Transcript Enabling the Environment for Diaspora and Investments

Joint African Institute High Level Seminar
Promoting Diaspora-led investments as sources of financing for enhanced
growth and development in Africa
Cape Town, South Africa, February 06-08, 2008
Manuel Orozco
Inter-American Dialogue
1
1.
2.
3.
4.
Understanding the basics of
diasporas and development;
Looking at the Latin America and
Caribbean experience;
Options and possibilities
Caveats and precautions
2
1.
2.
3.
4.
5.
Diasporas are a peculiar group with distinct
economic activities;
They are not necessarily short of ‘migrants’ and
the word should not be used as a euphemistic
expression;
Their activities intersect in different contexts with
development, investment being one area;
The modalities of investment are also varied:
individual [self-interested]; familiar [selfint/altruistic]; community based [altruism].
Learning to distinguish between preferences and
willingness is an essential ingredient of success
3
Immigrant economic practices
(annual expenses)
Family remittances
Household economy
(US$3600)
Donations
Community
(US$10,000 year)
Consumption
Trade and
services retail
(US$3,000)
Capital
investment
Property
and other I
(US$5,000)
4
Country
COL
CUB
ECU
ELS
GUA
GUY
HON
MEX
NIC
DR
BOL
JAM
LAC
Calls once a
week
80
48
98
41
56
42
57
66
70
77
33
75
61
Sends over $300
27
15
53
32
43
33
8
46
13
17
21
42
31
Buys HCG
88
29
95
66
50
84
74
86
83
65
70
64
73
Has a saving
account.
39
2
55
16
19
48
16
21
5
29
10
58
27
Travels once a
year
34
13
51
24
9
45
12
23
19
69
13
69
32
(& Spends over
US$1,000)
(61
50
90
61
48
54
43
70
26
64
91
58
60)
Has a mortgage.
Loan
12
2
14
13
4
18
12
3
6
6
36
15
10
5
2
1
3
2
8
4
2
3
3
4
2
3
21
1
24
13
1
21
8
5
7
13
31
16
12
10
2
3
29
7
2
4
3
1
16
6
Owns a small
bus.
Helps. Family w/
mort.
Belongs to HTA
6
To have a practical understanding of impacts, consider the volume of transactions performed by an
immigrant. Salvadorans, for example, make 750,000 remittance transfers a month on an average of
5
$330 totaling $3 billion/yr. Similarly, those visiting once a year spent on aggregate $168,750,000/yr.
60
Three or more times a year
Twice a year
Once a year
50
Once every two years
Once every three years
I travel very rarely
40
30
20
10
0
Germany
USA
UK
Nigerians in U.S.A.
$160,000,000.00
THREE OR MORE TIMES A YEAR
$140,000,000.00
TWICE A YEAR
ONCE A YEAR
$120,000,000.00
ONCE EVERY TWO YEARS
ONCE EVERY THREE YEARS
I TRAVEL VERY RARELY
$100,000,000.00
$80,000,000.00
$60,000,000.00
$40,000,000.00
$20,000,000.00
$0.00
ONE THOUSAND DOLLARS OR LESS
BETWEEN ONE AND THREE THOUSAND DOLLARS
MORE THAN THREE THOUSAND DOLLARS
$400,000,000.00
$350,000,000.00
$300,000,000.00
$250,000,000.00
$200,000,000.00
$339,972,715
$150,000,000.00
$211,002,729
$100,000,000.00
$95,402,456
$50,000,000.00
$0.00
ONE THOUSAND DOLLARS OR LESS
BETWEEN ONE AND THREE THOUSAND DOLLARS
In 2004 total tourist revenue was at U$480,000,000).
MORE THAN THREE THOUSAND DOLLARS
Peas
90
Peppers
Fresh fruits and vegetables
80
Noodles
Salted fish
70
Fresh fish and shrimp
Spices
60
50
40
30
20
10
0
Germany
UK
80 % of remittance senders buy home country goods
USA
Development
Activities
Family
remittances
In the diaspora
Through
the diaspora
Financial
Banking
the unbanked
intermediation;
MFI
Consumption of Access to a
Supply of home
goods and
demand of
country
services
products
commodities
Investment of
Diaspora related Technical
businesses;
training in
capital
remittance
receiving areas;
bonds
Cash and in kind Capacity
Project
donations or
identification;
building
investments
networking
By the diaspora
MTO
Small business
development
Manufactured
goods; nostalgic
trade; tourism;
other SMEs
Social
philanthropy
9
10
11
Percent of people who . . .
Germany
UK
USA
49%
50%
28%
2%
9%
54%
Travels at least once a year
34%
59%
52%
Calls at least once a week
42%
71%
84%
Buys home country goods
88%
83%
94%
Spends more than US$1,000
77%
52%
83%
Helps family with other economic obligations
58%
64%
28%
Supports or contributes to HTAs
37%
28%
15%
Has a mortgage loan in home country
13%
11%
5%
Mean percentage
44%
47%
49%
Send money to Ghana other than family remittances
Sends over US $350
13
35
30
25
20
15
10
5
Mutual funds
Unit trust
Real estate trust
Stock market
2 year bonds
3 year bonds
5 year bonds
0
14




Every year less than 5% of migrants or families
do invest in some economic activity.
That can be between 10,000 to 50,000 people
investing on average of US$7,000
However the large majority of investments are
informal and outside the financial and business
systems: use local contractors, local informal
lenders, cash payments, etc.
Thus, first step of enabling investment
environment for diasporas is to formalize the
economy by improving financial access
15
Considerations: 1) policy driven or spontaneous; 2) how they measured success, 3) what factors
triggered success, 4) what challenges they encountered, and 5) what solutions did they found to
mitigate the challenges.
Development
In the diaspora
Through
By the diaspora
Activities
the diaspora
G-Xchange
(Philippines); Wells
Fargo (US); Directo a
México (US/MX)
Family remittances
Atikha Foundation;
(Phi); BANSEFI (MEX);
Salcajá (GUA);
Financiera El Comercio
(PAR); AMUCCS (MEX);
ADOPEM (DR); Banco
Solidario (EC); Banco
Salvadoreno (SAL);
Fedecaces (SAL)
Consumption of goods
and services
MFIC (LAC); JNBS
(JAM)
Thamel (US-NEP)
Investment of capital
IntEnt; Construmex ;
ERCOF
Por Mi Jalisco; Fuproca
Cash and in
donations
investments
Oxfam Novib: DIR
Foundation; HIRDA;
Sankofa;
South African
Reconstruction &
Development Bond;
New Horizon
Investment Club
kind IME; SEDESOL
or
16
a) Financial Intermediation
i) Financial literacy: public-private partnership
ii) Banks and SCA investment intermediation
b) Migrant Outreach
i) Confidence building
ii) Contact and identification
iii) Outreach Program
c) Regulatory issues
i) Standards in financial access
ii) Easing of rules for migrants to access the financial system
d) Economic and Social issues
i) Investment: business investment plans and partnerships
ii) Construction
17
i) Financial
Literacy: publicprivate
partnership
a)
set up 20 educators at 10 bank branches who will
explain basic and practical concepts and skills on
financial management, indicate relevant financial
products, refer her/him to a bank liaison, and invite
her/him to form a financial relationship.
ii) Banks and SCA
intermediation
a)
set up a grant facility or financial development program
that announces competitive bids on TA grants for
financial institution development in remittance transfer
and financial intermediation (savings and investments).
18
i) Develop
confidence
building
a) establish department of outreach and communication within
Ministry of Foreign Affairs;
b) develop in tandem with the office of the president confidence
building incentives.
ii) Establish
contact and
identification
a) formalize a partnership with MTOs in the country to identify
migrant communities;
b) jointly establish communication with the community leaders and
prepare a minimum database of its diasporas.
iii) Outreach
Program:
a) learning about the logistical implementation of IME and 3x1
program type of schemes in cooperation with Mexican
government;
b) inviting private sector participation (MTOs, banks, donors and
other entities);
c) establish a minimum partnership fund on social development
projects.
19
i) Standards in a) establish annual targets on bankarizing migrants as clients,
financial
banking women recipients, loan provision and collateralization
access
from remittances;
b) identify immigrants’ financial and economic preferences
ii) Ease rules
on financial
access
a) Allow migrants to open bank accounts without severe
restrictions in identification;
b) Introduce investment loan opportunities to migrants
20
i) Investment:
business
investment
plans and
partnerships
a) identification of 20 competitive investment opportunities;
iii) Investment
promotion in
housing
a) exploration of financing facility followed by a housing
investment fund.
b) obtaining cooperation from the international community in
technical assistance with Business Plan preparation and
marketing schemes design;
c) taking on the lessons of IntEnt in the Netherlands
21

Four premises to keep in mind
Impact of remittances is significant
The impact however is not a solution to the challenges of development: Structural
problems of poverty and inequality are beyond migration and remittances; and the
broader effect depends on the productive base of local economy to absorb foreign
savings;
Policies can be implemented that can leverage the economic relationships migrants
have with home country;
Any development approach demands a transnational outlook and a gender
1.
2.
3.
4.
;
Investment climate is the proxy to attract
diaspora investments (political and economic
stability);
Realism of the possible is essential
Communication is also important
perspective



22
Country of origin
Remitters who belong
to an HTA (percent)
Median Income
Philippines
35.0
35,000
Guyana
26.3
24303
Nigeria
16.0
43,000
Jamaica
15.5
34,437
Ghana
15.0
46,000
Ecuador
10.0
16,067
Haiti
9.5
23,000
Honduras
6.7
21,828
Colombia
5.6
21,995
Mean
5.5
Nicaragua
4.0
22,814
Dominican Republic
3.3
24,194
Guatemala
2.8
12,975
Mexico
2.1
18,376
El Salvador
1.5
19,789
Bolivia
1.4
25,551
An economic profile of four Latin
American cities
Salcaja,
Quetzaltenang
o,
Guatemala
Jerez, Zacatecas
Mexico
Suchitoto,
El Salvador
Catamayo,
Loja, Ecuador
Basic profile
Population
37,558
14,829
17,869
27,000
Labor force (%)
41%
37%
34%
31%
Population ages 5-19
34.7% (ages 0-14)
36.81% (5,459)
34% (7 to 18)
30%
Main economic activities (%)
--Commerce and Services
--Agriculture
--Manufacturing
--Construction
35%;
19%;
13%;
11%;
42%;
4% (excl. subs.);
6%;
15.5%;
52.2%;
7.6%;
39%;
20%; est.
8%
Proximity to major urban center
45kms to
Zacatecas
9 kms to
Quetzaltenang
o
45 kms to
San Salvador
45 kms to Loja
Cost of living . . .
Food
219
228
209
201
Services (utilities)
60
44
40
43
Education
13
32
29
56
Health
40
41
34
68
Entertainment
27
3
40
35
Wages
323
303
125
162
Total earnings, remittances included
930
501
622
353
Income . . .
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
0.80
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

0.60
0.40
0.20
0.00
0.800

0.20
% migrants
FLD (major migration country # migr)/ (total # migr
Investment climate is essential









0.600

0.400
0.200






0.000

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0.40
0.60
0
0.80
Ratio of pc remittances to pc GDP
0.75










0.50



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

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



0.25


   
 
0.00
0.00

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
       

25.00

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
50.00
% rural population
75.00
50
100
150
200
1.00



Durability of democracy
Ratio of pc remittances to pc GDP


% m igrants = 0.09 + -0.00 * durable
R-Square = 0.02

Trade dependence on major partner=exppartner/totexp
1.00


0.75


0.50







0.25





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

 
 



 =
 0.08 + 0.00
Ratio of pc rem ittances to
 pc GDP


   


R-Square = 0.04
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* poverty

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0.00
20.00
40.00
POVERTY
60.00
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