Transcript The Importance of the Remittances by the African Diaspora and its problems Sonia Plaza Africa Region The World Bank 23 October, 2007

The Importance of the Remittances by the
African Diaspora and its problems
Sonia Plaza
Africa Region
The World Bank
23 October, 2007
Growth in Africa has lagged other
regions
Per capita GDP Growth
7
6
5
East Asia
Europe
4
3
LAC
MENA
South Asia
Africa
2
1
0
-1
-2
80s
90s
2001-05
2006-15
African economic outlook
African per capita income is now increasing in
tandem with other developing countries . . .
Annual Change in Real per capita GDP %
Forecast
7
6
5
4
3
2
1
0
-1 1990
-2
-3
-4
Developing Countries
Developing excluding China and India
Sub-Saharan Africa
High-Income Countries
1995
2000
2005
2008
African economic outlook
Source: World Bank
African immigrants are highly skilled
workers
Africa: % of Highly Skilled Expatriates
400,000
60
350,000
50
300,000
40
30
Percentage
200,000
Total Number of Expatriates
% of highly skilled
150,000
20
100,000
10
50,000
0
Af
ric
a
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ig
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ia
Ke
ny
a
G
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na
C
on
go
Et
hi
op
Zi
ia
m
ba
bw
e
U
ga
nd
a
Ta
nz
an
M
ad
ia
ag
as
ca
M
r
au
rit
iu
Se s
ne
g
C
am al
er
M
oo
oz
am n
bi
qu
C
on
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go
D
R
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0
So
ut
h
Number
250,000
Migration as a driver of growth
…Remittances to Africa are growing,
but are low by international standards
Workers' Remittances US$ per capita
Sub-Saharan Africa
Europe and Central Asia
Middle East and North Africa
East Asia and Pacific
South Asia
2003
2000
Latin America & Caribbean
1990
Low Income
Upper middle income
Low & middle income
World
0
10
20
30
40
50
60
70
80
Migration as a driver of growth
International Policy Agenda:
Remittances



Understanding the size and trends in
remittance flows to developing countries
Evaluating the impact of remittance on
the households
Designing policies to:



Reduce the transaction costs
Strengthen the formal financial infrastructure
Leverage remittances to improve access to
financial services
Some Government Policies:
Remittance countries
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Tax exemptions
Improved access to banking
services by recipients
Incentives to attract investment by
diaspora
Access to FX
Support for the projects of migrant
associations
Government Policies:
Remittance-Source Countries


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Policies affecting access to banks (
i.e. Matricula Consular)
Access to FX
Immigration regimes
Cooperation with receiving countries


Federal Reserve Bank’s automated
clearing house for Mexico
Possible Spain with some Latin Amerian
financial institutions
Remittances in Africa



Flows are much higher than official data
suggests
Weak reporting structures
Weak financial infrastructure: high
informal flows
What is needed?
 Reliable and effective financial services
 Enabling environment for attracting
remittances with appropriate products
Why fees are higher in Africa?
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
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Weak competitive environment in
the remittance market
Lack of access to technologysupporting payment and settlement
system
Burdensome regulatory and
compliance requirements
Where does Africa stand?
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Labor markets and knowledge embodied
in skills and human capital have not been
globalized ( some exceptions of to tail of
scientists, engineers, managers, and
other talents)
Global Knowledge market remains highly
unequal :
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
Major concentration of knowledge activities in
the North (technological efforts and patents)
However, increased number of scientists and
engineers graduating in the South
Role of Diaspora
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Overcome inadequate information
about international trading
opportunities
Migrants facilitate host and source
country bilateral trade and
investment
Is there a role for the Diaspora? Forms
of Involvement
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Licensing agreements between diaspora
owned or managed firms
Direct investment in local firms as a joint
venture
Knowledge spillovers (managerial
positions)
Networks of scientists and professionals
Virtual return, extended visits or
electronic communications
Return to permanent employment
The diaspora is more willing to take
risks in its own country but:
It will require:
 Conducive business environment
 Sound and transparent financial
sector
 Rapid and efficient court systems
 Safe working environment
Migration as a driver of growth
South Africa skilled Diaspora

Main barriers to doing business
according to the Diaspora




Crime
Cost of living
Taxation
Standard of public and commercial
services
Migration as a driver of growth
Types of Direct Contributions

Type of Support
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
Noncommercial
financial
Commercial
financial
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Examples
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
Collective
remittance to
community groups
Investment in IT in
India
Migration as a driver of growth
Some examples:
Mexico - Hometown Communities
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Organized groups collect
remittances from their members to
finance community investments in
their native towns
Vehicle for diffusion of information
about investments opportunities in
Mexico
Remittances are accompanied by
personal and managerial skills
Migration as a driver of growth
Mexico: Two Programs

My community in Guanajuato


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21 maquiladoras for garments established
Migrants invested US$ 2.2 million over four
years
Three for One in Zacatecas
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Channels community remittances to smallscale infrastructure projects
400 projects funded
For each $ 1 contributed by migrant, the
Federal Governement contributes $1, the state
government $1, and the municipal government
$1
Migration as a driver of growth
Using the diaspora: Some lessons from
high skilled migrants
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Key players: expatriates who have
become senior executives in firms
They will build awareness in their
corporations of their native
countries as outsourcing candidates
Migration as a driver of growth
Lessons from successful diaspora
networks
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Networks bring together people with
strong motivation
Member play both roles:
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
Implementing projects in the home
country; and
Serving as bridges and antennae for
the development of projects in the
home country
Migration as a driver of growth
Examples of Initiatives in Africa

Regional Initiative in Science and
Education (RISE) – Carnegie-IAS
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Origin: Vice Chancellors at Leaders’ Forum in
2006 concurred that staff development was
their greatest need
Objective: Prepare PhD-Level scientists and
engineers in SSA through university research
and training networks
Diaspora role: giving short courses, hosting
RISE students at labs abroad, engaging in
collaborative research
World Bank Initiatives
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Program of engagement with the
Africa Diaspora
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University of Ghana, Faculty of Social
Science
Ethiopia, Scholl of Medicine,
Telemedicine Unit, Connectivity
 Develop joint curriculum
 Thesis supervision, Mayo Clinic
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
Africa Migration and Development
Study
Some possible actions
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Building institutional linkages
between diaspora and homeland
governments
AAU
Diaspora Bonds
Building institutional links between diaspora
and homeland governments (continued)
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Building institutional links at the continental level (AU,
Nepad)
Fostering institutional cooperation with homeland
countries
Promoting institutional cooperation with sectors within
a homeland such as health, education, etc
AAU
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Issues of Accreditation
ICT (bandwith)
Sensitizing faculty that it will be
mutual collaboration (opportunities
for joint research)
Institutional Affiliation
Providing back home opportunities
Diaspora Bonds:
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Bonds issued by a country to its
own Diaspora
Examples: State of Israel bonds,
bonds issued by India, also bonds
issued by Lebanon and Sri Lanka
Potential for Africa?
Brain Drain or Brain Gain?
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The dilemma of highly skilled
migration
Using the diaspora: trade,
investment and technology
The special case of education and
health professionals
An Emerging Policy Agenda
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Policies to increase the development impact of remittances
 Improving market structure and reducing costs
 Winning the beauty contest – making receiving
countries more attractive
 Influencing how remittances are used
Managing migration
 Policies in receiving countries
 Dealing with fiscal losses
 Migration of skilled professionals in education and
health
 Mitigating the brain drain
International efforts at collective action
 A world migration organization?
 Mode IV and the GATT
Boosting Development Impact
Selected inventory of policy measures to enhance the impact of remittances
Objective
Measure
Capturing a share of remittances
for development purposes
Taxation
Stimulating transfers through
formal channels and/or
stimulating capital availability
Remittance
Stimulating investment of
remittances
Outreach
Outreach to migrant collectives/
Hometown associations (HTAs)
Matched
Influencing consumption
patterns
Promoting
of emigrants
Duties or levies on remittances transfers
Voluntary check-off for charitable purposes (on transfer forms)
bonds
Foreign currency accounts
Premium interest rate accounts
Promoting/enabling transfers through microfinance institutions (MFIS)
Promoting financial literacy/ banking the unbanked
Legalizing money transfer or remittances through ICT based systems
Linking up credit union cooperatives or banks with leading commercial
bank
institutions from developed countries with extensive branch networks in the sender
and in the receiving countries
Increasing domestic banks presence in transferring remittances
Pension plans
through MFI infrastructure
Outreach through migrant’s service bureaus
Tax breaks on imported capital goods
SME schemes (financial, infrastructure or innovative)
Training programs
funding
Public-private ventures
Competitive bidding for development projects
consumption of local goods and services.
Enabling migrants to spend on their relatives’ behalf
Thank you