Diaspora Matters

The Migration and Remittances team of the Development Economics and Prospects Group (DEPG) of the World Bank is organizing an International Conference on Diaspora and Development on July 13-14, 2009 in Washington D.C. 

The diaspora of developing countries can be a potent force for development for their countries of origin, through remittances, but more importantly, also through promotion of trade, investments, knowledge and technology transfers. The conference aims to consolidate research and evidence on these issues with a view to formulating policies in both sending and receiving countries.

The program committee invites economists (and non-economists as well) and policy makers to submit proposals for papers on related themes. Topics will include but are not limited to:

• Demographic trends that will influence the destination and composition of the diasporas from developing countries.
• Diaspora's economic and non-economic contributions to development through trade, investment, transfer of technology, skill transfer, institution building. (Ideally, we would like to cover topics other than remittances and brain drain on which much has already been written.)
• Policies that deepen the diaspora's contribution to the development of the country of origin. For example, do diaspora bonds actually help mobilize financing for development? Does dual citizenship deepen the diaspora's ties to the country of origin?

Papers with a focus on Africa are especially welcome. Also papers dealing with developed countries are welcome if they draw lessons for developing countries.

Since the 1960s, much of the literature on the development impact of migration has focused on ‘brain drain,’ the emigration of qualified professionals from developing countries and the subsequent loss of skills (which occurs faster than the replacement rate).

In the late 1990s, the literature shifted from brain drain to ‘brain gain,’ exploring the potential benefits of skilled migration arising from remittances, return migration, creation of trade and business networks, and the possible incentive effects of migration prospects on human capital formation at home.  You can see an extensive review of these issues here.

The questions related to the global mobility of high skilled workers can be grouped into two areas:

1. Brain drain/gain, and the challenge of retaining and attracting high-skilled professionals such as doctors, scientists, and engineers; and
2. The contribution of the diaspora in fostering the transfer of knowledge, technology, and finance, including remittances. ( link to http://www1.worldbank.org/prem/PREMNotes/premnote123.pdf)

A new report from the U.S. Census Bureau on Educational Attainment states that “a larger percentage of foreign-born than native-born residents had a master’s degree or higher in 2007.”  Their numbers lead me to ask:

• What are the challenges for the U.S. in developing, finding, and retaining talent?
• Will foreign students continue to choose the U.S.  as a place to study or will they prefer other countries?

Sri Lanka recently announced that it would open up the government securities market for its migrants abroad. Sri Lankan diaspora and migrant workers would be allowed to invest in rupee denominated treasury bills and treasury bonds.

The press release by the Sri Lanka central bank suggests that this measure “…is expected to widen the investor base, diversify the Government Securities market, make it more convenient for Sri Lankans living abroad to access Government Securities, and to create a more stable Government securities market. This scheme will also provide a safe and highly liquid investment opportunity for Sri Lankans living abroad, while providing them with an attractive return on their investments.”

Perhaps one of the earliest utilitarians was Charvak (his name literally means "sweet talker" in Sanskrit) who a few centuries ago said, "live happily as long as you live/drink a lot of ghee, and borrow if need be!" Now in the thick of a financial crisis marked by excessive borrowing and lending, one might argue against the Charvak Doctrine. It's true that debt, like fire, can be dangerous ("Don't borrow, because you will get into debt"), but if managed prudently, it can also fuel new projects, new products, and growth and employment in many poor countries.

Last week we launched a book titled "Innovative Financing for Development." In this book we argue that poor countries need additional, cross-border capital channeled to the private sector to generate employment, growth, and poverty reduction. For that, innovative financing mechanisms are necessary. The volume brings together various market-based innovative methods of raising development finance including securitization of future flow receivables, diaspora bonds, and the role of shadow sovereign ratings in facilitating access to international capital markets.

While diaspora bonds (both as financial instruments, and as "ties" with the diaspora) are obviously linked to migration, the chapters in the book explain that (a) properly accounting for migrant remittances can significantly improve sovereign ratings; and (b) future migrant remittances can be used as collateral to further lower the borrowing costs and increase the tenor of loans.