Speakers at two-day session urge efforts to mainstream remittances into development strategies, ensure financial inclusion of migrants, reduce transaction costs, and take concerns of rural population and women migrants into account
Geneva, 17 February 2011 - Money sent home by economic migrants working in foreign countries exceeded $300 billion in 2010, and this vast and growing tide of income needs to be safeguarded and channelled so that it does the most good for families and economies in the world´s poor nations, experts said at a two-day UNCTAD meeting.
The 14-15 February session, titled "Maximizing the development impact of remittances", heard the Deputy Secretary-General of UNCTAD, high officials of migrant-sending and migrant-receiving countries, and high representatives of several international organizations, as well as members of the Global Migration Group, civil society and the private sector sound a common theme: that remittances are now a major economic force, and they must be better understood and harnessed for development.
Discussions during the two-day expert meeting dealt with such topics as the opportunities and challenges posed by trends in migration and remittances; the ways, means, and preconditions needed in order to enhance the development impact of remittance flows; surmounting the practical difficulties of sending remittances home; and addressing barriers to remittance flows, including through trade and cooperation agreements facilitating temporary and circular migration.
More can be done to ensure that families and developing-nation economies derive lasting benefit from these wages earned overseas, speakers said. They stressed that less of this money should be lost in transmission, and more should be invested in the stable, broad-based social and economic growth of economies that originally were weak enough for citizens to feel compelled to leave and work elsewhere.
"Remittances account for about 2 per cent of the gross domestic product (GDP) of all developing countries, and for higher percentages in many," UNCTAD Deputy Secretary-General Mr. Petko Draganov said in opening the meeting. "In Lesotho, Nepal, Samoa, Haiti and Bangladesh, these money transfers make up more than 8 per cent of GDP. Although the effects across countries are varied, remittances have reduced poverty at the household level in many developing countries. A recent UNCTAD study found that in countries where remittances make up 5 per cent or more of GDP, on average a 10 per cent rise in remittances leads to a reduction of 3.9 per cent in the poverty headcount ratio," Mr. Draganov added that "Evidence shows that a significant amount of remittance transfers to developing countries is spent on household consumption and human capital." Such emphasis on food, education, housing, health and related purchases can ripple outwards through the domestic economies of poor nations and - if managed well - can create jobs and business opportunities that raise living standards and keep future potential migrants at home.
However, Mr. Draganov and others added that the costs of sending money from overseas could be high - the current average fee was around 8.7 per cent - and that there was "still a lack of safe, reliable, accessible transfer systems for remittances…." "For some countries, excessive margins are charged."
Mr. Dian Triansyah Djani, Indonesia´s ambassador to the international organizations in Geneva, who chaired the meeting, characterized the current trend by saying that "the hardships imposed by the world economic crisis have further increased the number of economic migrants, with the volume of remittances growing in parallel… Yet much of the time, the transfer, circulation and distribution of these remittances are hampered by systemic flaws."
The particular issues raised by remittances sent by women migrant workers were cited repeatedly. Ms. Purnima Mane, Deputy Executive Director of the United Nations Population Fund, said that women now outnumbered men among economic migrants in the wealthy nations of Western Europe and North America. Although they tended to earn lower wages than their male counterparts, evidence indicated that they sent a higher proportion of their incomes home, and that they sent this money more dependably and more often. "Often they are the only contributors to family income," Ms. Mane told the meeting. "There has been too little analysis of the relation between gender and remittances. Because of the frequency of these financial transfers, women migrants - and their children back home - are especially hurt by high transaction costs," she remarked.
"Governments should try to fashion incentives so that families receiving remittances invest any surpluses in ways that spur development in their home nations," recommended Mr. William Lacy Swing, Director-General of the International Organization for Migration. Migration is "the world´s oldest development strategy - its oldest poverty-eradication strategy," he told the meeting. "If you´re poor where you are, you move." The challenge, he said, is to use the wealth returning in the form of remittances so that it spreads economic growth broadly in the poorer, recipient nations.
"A telling and valuable characteristic of these international flows of money is their ´private´ character," said Mr. Assane Diop, Executive Director for Social Protection at the International Labour Organization. "The money goes first and foremost to families," he said, "to housing, food, education, health needs, children´s needs. It has a very direct impact on poverty reduction." Mr. Diop termed remittances as being "much better" as a way of distributing wealth in developing countries than foreign direct investment (FDI), although flows of FDI were much greater in monetary terms.
Juan José García Vásquez, Vice-Minister of Foreign Affairs in Charge of Migration Issues (El Salvador) told the meeting: "We must clearly establish a link between remittances and development." In El Salvador, he said, remittances were "the main source of income", with some 26 per cent of Salvadorean families receiving them.
Ms. Kyung-wha Kang, United Nations Deputy High Commissioner for Human Rights, said the rights of migrant workers should not be neglected in any discussion of remittances, as "development cannot be defined solely in economic terms".
Mr. Juan José Gómez Comacho, Mexico´s ambassador to the international organizations in Geneva, reported on the 2010 session of the Global Migration and Development Forum that had been held in Puerto Vallarta, Mexico. Noting that the topic of economic migration was sensitive, especially in the wake of the global recession, he told the meeting: "Migration is going to be one of the main phenomena of the twenty-first century, and we have to deal with it."
Speakers at the meeting considered that an integrated and coherent policy, regulatory and institutional framework, for migration, remittances and development, was a key component to national development strategies. Expanding access by sending and recipient families to banks (many, particularly in rural areas, do not have accounts) and offering a variety of options for sending the money home, such as through post offices, microfinance institutions, banks, the internet, and mobile phones, could lower transfer costs, speakers said. They also noted that such steps, accompanied by financial education and access to information, including through dedicated websites, could reduce the volume of remittances sent home informally and make it easer for recipients to save. In such a situation, money that was not immediately spent by recipient families would more easily be pooled for domestic investment that could spur economic growth and job creation.
Experts stressed the need to conduct country-specific reviews of the financial regulations and payment systems affecting remittance flows, in order to assess what exists, what works, and what could be improved. This could help in setting up an analytical framework and roadmap to evaluate countries´ levels of financial inclusion and financial literacy as a key component of development strategies. It could also help to produce a toolkit and database on pro-development practices and on policies facilitating remittance flows, in order to address barriers and to promote productive investments to better harness remittances for development.
