1 / 25

Workers Remittances in Mediterranean Partner Countries: The EIB’s work program

Workers Remittances in Mediterranean Partner Countries: The EIB’s work program. Pedro J. F. de Lima Development Economics Advisory Service European Investment Bank. Migration and Development Conference Washington DC, 24 May 2007. Workers ’ Remittances: a lever for economic development.

sol
Download Presentation

Workers Remittances in Mediterranean Partner Countries: The EIB’s work program

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Workers Remittances in Mediterranean Partner Countries:The EIB’s work program Pedro J. F. de Lima Development Economics Advisory Service European Investment Bank Migration and Development Conference Washington DC, 24 May 2007

  2. Workers’ Remittances: a lever for economic development EIB’s operational targets • Contribute to reduce remittances’ transfer costs, by promoting competition and disseminating information • Increased use of formal transfer channels, in particular through increased population access to banking services • Remittances as a tool for improved financial sector funding conditions

  3. Remittances in Mediterranean Partner Countries (MPC)and EIB support • EIB has long standing relationship with Mediterranean countries • In Barcelona in 2002 the EIB received a new mandate (FEMIP) … • increase in finance (EUR2 billion per year), technical assistance, policy dialogue. • priority on private sector development

  4. Remittances in Mediterranean Partner Countries (MPC)and EIB support • … reinforced in 2004 with the introduction of a special FEMIP envelope to enhance private sector lending (extended risk-sharing operations) and the creation of Trust Fund to support initiatives in priority sectors • For the 2007-2013 period, FEMIP mandate renewed at EUR 8.7 billion by the European Council to finance private sector, regional integration and socio-economic infrastructures.

  5. Study on improving the efficiency of workers’ remittances in MPCs • In this context, the EIB launched a major study on remittances. • Purpose of study was to determine ways to improve the efficiency of workers’ remittances in Mediterranean countries • Eight Mediterranean countries targeted: Algeria, Morocco, Tunisia, Egypt, Jordan, Lebanon, Syria, and Turkey

  6. Study on improving the efficiency of workers’ remittances in MPCs: Objectives The study aimed to determine: • The origin of flows • The channels of transmission of remittances and associated costs • The impact of market imperfections in host and recipient countries on costs • The use of funds in recipient countries and impediments to their efficient allocation

  7. Study on improving the efficiency of workers’ remittances in MPCs: Methodology

  8. Considerable economic importance to MPC’s

  9. Considerable economic importance to MPCs: remittances larger than FDI and ODA combined

  10. Considerable economic importance to MPCs, but not uniformly across the region Remittances as % of GDP (2005), MPC countries

  11. Not as stable as in other parts of the world: oil dependence and renewed migration flows Remittances in USD dollars

  12. Remittances in MPC: diversity of sources… • In Algeria, Morocco, Tunisia and Turkey, remittances from the EU account for 85-90% of total • For Egypt, Jordan, Lebanon, and Syria, Golf countries are the main source (EU accounting for 5-10% of remittances)

  13. ...but little variation regarding use • Use of remittances in Mediterranean countries follows a pattern similar to that of other areas • Consumption is by far the largest item (50%) • Health and education are another important use (18%) • Housing investment has some significance (14%) • Business investment appears to be relatively limited in most countries. Egypt and Tunisia appear exceptional (15 to 18%)

  14. Improving the efficiency of workers’remittances in Mediterranean countries • Market imperfections and information deficiencies • Exclusivity contracts for MTOs in post offices • Lack of transparency on transfer costs (particularly as regards exchange rate fees); • Inadequate information regarding available transfer mechanisms and associated costs, speed and reliability; • Inadequate payment systems and limited usage of bank accounts in Mediterranean countries. • Accessibility to banking accounts for emigrants residing in the EU is also limited and banking products are not sufficiently tailored for remitters, with few exceptions. • Imperfections result in high transactions costs, which could exceed 16 percent of capital sent.

  15. Costs and flows per migrant not too dissimilar across corridors…

  16. …but large differences as regards use of banking sector Relatively efficient GER-TK channel, much less GER-LE or FR-AL

  17. Reduce transfer costs Disseminate information, promote best practices Channel remittances to formal sector; increase access to banking Promote efficiency and interconnection of payment systems The FEMIP-EIB contribution

  18. Information dissemination and promotion of best practices

  19. Remittances contributing to improve funding of financial institutions Banking and financial sectors strengthening Financial development leading to economic growth The FEMIP-EIB contribution

  20. Securitization of remittances flows • Remittances as collateral for the issuance of bonds/notes (future flow securitization): banks transfer the foreign currency flows to an SPV set-up in a well-established financial centre. Risk to international investors gets reduced: • Willingness to pay issues are settled • Transfer and convertibility risks are mitigated

  21. Securitization of remittances flows • Particularly appealing for countries with sub-investment ratings • In 2005, five SPVs issued more than 4 billion USD in Turkey securitized by diversified payment rights : Technically, securitisation encompasses a number of financial transfers(SWIFT transfers MT-100, MT-102, MT-102+, MT-103, MT-103+…, corresponding to transactions such as cash-against-goods, cash-against-document transactions, letter of credit transactions, cheques, as well as workers’ remittances)

  22. EIB support to first remittance securitization operation in Lebanon Lebanon: a good candidate. • Large and stable remittance flows • Economy with sky-high public debt levels (200% of GDP)  low sovereign rating (B3/B-)/high T&C risks • Deep and relatively sophisticated financial sector with a supportive regulatory environment (securitization law); however, heavy exposure to government debt

  23. EIB support to first remittance securitization operation in Lebanon • EIB support: • Catalytic role: bringing together the different players required to setup the deal • Buyer of SPV notes (50% of 100 million EUR) • TA support – first SPV seen as a public good, replicable by subsequent SPVs

  24. EIB support to first remittance securitization operation in Lebanon • Some difficulties: • Delicate political environment • SPV is relatively small => operation costs (which are mostly fixed) are relatively large • SPV rating? Enhancing mechanisms? • First SPV expected by end-2007

  25. Workers Remittances in MPCs: The role of the EIB • For copies of the report and updated information, check: http://www.eib.org/publications/publication.asp?publ=244 • Or contact Pedro J. F. de Lima p.delima@eib.org +352 4379 7712

More Related