REMITTANCES AND DEVELOPMENT

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REMITTANCES AND DEVELOPMENT
2nd International Conference Development
Assistance
- Plan B for Millennium Development Goals ???
University of Economics, Bratislava 27th June 2007
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Contents

• Migration and Development new issue ?
• Remittances
• Transfer mechanisms
• Migration and poverty
• Remitters
• Brain Drain and Brain Gain

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Beginnings (???)

• From small beginnings in the late 1990s, renewed
  interest in the impact of migration on
  development has burgeoned into a somewhat
  organized international debate (NEWLAND, 2007).
• One of the first report of UN (1996) aimed on the
  issue expressed that international migration and
  development are interrelated and the linkages are
  numerous and complex.
• Ten years later new report (UN, 2006) progressed
  forward the issue and is already focused on the
  demographic, social and economic aspects of
  international migration in relation to
  development.
• In September 2006, the UN meeting of the General
  Assembly to discuss the issue, which produced an
  agreement to hold an annual Global Forum on
  Migration and Development, the first to be hosted
  by the government of Belgium in July 2007.

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• During the last decade the discussion about
  international migration and development linkages
  moved to focus on the three principal concerns
  (compare with NEWLAND, 2007)
• optimism about positive impacts from remittances
  and other contributions by emigrants to their
  home countries,
• concerns about posit./negat. impacts from the
  loss of skilled people, and
• an underlying hope on the part of some major
  destination countries that accelerated
  development might slow migration flows from the
  developing countries toward the North.

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What is remittances ?

• Remittances are financial or goods transfers from
  migrants staying abroad.
• Remittances are notoriously difficult to measure
  accurately.
• Estimates of the volume of flows remitted by
  international migrants through official channels
  only.
• Especially poor people from countries located
  near major labor-receiving regions, are more
  likely to remit through informal, informal
  channels (ADAMS, PAGE, 2005).
• Estimation for 2006 206 250 mld. USD.

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Motives for remittances

• There are various motives for remittances, which
  AMUEDO-DORANTES et al. (2005 38-39) divided into
  five groups
• Remittances connected with altruistic behaviour
  towards families staying in the sending country.
• Remittances for consumption smoothing based on
  efforts to diversify incomes and thus risk to the
  whole family.
• Remittances for target saving to fulfil a
  specific goal such as housing construction
  or enterprise establishment.
• Remittances as a migrants insurance tool to
  maintain ties with families, if something goes
  wrong in the new destination.
• Remittances to repay initial loans for migration.

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Types of remittances

• 1. Personal deposits or investments (migrant to
  migrant)
• 2. Intra-family transfers ( Migrant to
  non-migrant - family, friends).
• 3. Charitable donations ( Migrant to collective)
• 4. Collective investments in development (
  Collective to collective)
• 5. Taxes or levies ( Migrant to government)

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Formal remittance system - major building blocks

• 1. The institution which provides the transfer,
  including banks, money transfer agencies, postal
  banks, and credit unions
• 2. The mechanisms that carry the transfer from
  one place to another, including cheques and bank
  drafts, money orders and giros, electronic
  transfer mechanisms such as SWIFT, and
  proprietary networks
• 3. The customer interface through which cash is
  collected and/or disbursed to recipients,
  including automated teller machines (ATMs),
  retail or store fronts, fixed and mobile phones,
  and the internet.

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Transfer mechanisms

• 1. Cash-based electronic transfers
• 2. Electronic account-to-account transfers
• 3. Card-based transfers
• 4. Paper-based transfers
• 5. Informal value transfer systems (IVTS)
• 6. Personal couriers
• 7. Remittances in kind

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International Migration and Poverty

• The results of analytical study (based on
  macro-data comparison) of WBs scientists (ADAMS,
  PAGE, 2005) show that international migration and
  remittances significantly reduce the level,
  depth, and severity of poverty in low-income and
  middle-income developing countries.
• A similar increase in per capita official
  international remittances will lead, on average,
  to 3.5 decline in the share of people living in
  poverty.

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Who are Remitters ?

• There is a conventional idea that extremely poor
  people generally do not migrate (except the cases
  of displacement or involuntary migration).
• The poorest of the poor cannot afford either risk
  or movement and the majority starves in situ (x
  Great Famine in Ireland 1845-1850).
• It has been emphasized that migrants tend to be
  among the more innovative and better-educated
  members of any population (SKELDON, 2002 71, 78).

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Brain Drain or Brain Gain ?

• Traditional Approach
• underdevelopment is perceived to be the trigger
  of international migration.
• For a last decades, the literature on labour
  migration between developing and developed
  countries has reflected the view the view, that
  this migration is associated with a brain drain
  the countries of origin lose high-skill workers.
• The greater openness in the issue seems to have
  unfavorable repercussion and for this reason the
  literature on the brain drain has consequently
  concentrated on the question of how to mitigate
  this adverse consequence.

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Brain Drain or Brain Gain ?

• New (Modern ?) Approach
• ODED HELMENSTEIN PRSKAWETZ (1997) studied human
  capital depletion and formation in a economy open
  to out-migration, as opposed to an economy which
  is closed.
• They have demonstrated that a brain gain may
  occur without using the argument that gain arises
  from new skills that are acquired abroad and are
  brought home upon return.
• Since expected migration favourably alters the
  incentives of a poor countrys workforce to
  invest in human capital formation, policy makers
  may wish to reconsider before embarking on
  measures that hinder migration.
• Also BEINE, DOCQUIER, RAPOPORT (2001 277) show
  that average level of human capital is higher in
  the economy opened to migrations than in the
  economy without migration possibilities .

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Conclusion

• Full and complete accounting of the impact of
  international remittances on development/poverty
  in the developing world needs more accurate data
  on the large level of unofficial remittances
  returning to developing countries (ADAMS, PAGE,
  2005 1660).
• About ten years ago, migration issue was
  receiving insufficient attention in the
  development studies literature (DE HAAN, 1999).
• The key question that remains, is whether and how
  this increased recognition of the significance of
  migration has entered mainstream development
  studies thinking, including debates on growth and
  poverty reduction (DE HAAS, 2005).

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Conclusion II lost in New York

• Conclusions about the role of migration in
  development differ hugely and recent papers and
  studies show the polarization in the debate.
• PRITCHETT (2003 37-40) stresses that there are
  economic, technological and demographic reasons
  for much larger labour mobility and migration
  flows across borders, and that migration is the
  Millennium Development Goals plan B in the case
  not achieving the principal goals and tasks in
  2015 (which very presumable).
• International migration is usually positive both
  for countries of origin and of destination. Its
  potential benefits are definitely larger than the
  potential gains from freer international trade,
  including foreign direct investments or
  programmes of official development assistance,
  particularly for developing countries.

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References

• ADAMS, R. H., PAGE, J. Do international migration
  and remittances reduce poverty in developing
  countries? World Development, 2005, vol. 33, no.
  10, pp. 1645-1669. ISSN 0305-750X.
• AMUEDO-DORANTES, C., BANSAK, C., POZO, S. On the
  remitting patterns of immigrants Evidence from
  Mexican survey data. Economic Review, 2005, vol.
  20, no 1, pp. 37-58. ISSN 0732-1813.
• BEINE, M. DOCQUIER, F. RAPOPORT. H. Brain Drain
  and Economic Growth Theory and Evidence. Journal
  of Development Economics, 2001, 64(1), 275-289.
• CARLING, J. Migration Remittances and Development
  Cooperation. Oslo International Peace Research
  Institute, 2005.ISBN 82-7288-224-8
• DE BRUYN, T. WETS, J. Remittances in the Great
  Lakes Region. IOM Migration Research Series, No.
  25. October 2006. ISSN 1607-338X
• DE HAAS, H. International migration, remittances
  and development myths and facts. Third World
  Quarterly, 2005, vol. 26, no. 8, pp. 1269-1284.
  ISSN 0143-6597.
• DE HAAN, A. Livelihoods and Poverty The Role of
  Migration A Critical Review of the Migration
  Literature. The Journal of Development Studies,
  Vol. 36, No. 2, December 1999, pp. 1-47.
• NEWLAND, K. A New Surge of Interest in Migration
  and Development. Washington Migration Policy
  Institute, February 2007.

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References II

• ODED, S. HELMENSTEIN, C. PRSKAWETZ, A. A Brain
  Drain with a Brain Gain. Economics Letters, 1997,
  55 227-234.
• PRITCHETT, L. The Future of Migration
  Irresistible Forces meet Immovable Ideas. The
  Future of globalization Explorations in light of
  the recent turbulence. Conference at Yale
  University, Center for the Study of
  Globalization. Draft for comments. October 10,
  2003.
• SKELDON, R. Migration and poverty. Asia-Pacific
  Population Journal, 2002, vol. 17, no. 4, pp.
  67-82. ISSN 02591-238X.
• UNITED NATIONS. Concise report on world
  population monitoring, 1997 international
  migration and development. Report of the
  Secretary-General. New York Economic and Social
  Council, 24 December 1996.
• UNITED NATIONS. World population monitoring,
  focusing on international migration and
  development. Report of the Secretary-General. New
  York Commission on Population and Development,
  Economic and Social Council, 25 January 2006.

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Thank you very much for your attentiton !

• Robert Stojanov
• stojanov_at_centrum.cz
• Institute for Migration and Development,
• European Polytechnic Institute,