Transcript Migration, Remittances, and Development

Migration, Remittances, and
Development: Policy Options
Dilip Ratha
Migration and Remittances Team
Development Prospects Group
World Bank
Lowy Institute, Sydney
July 16, 2008
Outline
A. Stylized facts
B. Development impact of international
migration
C. Policy implications
A. Stylized facts
1. Only 3% of world population are
international migrants; 97% are not.
2. Economic migrants account for 93% of
global migant stock.
Income differences are a powerful
motivation for migration
Median wage levels for workers in the same occupation, relative to high-income
economies
(1988-92, adjusted for purchasing power)
100
100
75
50
43
28
21
25
0
High
income
Upper middle
income
Lower middle
income
Source: Freeman and Oostendorp 2000
Low
income
A. Stylized facts
1. Only 3% of world population are
international migrants; 97% are not.
2. Economic migrants account for 93% of
global migant stock. Economic migration is
set to increase in future.
3. South-South migration is as high as as
South-North migration.
South-South migration is almost as large as
South-North migration
Destination of migrants from the South
North (HInon-OECD)
13%
South
47%
North (HIOECD)
40%
Source: Ratha and Shaw (2007)
B. Development impact of international
migration
1. Migration benefits all parties – the migrants, the
destination country, and the origin country.
Migration boosts welfare for most
households
Global income gains of $356 billion (0.6%)
180
Change in real income in 2025, $ billion
150
120
90
60
143
139
162
30
0
-30
-88
-60
-90
Natives, highincome countries
Old migrants,
high-inc.
countries
.
Source: Global Economic Prospects 2006
Residents,
developing
countries
New migrants
B. Development impact of international
migration
1. Migration benefits all parties – the migrants, the
destination country, and the origin country.
2. Benefits to countries of origin are mostly through
remittances.
Remittances are large, have continued to
increase
$ billion
375
Private debt
and portfolio
equity
325
275
FDI
225
175
Recorded
Remittances
125
75
ODA
25
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
20 06
07
e
-25
Top recipients of remittances
$ billion, 2007
30
27
26
% of GDP, 2006
40
25
36
32
27
30
17
20
36
13
26
20
10
10
0
0
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Remittances reduce poverty
 Evidence from a few household surveys shows that
remittances reduce poverty
 Remittances also finance education and health
expenditures, and ease credit constraints on small
businesses
Remittances have reduced poverty in
Nepal
45
42
1995/6
2003/4
40
35
32
31
30
25
23
20
15
% of household
receiving remittances
Poverty headcount rate
%
Source: World Bank, DFID, ADB Study 2006, Glinskaya and others 2006
Remittances help reduce poverty in Sri Lanka
25
% of Sri Lankan households that moved up to a higher
income decile after receiving remittances, 1999-2000*
20
15
10
20
16
5
0
8
0
0
1
1
2
3
3
-1
4
5
6
-5
Income Decile
-10
5
7
8
9
10
-7
Remittances tend to rise following
crisis, natural disaster, or conflict
Remittances as % of private consumption
2.0
1.7
2.0 2.0
1.8
1.4
1.2
1.0
0.5
Indonesia
Thailand
Mexico
year before
year of crisis
year after
Downside of remittances
 Large remittance flows may lead to currency
appreciation and adverse effects on exports; but
sterilization of inflows may not be an appropriate
policy response
 Remittances may create dependency
 Remittance channels may be misused for money
laundering and financing of terror
Migration and remittances in the Pacific
1. Remittances to Pacific Island countries were about
$500 million in 2006
Tonga
$91 mn or 39% of GDP
Samoa
$67 mn or 14% of GDP
Fiji
$165 mn or 6% of GDP
2. Outward remittances from Australia $2.8 bn or
0.4% of GDP, New Zealand 0.9 bn or 0.8% of GDP
in 2006
B. Development impact of international
migration
1. Migration benefits all parties – the migrants, the
destination country, and the origin country.
2. Benefits to countries of origin are mostly through
remittances.
3. Emigration of skilled people may be a problem in
small countries
4. Diasporas also provide business contact, trade
network, technology, and capital to the origin
country.
Discount on Israel diaspora bonds
15 Percent
US Treasury 10-year
13
11
9
7
5
3
20
03
19
98
19
93
19
88
19
78
19
73
19
68
19
63
19
58
19
53
1
19
83
Israel DCI
bond
Israel and India have raised nearly $40 billion
via diaspora bonds
Outline
A. Some stylized facts
B. Development impact of international
migration
C. Policy implications
C. Policy implications
1. The international remittances agenda
International remittances Agenda
1. Improve monitoring, analysis, projection (MAPping)
2. Improve retail payment systems:
 reduce remittance costs
High remittance fees are a drain migrant income
30
26
Fee for sending $300 from
U.S. to Mexico, left-scale
Remittance flows to Mexico,
$ bn, right scale
30
25
22
20
18
15
14
10
10
6
5
2
0
1999
2000
2001
Source: Condusef, Mexico
2002
2003
2004
2005
2006
2007
South-South remittance costs tend to be
higher than North-South costs
Fee and FX commission $
London-Lagos
$29
Cotonou-Lagos
$35
South-South
Singapore-Jakarta
Kuala Lumpur-Jakarta
$10
North-South
$12
Jakarta-Kuala Lumpur
Los Angeles-Mexico City
Guatemala City-Mexico City
Mexico City-Guatemala City
$27
$13
$23
$24
Cost of remittances to Pacific Islands often
exceed 20%
International remittances Agenda
1. Improve monitoring, analysis, projection (MAPping)
2. Improve retail payment systems:

Reduce remittance costs

Improve competition in remittance industry

Share networks - avoid exclusivity contracts

Avoid overregulation of remittance industry

Introduce new technology
3. Leverage remittances for financial access for households
4. Leverage remittances for improving access to capital markets
for institutions/countries
1. Monitoring,
analysis, projection
3. Financial
access for
households
4. Capital
International market access
Remittances for institutions
Agenda
2. Retail payment
systems
1. Monitoring, analysis, projection
- Size, corridors, channels
- Counter-cyclicality
- Effects on poverty, education, health,
investmen
- Policy (costs, competition, exchange
controls)
3. Financial access for
households
- Deposit and saving products
- Loan products (mortgages,
consumer loans,
microfinance)
- Credit history for MFI clients
- Insurance products
International
Remittances
Agenda
4. Capital market access
- Private banks and
corporations
(securitization)
- Governments (diaspora
bonds)
- Sovereign credit rating
2. Retail payment systems
- Payment platforms/instruments
- Regulation (clearing and settlement, capital
adequacy, exchange controls, disclosure, crossborder arbitration)
- Anti-money laundering/Countering financing of
terrorism (AML/CFT)
G8 Global Remittances Working Group
C. Policy implications
1. The international remittances agenda
2. Know your migrants/diaspora
3. Help potential migrants acquire globally marketable
skills
4. Ethical recruitment policies may be ineffective, and
unethical –
5. Improve transparency in recruitment of migrants
6. Border control policies should be revisited
Migration
0
Border control
Maximum
Migration Curve
C
Migration
0
Border control
Maximum
Migration Curve
C
Income difference
Migration
0
Border control
Maximum
C. Policy implications
1. The international remittances agenda
2. Know your migrants/diaspora
3. Help potential migrants acquire globally marketable
skills
4. Ethical recruitment policies may be ineffective, and
unethical –
5. Improve transparency in recruitment of migrants
6. Border control policies should be revisited
7. Migration is not a substitute for employment
creation at home
Development implications of
migration and remittances
 Migration and remittances continue to increase.
South-South migration may be as large as SouthNorth migration
 Migration generates substantial welfare gains and
reduces poverty. Benefits to countries of origin are
mostly through remittances, and also through trade,
investments, and transfer of knowledge, skill and
technology
 Migration and remittances can be leveraged for the
development of poor countries, but they are not a
substitute for development at home
World Bank work program
•
Research and publications
•
Global advocacy
•
Country analytic work/Operations
•
Africa migration project
•
Pacific Islands labor mobility program
References:
At Home and Away: Expanding Job Opportunities
for Pacific Islanders through Labour Mobility
Migration and Remittances Factbook 2008
www.worldbank.org/prospects/migrationandremittances
1. Monitoring, analysis, projection
- Size, corridors, channels
- Counter-cyclicality
- Effects on poverty, education, health,
investmen
- Policy (costs, competition, exchange
controls)
3. Financial access for
households
- Deposit and saving products
- Loan products (mortgages,
consumer loans,
microfinance)
- Credit history for MFI clients
- Insurance products
International
Remittances
Agenda
4. Capital market access
- Private banks and
corporations
(securitization)
- Governments (diaspora
bonds)
- Sovereign credit rating
2. Retail payment systems
- Payment platforms/instruments
- Regulation (clearing and settlement, capital
adequacy, exchange controls, disclosure, crossborder arbitration)
- Anti-money laundering/Countering financing of
terrorism (AML/CFT)