REMITTANCES AND DEVELOPMENT

1. 2nd International Conference “Development Assistance” REMITTANCES AND DEVELOPMENT - “Plan B“ for Millennium Development Goals ??? University of Economics, Bratislava 27th June 2007

2. Contents Migration and Development – new issue ? Remittances Transfer mechanisms Migration and poverty Remitters Brain Drain and Brain Gain

3. Beginnings (???) From small beginnings in the late 1990s, renewed interest in the impact of migration on development has burgeoned into a somewhat organized international debate (NEWLAND, 2007). One of the first report of UN (1996) aimed on the issue expressed that international migration and development are interrelated and the linkages are numerous and complex. Ten years later new report (UN, 2006) progressed forward the issue and is already focused on the demographic, social and economic aspects of international migration in relation to development. In September 2006, the UN meeting of the General Assembly to discuss the issue, which produced an agreement to hold an annual Global Forum on Migration and Development, the first to be hosted by the government of Belgium in July 2007.

4. During the last decade the discussion about international migration and development linkages moved to focus on the three principal concerns (compare with NEWLAND, 2007): optimism about positive impacts from remittances and other contributions by emigrants to their home countries, concerns about posit./negat. impacts from the “loss” of skilled people, and an underlying hope on the part of some major destination countries that accelerated development might slow migration flows from the developing countries toward the North.

5. What is remittances ? Remittances are financial or goods transfers from migrants staying abroad. Remittances are notoriously difficult to measure accurately. Estimates of the volume of flows remitted by international migrants through official channels only. Especially poor people from countries located near major labor-receiving regions, are more likely to remit through informal, informal channels (ADAMS, PAGE, 2005). Estimation for 2006 – 206 – 250 mld. USD.

6. Motives for remittances There are various motives for remittances, which AMUEDO-DORANTES et al. (2005: 38-39) divided into five groups: Remittances connected with altruistic behaviour towards families staying in the sending country. Remittances for consumption smoothing based on efforts to diversify incomes and thus risk to the whole family. Remittances for target saving to fulfil a specific goal such as housing construction or enterprise establishment. Remittances as a migrants’ insurance tool to maintain ties with families, if something goes wrong in the new destination. Remittances to repay initial loans for migration.

7. Types of remittances 1. Personal deposits or investments (migrant to migrant) 2. Intra-family transfers ( Migrant to non-migrant - family, friends). 3. Charitable donations ( Migrant to collective) 4. Collective investments in development ( Collective to collective) 5. Taxes or levies ( Migrant to government)

8. Formal remittance system - major building blocks 1. The institution which provides the transfer, including banks, money transfer agencies, postal banks, and credit unions; 2. The mechanisms that carry the transfer from one place to another, including cheques and bank drafts, money orders and giros, electronic transfer mechanisms such as SWIFT, and proprietary networks; 3. The customer interface through which cash is collected and/or disbursed to recipients, including automated teller machines (ATMs), retail or store fronts, fixed and mobile phones, and the internet.

9. Transfer mechanisms 1. Cash-based electronic transfers 2. Electronic account-to-account transfers 3. Card-based transfers 4. Paper-based transfers 5. Informal value transfer systems (IVTS) 6. Personal couriers 7. Remittances in kind

10. International Migration and Poverty The results of analytical study (based on macro-data comparison) of WB´s scientists (ADAMS, PAGE, 2005) show that international migration and remittances significantly reduce the level, depth, and severity of poverty in low-income and middle-income developing countries. A similar increase in per capita official international remittances will lead, on average, to 3.5% decline in the share of people living in poverty.

11. Who are Remitters ? There is a conventional idea that extremely poor people generally do not migrate (except the cases of displacement or involuntary migration). The poorest of the poor cannot afford either risk or movement and the majority starves in situ (x Great Famine in Ireland 1845-1850). It has been emphasized that migrants tend to be among the more innovative and better-educated members of any population (SKELDON, 2002: 71, 78).

12. Brain Drain or Brain Gain ? Traditional Approach underdevelopment is perceived to be the trigger of international migration. For a last decades, the literature on labour migration between developing and developed countries has reflected the view the view, that this migration is associated with a brain drain: the countries of origin lose high-skill workers. The greater openness in the issue seems to have unfavorable repercussion and for this reason the literature on the brain drain has consequently concentrated on the question of how to mitigate this adverse consequence.

13. Brain Drain or Brain Gain ? New (Modern ?) Approach ODED; HELMENSTEIN; PRSKAWETZ (1997) studied human capital depletion and formation in a economy open to out-migration, as opposed to an economy which is closed. They have demonstrated that a brain gain may occur without using the argument that gain arises from new skills that are acquired abroad and are brought home upon return. Since expected migration favourably alters the incentives of a poor country´s workforce to invest in human capital formation, policy makers may wish to reconsider before embarking on measures that hinder migration. Also BEINE, DOCQUIER, RAPOPORT (2001: 277) show that average level of human capital is higher in the economy opened to migrations than in the economy without migration possibilities .

14. Conclusion Full and complete accounting of the impact of international remittances on development/poverty in the developing world needs more accurate data on the large level of unofficial remittances returning to developing countries (ADAMS, PAGE, 2005: 1660). About ten years ago, migration issue was receiving insufficient attention in the development studies literature (DE HAAN, 1999). The key question that remains, is whether and how this increased recognition of the significance of migration has entered mainstream development studies thinking, including debates on growth and poverty reduction (DE HAAS, 2005).

15. Conclusion II – lost in New York Conclusions about the role of migration in development differ hugely and recent papers and studies show the polarization in the debate. PRITCHETT (2003: 37-40) stresses that there are economic, technological and demographic reasons for much larger labour mobility and migration flows across borders, and that “migration is the Millennium Development Goals plan B” in the case not achieving the principal goals and tasks in 2015 (which very presumable). International migration is usually positive both for countries of origin and of destination. Its potential benefits are definitely larger than the potential gains from freer international trade, including foreign direct investments or programmes of official development assistance, particularly for developing countries.

16. References ADAMS, R. H., PAGE, J. Do international migration and remittances reduce poverty in developing countries? World Development, 2005, vol. 33, no. 10, pp. 1645-1669. ISSN 0305-750X. AMUEDO-DORANTES, C., BANSAK, C., POZO, S. On the remitting patterns of immigrants: Evidence from Mexican survey data. Economic Review, 2005, vol. 20, no 1, pp. 37-58. ISSN 0732-1813. BEINE, M.; DOCQUIER, F.; RAPOPORT. H. Brain Drain and Economic Growth: Theory and Evidence. Journal of Development Economics, 2001, 64(1),: 275-289. CARLING, J. Migration Remittances and Development Cooperation. Oslo: International Peace Research Institute, 2005.ISBN 82-7288-224-8 DE BRUYN, T.; WETS, J. Remittances in the Great Lakes Region. IOM Migration Research Series, No. 25.October 2006. ISSN 1607-338X DE HAAS, H. International migration, remittances and development: myths and facts. Third World Quarterly, 2005, vol. 26, no. 8, pp. 1269-1284. ISSN 0143-6597. DE HAAN, A. Livelihoods and Poverty: The Role of Migration – A Critical Review of the Migration Literature. The Journal of Development Studies, Vol. 36, No. 2, December 1999, pp. 1-47. NEWLAND, K. A New Surge of Interest in Migration and Development. Washington: Migration Policy Institute, February 2007.

17. References II ODED, S.; HELMENSTEIN, C.; PRSKAWETZ, A. A Brain Drain with a Brain Gain. Economics Letters, 1997, 55: 227-234. PRITCHETT, L. The Future of Migration: Irresistible Forces meet Immovable Ideas. The Future of globalization: Explorations in light of the recent turbulence. Conference at Yale University, Center for the Study of Globalization. Draft for comments. October 10, 2003. SKELDON, R. Migration and poverty. Asia-Pacific Population Journal, 2002, vol. 17, no. 4, pp. 67-82. ISSN 02591-238X. UNITED NATIONS. Concise report on world population monitoring, 1997: international migration and development. Report of the Secretary-General. New York: Economic and Social Council, 24 December 1996. UNITED NATIONS. World population monitoring, focusing on international migration and development. Report of the Secretary-General. New York: Commission on Population and Development, Economic and Social Council, 25 January 2006.

18. Robert Stojanov stojanov@centrum.cz Institute for Migration and Development, European Polytechnic Institute, Thank you very much for your attentiton !