India tops in remittances
Migrants send home $300 billion in 2006, nearly three times more given in foreign aid to developing countries.india Updated: Oct 19, 2007 13:30 IST
With Indians at the top, migrants working in industrialised countries sent home more than $300 billion in 2006 nearly three times the $104 billion given in foreign aid to developing countries.
India with $24.5 billion took in more remittance than any other nation. It was followed by Mexico ($24.2 billion), China ($21 billion), the Philippines ($14.6 billion) and Russia ($13.7 billion), according to a new UN study.
"This figure, which is a conservative estimate, shows that the seemingly small sums sent home by migrant workers when added together dwarf official development assistance," said Kevin Cleaver, assistant president of the UN International Fund for Agricultural Development (IFAD), which co-authored the study with the Inter-American Development Bank (IDB).
Asia received the largest share of the remittances - more than $114 billion - followed by Latin America and the Caribbean with $68 billion, Eastern Europe with $51 billion, Africa with $39 billion and the Near East with $29 billion, according to the report released in Washington on Thursday.
The report released ahead of the International Forum on Remittances 2007, co-hosted by IFAD and IDB, also found that the remittances sent home regularly by some 150 million migrants exceeded foreign direct investment (FDI) in developing countries, which last year totaled around $167 billion.
The sheer volume of the transfers has implications for international development as official development assistance and foreign direct investment together provided only $271 billion last year.
"This is a real paradigm shift because of the amounts and because it's in private hands," said Cleaver. "I bet you the aid architecture is going to change direction in the next 10 years.
"This is a global phenomenon. ...This is a globalisation of labour markets," he said.
"Walls aren't stopping them. Patrol boats in the Mediterranean aren't stopping them. They're coming to work."
The money is important to many countries. Of 162 developing nations covered in the report, 45 receive more than 10 percent of their gross domestic product from migrants.
Terry said the sum of global remittances grows about 10 per cent each year. A steady drop in transfer fees caused largely by increased competition and government regulation has accompanied the increase. That means more money is usable.
IFAD underscored that more than one third of these remittances flow to families in rural areas, and is mostly used for basic necessities such as food, clothing and medicines. While 10-20 per cent is saved, too often these savings are hidden in homes rather than put to work in financial institutions, constituting a "major missed opportunity for local development".
"The reason why we can't get leverage out of it is because it still is in the realm of cash-to-cash transactions," said Donald F Terry, manager of the bank's Multilateral Investment Fund. "We've got to figure out how to move that into the financial system."
Although the transfers help families escape poverty, the big challenge is harnessing the money for development, researchers said. The impact might be improved by promoting developing nations' investment climates and expanding banking systems to reach rural areas, Cleaver said.
The potential is strong in regions including Eastern Europe and Southeast Asia, where nearly all remittances are doled out in cash by banks. The key is to turn receivers there and everywhere into bank customers who open accounts and take out loans, the study said.
"Given the chance, poor people will invest their money. And if we do that, we give a better opportunity to a future generation," said Terry.