The Importance of the Remittances by the African Diaspora and its problems

1. The Importance of the Remittances by the African Diaspora and its problems Sonia Plaza Africa RegionThe World Bank23 October, 2007

2. Growth in Africa has lagged other regions Per capita GDP Growth African economic outlook

3. African per capita income is now increasing in tandem with other developing countries . . . Annual Change in Real per capita GDP % Forecast 2008 African economic outlook Source: World Bank

4. African immigrants are highly skilled workers Migration as a driver of growth

5. …Remittances to Africa are growing, but are low by international standards Migration as a driver of growth

6. 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

7. Some Government Policies: Remittance countries • 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

8. Government Policies:Remittance-Source Countries • 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

9. 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

10. Why fees are higher in Africa? • Weak competitive environment in the remittance market • Lack of access to technology-supporting payment and settlement system • Burdensome regulatory and compliance requirements

11. Where does Africa stand? • 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 : • Major concentration of knowledge activities in the North (technological efforts and patents) • However, increased number of scientists and engineers graduating in the South

12. Role of Diaspora • Overcome inadequate information about international trading opportunities • Migrants facilitate host and source country bilateral trade and investment

13. Is there a role for the Diaspora? Forms of Involvement • 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

14. 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

15. 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

16. Type of Support Noncommercial financial Commercial financial Examples Collective remittance to community groups Investment in IT in India Types of Direct Contributions Migration as a driver of growth

17. Some examples: Mexico - Hometown Communities • 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

18. Mexico: Two Programs • My community in Guanajuato • 21 maquiladoras for garments established • Migrants invested US$ 2.2 million over four years • Three for One in Zacatecas • Channels community remittances to small-scale 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

19. Using the diaspora: Some lessons from high skilled migrants • 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

20. Lessons from successful diaspora networks • Networks bring together people with strong motivation • Member play both roles: • 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

21. Examples of Initiatives in Africa • Regional Initiative in Science and Education (RISE) – Carnegie-IAS • 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

22. World Bank Initiatives • Program of engagement with the Africa Diaspora • University of Ghana, Faculty of Social Science • Ethiopia, Scholl of Medicine, • Telemedicine Unit, Connectivity • Develop joint curriculum • Thesis supervision, Mayo Clinic • Africa Migration and Development Study

23. Some possible actions • Building institutional linkages between diaspora and homeland governments • AAU • Diaspora Bonds

24. Building institutional links between diaspora and homeland governments (continued) • 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

25. AAU • Issues of Accreditation • ICT (bandwith) • Sensitizing faculty that it will be mutual collaboration (opportunities for joint research) • Institutional Affiliation • Providing back home opportunities

26. Diaspora Bonds: • 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?

27. Brain Drain or Brain Gain? • The dilemma of highly skilled migration • Using the diaspora: trade, investment and technology • The special case of education and health professionals

28. An Emerging Policy Agenda • 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

29. Boosting Development Impact Selected inventory of policy measures to enhance the impact of remittances

30. Thank you