- Greece Targets US Investors With $3B Of Diaspora Bonds (Mar. 8, 2011)
- More Foreign-Born Scholars Lead U.S. Universities (Mar. 9, 2011)
- Libyan exodus raises fears about Asia's remittance flows (March 10, 2011)
- Sri Lanka's worker remittances rise by 23.6% (Mar. 7, 2011)
- Russian remittances to Uzbekistan nearly $3 billion (Mar. 7, 2011)
- Pakistan: Remittances increase by 43pc (Mar. 11, 2011)
The New York Times recently featured an article on the contribution of female migrants to their families and to their countries of origin and destination. According to the Times, “Eleven years into the 21st century, women migrants have become a formidable force for development — and for the rise of women in developed countries whose careers depend on affordable child care.” Remittances sent by female migrants “…appear to be more frequent, regular and reliable even in times of crisis.”
Female migrants account for about half of an estimated 215 million international migrants in 2010 (UNPD). The share of women in skilled occupations has increased in OECD countries. However, there are very few rigorous studies that specifically consider the role of gender in migration. A few available studies suggest that female migrants typically send money for – and female recipients spend remittances on – human capital investments such as food, education and healthcare of family members (see evidence for Ghana).
Migration is a strategy followed by women when they face poverty or when they widowed or divorced. In India, women mainly migrate because they get married. In other countries women migrate to get better job opportunities, for education purposes or for family reunification. For example in Lesotho, since divorced women or widowers do not count with the income of a male migrant wage-earner, they are the ones who have to support their families.
Case study evidence of migrants’ labor market performance in receiving countries shows that most immigrants from developing countries, regardless of their destination, suffer an earnings penalty and higher inactivity levels and unemployment rates than nationals. In Europe, unemployment rates for immigrants originating from developing countries are uniformly higher than those from more developed economies. This gap is more pronounced for women than men across all skill levels (Page and Plaza, 2006). The situation is not different for immigrants in South Africa. The majority of female workers from Lesotho work in low-paying jobs since they have an irregular migration status. However, they get more money compared to what they get in Lesotho for the same work that they do in South Africa. The majority of women from Lesotho work as domestic workers, followed by agricultural jobs and in the informal sector (Crush, Dodson, Gay and Leduka, 2010).
Migration has a profound impact on the lives of the migrant households, but also their societies are shaped by the cumulative effects of labor mobility and consequently remittances. Literature provides interesting insights into the true development impact of migration. Dilip was asked to provide a background document assessing the state of the current knowledge for a roundtable discussion at the Civil Society Days of the Global Forum of Migration and Development 2010 held in November in Puerto Vallarta, Mexico. This resulting paper (co-authored with me and Sanket) has since then been revised and recently published as a World Bank working paper.
In the paper we have reviewed a variety of studies representing different aspects of migration in order to distill key messages and new insights. Main observations arising from the survey are:
For a sending country, migration and the resulting remittances lead to increased incomes and poverty reduction, improve health and educational outcomes, and promote productivity and access to finance. Although individual variation exists, the economic impact is primarily and substantially positive. Yet, these gains come at a substantial social cost to the migrants and their families as migration may lead to eroded family structures, children losing parental care, and weaker safety nets.
For 20 years, BP Agrawal led research and development at such companies as General Dynamics, ITT, GTE, and Hughes, helping take new technologies from lab to marketplace. US-based Agrawal and his diaspora peer had a number of discussions on how they can make an impact in home country (India), and concluded that it is not their financial contributions that would make a difference but rather new commercial models of public service provision. In 2006, he won Development Marketplace awards for River from the Sky, a system of community water provision in draught-stricken areas and in 2007 for, Clinics for Mass Care, a system of mobile, kiosk-based clinics.
Recognition of the poor as a major market opportunity has produced bottom-of-the-pyramid innovation, the hallmark of which is global search for home-grown solutions. Diaspora members are natural vehicles for both global search and diffusion in the local context. In reality, diffusion is all that matters. Thanks to Agrawal’ patience, perseverance and persistence, he was able to enter into partnership with a local government which significantly speeded up the diffusion.
It has often been said that the diaspora of developing countries possess considerable wealth that can be tapped – via issuance of diaspora bonds – for the origin countries’ development. We have just released a Migration and Development Brief where we present some preliminary estimates of the annual savings of the global diaspora from developing countries.
As outlined in chart 1, there are three broad elements to estimating savings of the diaspora from developing countries: (a) the size of the diaspora stocks in the different host countries, (b) the average income of the diaspora members, and (c) their propensity to save. However, lack of comparable data on migration and migrants’ income across host countries, the undocumented status of many migrants, and differences in the concepts used for income and savings across countries make this exercise especially challenging.
|Chart 1: Diaspora savings and potential market for Diaspora bonds.|
|Click here to see a larger version of this chart.|
|Kathmandu, Nepal. Photo: © Simone D. McCourtie / World Bank|
You might recall that the finance minister of Nepal announced in the annual budget in July 2009 that the government would issue a diaspora bond to raise funds for infrastructure development. Indeed Nepal Rastra Bank followed through in June 2010 by floating a “Foreign Employment Bond”. Although the initial goal was to issue Rs. 7 billion (about $100 million), Rs. 1 billion was floated in the first round. Nepali workers in Qatar, Saudi Arabia, UAE, and Malaysia could buy the bond from one of seven licensed money transfer operators in denominations of Rs. 5,000 (about $65).
Data are hard to come by, but the funds raised have been minuscule, nowhere near target. Apparently, the name of the bond had nothing to do with its unsuccessful launch!
On days like this, I look out of the window and realize a year has gone by. And yet there is this sense of running on the same spot: Yes, we have worked very hard; but has that made a dent on the world?
For those working on migration issues, the answer isn’t very encouraging. The only good news is that remittances proved to be resilient during the crisis and are on a recovery path. But anti-immigration sentiment has deepened worldwide. In some cases, the sentiment is beginning to take a hurtful tone. What is lost in rhetoric and scapegoats is the fact the majority of migrants is neither criminal nor unwanted. That migrants are human beings and ought to be respected as such has taken a back seat in many countries with strong and democratic institutions.
On this day, the International Migrants Day, it is worth repeating the words of the UN Secretary-General: Together, let us reaffirm the fundamental principle of the Universal Declaration of Human Rights: “all human beings are born free and equal in dignity and rights”.
Myth and realities
As to market entry, often the problem seems to be associated with foreign exchange or other laws and regulations. Many countries have foreign exchange regulations that do not allow remittance companies to operate outside banks. This is confirmed by our surveys conducted for an upcoming paper. On the other hand, I have seen no case where remittance companies are not allowed to operate independently from banks because of AML/CFT requirements.
A few receiving countries already tax remittances, often through indirect means. For example, remittances sent from the US to Cuba can only be paid to recipients in Cuban Convertible pesos (CUC) or Chavitos with a tax of 20 percent for conversion of US$ to CUCs. The US government and a US senator called upon Cuba to repeal this tax when the US lifted restrictions on sending remittances to Cuba. Other countries that have a parallel market premium with an overvalued official exchange rate, e.g., Ethiopia, Pakistan, and Venezuela to name a few, also implicitly tax remittances when they require recipients to convert remittances to local currency at uncompetitive official exchange rates. Philippines used to impose a small Documentary Stamp Tax (DST) of 0.3 pesos for every 200 pesos, but this was scrapped in November (see article).