – perhaps the largest – migrant population relative to natives (no pun intended) in the world. If you ask me which is the most developed Indian city, I would say Dubai!

Photo © Curt Carnemark / World Bank

For sure, Dubai has some of the best Indian food. (As an aside, London used to be the city with the best Indian food. I was there a couple of weeks ago, and was a bit disappointed with the Indian (actually Bangladeshi) restaurants. Perhaps the recent visa restriction on hiring cooks from other countries is beginning to have an impact!)

With all the photos in the media of migrants leaving Dubai (abandoning cars on the airport parking lot), I was forced to visit Dubai in April, and once more after that. The level of activity seemed to me as high as the skyscrapers, although the locals reported a slowing down in the pace of construction. I visited a few embassies and remittance service providers. Dubai is slowing, but only for a while, and not all sectors are affected the same way by the crisis. For example construction workers are more affected than hotel workers. Migrants from Kerala (India) and Bangladesh are more affected than those from Nepal and the Philippines. Pakistani drivers are also affected, not the least because rising house prices in Dubai has forced many of them to send their wives and children home. It occurred to me that this could be a reason for the surge in remittance flows to such separated families in South Asia.

Money transfer companies - many of which are also exchange houses and employers of registered hawaladars - were doing brisk business. Remittances to South Asia seemed to be booming.

A highlight of the Dubai trip was a ride to the desert. Sanket and I went dune bashing with a hawaladar/money transmitter friend!

On the sidelines of the Diaspora conference I asked some colleagues how the crisis was impacting Africa and other regions, and how the diaspora could be of help. Please check out what they said, on video.

Excerpt from the budget speech (July 13, 2009, para 139) by the Nepal finance minister for the new fiscal year beginning this month:

"An arrangement has been made to issue "Infrastructure Development Bond" of an amount of Rs. 7 billion by Nepal Rastra Bank fixing pegged exchange rates targeting the Nepalese working abroad through Nepalese Embassies in South Korea, Malaysia, United Arab Emirates, Saudi Arabia and Qatar, as a part of domestic borrowing for the coming fiscal year. Such Bonds can be purchased only from workers working abroad. From this arrangement, the remittance can be used for infrastructure development and the remittance itself remains free of additional charges while transmitting to Nepal. In addition to it, I am confident that such workers employed abroad will receive interest from the day of bond purchase and be benefitted."

Como mencioné en mi anterior post, nuestra Nota Informativa No 10, la cual presenta una revisión de las perspectivas de las remesas, ha generado un gran interés en el mercado financiero, entre los analistas, investigadores, y en los medios de comunicación. El Financial Times escribió un editorial basado en nuestra nota. Aun una pequeña disminución del 7.3% en los flujos de remesas, según nuestras estimaciones, puede ocasionar un impacto a los países que enfrentan déficits de financiación externa. Ahora sabemos que la resistencia a la disminución de las remesas en el futuro fue un factor importante detrás del éxito del lanzamiento de los US $ 750 millones mega-bono de Filipinas.

El video adjunto es una versión muy corta de nuestras estimaciones sobre las tendencias de las remesas en el 2009.  

Dilip Ratha, economista principal y experto en remesas, Banco Mundial from World Bank on Vimeo.

With Sanket

Newly available data show that remittance flows to developing countries reached $328 billion in 2008. In India, flows were stronger than expected in 2008 reaching $52 billion, up 34% compared to a year ago, and higher than our earlier estimate of $45 billion. India retains its position as the top recipient of migrant remittances among developing countries, followed by China, Mexico and the Philippines (figure 1).

Figure 1. India was the top recipient of migrant remittances among developing countries in 2008

As mentioned in my earlier post, our Brief outlining the revised outlook for remittances has drawn a lot of interest, from market players, analysts, policy wonks, and the media. The Financial Times wrote a great editorial on this matter. Even a small decline of 7.3% in remittance flows, as we predict, can make a great deal of difference to countries facing external financing gaps. Now we know that the resilience of remittances going forward was an important factor behind the successful launching of the $750 million mega-bond from the Philippines.
 
This week, I have decided to post a video highlighting some regional trends. Let's continue this discussion. Please send in your thoughts and comments.

Dilip Ratha from World Bank on Vimeo.

We have just released Migration and Development Brief 10 reporting latest data on remittance flows. In line with a recent downward revision in the World Bank’s forecast of global economic growth, we have lowered our forecasts for remittance flows to developing countries to -7.3 percent in 2009 from the earlier forecast of -5 percent.