INTERNATIONAL MIGRATION AND DEVELOPMENT IN ASIA

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1 INTERNATIONAL MIGRATION AND DEVELOPMENT IN ASIA by Graeme Hugo Federation Fellow Professor of Geography and Director of the National Centre for Social Applications of GIS The University of Adelaide Presentation to 8 th International Conference of the Asia Pacific Migration Research Network on the theme of 'Migration, Development and Poverty Reduction, Fuzhou, China May 2007

2 INTERNATIONAL MIGRATION AND DEVELOPMENT IN ASIA HUGO Graeme Federation Fellow Professor of Geography and Director of the National Centre for Social Applications of GIS The University of Adelaide Introduction Migration has always had both beneficial and negative impacts on migrants themselves, their origin communities and their destinations. However, recently a higher level of attention has been focussed on the migration and development issue for a number of reasons: The last two decades has seen an increase in the scale and complexity of international migration. The dominant gradient of flow has moved from north-north to south-north countries so that the potential developmental effects on south countries has increased. Not only have the numbers of expatriates from poorer countries in better off nations increased exponentially but the hyper-connectivity (Dade 2004) facilitated by modern information, communication and travel technology has allowed these expatriates to maintain stronger and more intimate linkages with their home countries than ever before. There has been a shift in the global discourse around the developmental impacts of south-north international migration away from a dominant focus on brain drain toward one which recognises that the movement also has positive impacts on origin communities. Accordingly there has been enhanced interest not only in the relationship between migration and development but especially in the possibility of developing policies and programmes which on the one hand can enhance the positive effects on origin nations but also ameliorate the negative impacts. Multilateral agencies such as the World Bank (Ellerman 2003, Terry and Wilson 2005) and Asian Development Bank (2004) as well as national development assistance agencies such as DFID (House of Commons 2004) and USAID (Johnson and Sedacca 2004) began examining the potential for intervention which will enhance international migration s contribution to economic and social development and poverty alleviation in poor countries. Moreover there have been a number of major international initiatives regarding the migration-development linkage. In 2004 the International Labour Organisation (2004) produced a major report entitled Toward a Fair Deal for Migrant Workers in the Global Economy which addressed these issues. In 2003 the Secretary General of the United Nations set up the Global Commission for International Migration which produced its report in 2005 entitled Migration in an Interconnected World: New Directions for Action. The World Bank s 2006 Global Economic Report focussed on the economic implications of remittances and migration. Perhaps most significant has been the strong focus on international migration and development within the United Nations. The Secretary General produced a

3 comprehensive report on International Migration and Development (United Nations 2006a). This was a prelude to the convening of a High Level Dialogue of Representatives of all States at the UN General Assembly on September 2006 in order to: explore one of migration s most promising aspects: its relationship to development. The potential for migrants to help transform their native countries has captured the imaginations of national and local authorities, international institutions and the private sector. There is an emerging consensus that countries can cooperate to create triple wins, for migrants, for their countries of origin and for the societies that receive them. (United Nations 2006a, 5) This paper seeks to summarise trends relating to the scale and nature of mobility from poorer to better off nations, the actual and developmental impacts and the policies and programmes which can potentially increase the positive impacts. At the outset it needs to be stressed that the migration-development relationship is complex and multidirectional, and that there is variation from one context to another with differences in the nature of migration and in the economic, political and social situations in origin and destination areas. Hence, while generalisation is possible, the particular circumstances of individual migration situations always mediate the developmental impacts of migration. Moreover, knowledge of the migration and development relationship is partial and the data on population mobility itself and in key areas such as remittances remains limited. A New Era of Global Migration The United Nation s Population Division (2002, 2004a and 2006b; Asian Migration News, June 2005) estimates that the number of persons living outside their nation of birth increased from 76 million in 1960 to 175 million in 2000 and million in International migrants made up 8.7 percent of More Developed Countries population and 1.5 percent of those living in less developed nations. Almost all nations of the world are now influenced by international migration to a significant degree. There has been a significant shift not only in the scale of that movement but also in its spatial patterning. There has been an increasing amount of global migration from south to north countries. Table 1 shows that the number of international migrants in More Developed Countries (MDCs) quadrupled between 1960 and 2005 while that in Less Developed Countries (LDCs) less than doubled. The proportion of residents in MDCs who were migrants increased from 3.4 to 9.4 percent while for LDCs it fell from 2.1 to 1.4 percent. Net international migration gains now account for half of population growth in MDCs. Moreover, while until recently, the more developed countries recording significant net immigration gains were restricted to the traditional immigration nations of North America and Oceania, now all more developed nations experience significant immigration. Similarly whereas virtually no less developed nations experienced substantial non-refugee outmigration in the early post war years, now virtually all such nations are influenced to some degree. 2

4 Table 1: Source: International Migration Between Less Developed and More Developed Countries United Nations Population Division, Trends in the Migrant Stock, The 2005 Revision Major area Estimated number of international migrants at mid-year (millions) Average annual growth of the international migrants International migrants as a share of the population (percent) Distribution of international migrants by region World More Developed Countries Less Developed Countries The United Nations (2002) estimated that between 1995 and 2000 more developed countries received a 12 million net migration gain from less developed nations. Of the 2.3 million net gain per year, 1.4 million is in North America and 800,000 in Europe. One of the key results of these changes has been the rapid growth of communities of expatriates from less developed nations residing in more developed nations. This is apparent in Figure 1, which shows the numbers of persons born in south nations who were enumerated in OECD nations at the 2000 round of censuses. The censuses counted 46 million expatriates in OECD nations born outside of Europe and North America (Table 2). The fact that the official figures represent only part of the expatriate population from south countries is reflected in Table 3 which shows estimates of the size of the diaspora of some of the larger countries. Figure 1: Source: Persons born in South Nations Enumerated in OECD Nations at the 2000 Round of Censuses OECD data base on immigrants and expatriates NUMBER OF PEOPLE 2,500,000 1,000, ,000 < 18,500 3

5 Table 2: Region of Birth of Foreign-Born in OECD Countries, 2000 Source: Dumont and Lemaitre million Africa-born 16.8 million Asian 15.6 million Latin American 2.4 million North America 5.3 million Caribbean-born 1.2 million Oceania 20.4 million EU million other Europe Table 3: National Diasporas in Relation to Resident National Populations Source: US Census Bureau 2002a and b; Southern Cross 2002; Bedford 2001; Ministry of External Affairs, India, Naseem 1998; Sahoo 2002; Iguchi 2004; Guitierrez 1999; Dimzon 2005 USA: Australia: New Zealand: Philippines: India: Pakistan: China: Japan: Mexico 7 million 2.5 percent of national population 900, percent of national population 850, percent of national population 7.5 million 9.0 percent of national population 20 million 1.9 percent of national population 4 million 2.8 percent of national population 30 to 40 million 2.9 percent of national population 873, percent of national population 19 million* 19 percent of national population * Mexican diaspora in the U.S. The GCIM (2005) has identified increasing differentials in 3Ds as the major drivers of enhanced Demography, Development and Democracy. The argument is that gradients between poorer and better off nations are steapening and accordingly movement is increasing along those gradients. For example, Table 4 compares the actual and projected growth in the numbers in the workforce entry age groups (15-24) in Europe and Asia. In Europe they began to decline in the 1980s and will fall from 100,904 in 2000 to 65,880 in In Asia the numbers will continue to grow to 670,000 in 2020 but will decline thereafter. Clearly there will be replacement migration to Europe from Asia and Africa (United Nations 2003). Similarly there are stark income differentials between origin and destination countries as Table 5 indicates. Similarly differences in the political situation and extent of freedom between nation states will continue to be a force for international migration. 4

6 Table 4: Europe and Asia Population Aged 15-24, and Projected 2020 and 2040 Source: United Nations, 2003 Europe Annual Percentage Population Aged Growth Year Number ( 000) Percent Per Annum , , , , , , , Asia Annual Percentage Population Aged Growth Year Number ( 000) Percent Per Annum , , , , , , , Note: Excludes Western Asia While total numbers of international migrants have increased, 2004 saw the number of mandated refugees recognised by the UNHCR (2005) decline to 9 million the lowest figure for more than a quarter of a century. This does not mean, however, that forced migration reduced in significance since the number of people of concern to UNHCR increased from 17 million in 2003 to 19 million in Much of the difference was made up of internally displaced persons (IDPs). Moreover, the ILO has reported that there are 12.3 million forced labourers in slave-like situations, most in less developed countries (Asian Migration News, May 2005) and often associated with trafficking. Forced migration remains a substantial and volatile element in the global migration situation. It is of particular significance not only because of the dire situation of most displaced persons but also since it is instrumental in the creation of networks along which future voluntary migrants move. 5

7 Table 5: Asia: Gross National Income per Capita ($US), 2003 Source: World Bank, 2004 Origin Countries Destination Countries Bangladesh 400 UK 28,350 Bhutan 660 France 24,770 Cambodia 310 Australia 21,650 China 1,100 US 37,610 India 530 Canada 23,930 Indonesia 810 Germany 25,250 Laos 320 Italy 21,560 Nepal 240 Spain 16,990 Pakistan 470 Sweden 28,840 Philippines 1,080 Saudia Arabia 8,530 Sri Lanka 930 Singapore 21,230 Vietnam 480 Japan 34,510 Myanmar Estimated to be $765 or less United Arab Emirates Estimated to be $9,386 or more In addition to the 3Ds the growth in international migration has been fostered by a number of facilitating factors: The cheapening and speeding up of international travel making it easier to move (and return). The rapid development of Information and Communication Technology which has allowed the diaspora to maintain frequent and intimate contact with origins. The growth of diaspora communities has meant that potential migrants have more social capital in destination areas in the form of friends, family and compatriots who can provide help on arrival and reduce the risks associated with migration. The development of a large global migration industry involving a large number of recruiters, agents, travel providers, etc. who encourage and facilitate migration. The United Nations international migration data represent only the tip of the iceberg of a much larger number of people who are involved in circulation of one kind or another between nations. While such movement has always existed it has been made more feasible by globalisation trends such as developments in transport and communication and the internationalisation of labour markets. The rapid increase in non permanent international migration is evident in Figure 2 which shows the spectacular increase in the number of Chinese travelling abroad in recent years. This circulation is of major significance for economic and social change in less development countries but is little understood. 6

8 Figure 2: Source: Number of Chinese Travelling Abroad for Business and Tourism and Total Number of Outbound Trips from China, Far Eastern Economic Review, 24 June 2004, p. 30; Asia Times Online, 9 February 2006; Carey, 21 June 2006, Special Section China s New Consumers, ialid=46; Public Diplomacy Watch, 16 November 2006 There is a bifurcation in the flow from less developed to more developed countries (Castles and Miller 1998): on the one hand including high skilled, highly paid transnationals operating in an international labour market and on the other low paid, lower skilled groups needed in labour markets in countries where fertility has fallen well below replacement level and the local labour force has ceased to grow. Asia is the case par excellence here and Table 6 shows that there are at any one time over 20 million Asians working on a temporary basis in more developed nations, especially in the Middle East and other Asian nations such as Japan, Singapore, Malaysia, Thailand, Hong Kong, Taiwan, Brunei and Korea. 7

9 It has been estimated that 49 percent of the world s current international migrants are women (United Nations 2004a) and that around 10 percent of these are refugees and some 75 percent of them travel with children (Asian Migration News, 1-15 March 2005). The significance of female migration has increased in recent decades and the proportion of women moving independently has also increased. While the diversity of female migration is also increasing, they tend to be more concentrated in particular occupations than their male counterparts especially among non-permanent labour migrants. There has been a substantial increase in the numbers of women moving as mail order brides, especially out of some Asian countries like the Philippines, Thailand and Vietnam. Women are disproportionately involved in migrations where they are at high levels of vulnerability to exploitation such as where they work as housemaids, carers or in the entertainment industry. Table 6: Asian Countries: Estimates of Stocks of Migrant Workers in Other Countries Origin Countries Number Main Destinations Source of Information Year Southeast Asia Burma/Myanmar 1,100,000 Thailand Migration News, December Thailand 340,000 Saudi Arabia, Taiwan, Myanmar, Migration News, March 2002, 2002 Singapore, Brunei, Malaysia Scalabrini Migration Center 1999 Laos 173,000 b Thailand Migration News, January Cambodia 200,000 Malaysia, Thailand Scalabrini Migration Center Vietnam 340,000 Korea, Japan, Malaysia, Taiwan Nguyen, Philippines 4,750,000 Middle East, Malaysia, Thailand, Dimzon, Korea, Hong Kong, Taiwan Malaysia 250,000 Japan, Taiwan Asian Migrant Center Singapore 150,000 a Yap, Indonesia 2,000,000 a Malaysia, Saudi Arabia, Taiwan, Singapore, South Korea, United Arab Emirates Migration News, November Total 8,313,000 South Asia India 3,100,000 Middle East Migration News, April Pakistan 3,180,973 Middle East, Malaysia Scalabrini Migration Center Bangladesh 3,000,000 Saudi Arabia, Malaysia Migration News, July Sri Lanka 1,500,000 Middle East, Malaysia Migration News, November Nepal 4,000,000 Middle East, India, Malaysia Asian Migration News, May Total 14,780,973 North East Asia China 530,000 Middle East, Asia and the Pacific, Ma, Africa North Korea 300,000 China Migration News, June South Korea 632,000 Japan Migration News, August Japan 61,000 Hong Kong Stahl and PECC-HRD, 1996; Iguchi, Total 1,523,000 Central Asia Kyrgyztan 600,000 Russia, Kazakhstan, UK, Germany, Asian Migration News, May South Korea, Turkey Uzbekistan 700,000 Russia, Kazakhstan Asian Migration News, March Tajikistan 600,000 Russia, Kazakhstan Asian Migration News, March Total 1,900,000 a. Documented b. Undocumented 8

10 Brain Drain Until recently the predominant discourse on south-north migration has been of the high degree of selectivity of that migration which has drained poor nations of their most talented residents and hence exacerbated the constraints which low levels of human capital have imposed on development in those countries. This pejorative focus in the literature on south-north migration was reinforced by evidence of peoplesmuggling and trafficking. It has been only in recent years that there has been a counter view stressing some of the positive impacts of migration on origin areas. Nevertheless it is important to not turn a blind eye to the continuing significance of brain drain. As Ellerman (2003,38) points out if the brain drain literature of the 1960s and 1970s can be criticized as ignoring the complexity of migration effects by focusing only on one effect perhaps some of the current writing is excessively optimistic about the impact of migration in the South. What is required is a deep understanding of the complexity of the effects of south-north migration in order to identify areas where policy intervention can maximise positive effects and minimise negative effects. Recent OECD 1 work has indicated that 88 percent of immigrants to those nations have secondary education or higher qualifications but, that except in relatively small nations, south countries do not lose a high proportion of their highly skilled persons to OECD nations. They compared the numbers of skilled expatriates in OECD nations with the numbers remaining in their home nations and calculated the proportion that expatriates made up of all skilled persons from individual developing nations. Table 7 presents the 15 nations with the lowest and highest percentages of their skilled nationals living outside the country from two separate studies. It shows that the countries with the smaller proportions of their skilled workers in foreign countries are the large nations such as China, India, Indonesia, Brazil and Bangladesh. On the other hand those nations with the largest proportions of their skilled nationals in foreign countries are predominantly smaller. The OECD thus points out that brain drain may more adversely impact on smaller nations preventing them from reaching a critical mass of human resources necessary to foster long term economic development. There are, however, some exceptions. The Philippines (2005 population 84.8 million) is one of the nations most influenced by emigration and it is estimated that in 2000, 18 percent of Filipinos with college degrees were in the United States alone (Migration News, July 2004) suggesting that at least one in three Filipino university graduates are lost to the nation. While the aggregate numbers are significant it is also important to look at who moves. Is the migration especially selective of the brightest and the best who are of critical importance in providing leadership as well as specific skills in the origin country s efforts to develop? Moreover it can be concentrated in particular skill areas which can impinge negatively on the wellbeing of origin populations and development potential. Particularly significant here is the net loss of doctors, nurses and other health personnel from south countries. With ageing of the population in OECD nations there have been shortages of medical workers and consequent recruitment of people with these skills from developing countries. In Australia, for example, in 2001, 21.7 percent of the medical workforce were born in Asia, Africa and the Middle East compared with only 7.8 percent of all workers (Hugo 2005a). The impact of the loss of doctors in Africa and Asia is evident in Figure 3 which shows the very low 9

11 provision of doctors in most countries while richer countries enjoy high ratio s of doctors per 100,000 people. Table 7: Highly Skilled Expatriates from Selected non-oecd Countries Source: OECD 2005, 129 Cohen and Soto (2001) Highly skilled aged 15+ Barro and Lee (2000) Highly skilled aged non-oecd countries with the lowest percentage of highly skilled 15+ expatriates in OECD countries 15 non-oecd countries with the highest percentage of highly skilled 15+ expatriates in OECD countries Brazil 1.7 Brazil 1.2 Myanmar 1.7 Thailand 1.4 Indonesia 1.9 Indonesia 1.5 Thailand 1.9 Paraguay 1.8 Bangladesh 2.0 Argentina 1.8 Paraguay 2.0 China 2.4 Nepal 2.1 Myanmar 2.4 India 3.1 Peru 2.7 Bolivia 3.1 Nepal 2.9 China 3.2 Bangladesh 3.0 Jordan 3.2 Bolivia 3.1 Venezuela 3.3 India 3.4 Costa Rica 4.0 Egypt 3.4 Syria 4.3 Venezuela 3.5 Egypt 4.4 Swaziland 3.5 Guyana 83.0 Guyana 76.9 Jamaica 81.9 Jamaica 72.6 Haiti 78.5 Guinea-Bissau 70.3 Trinidad and Tobago 76.0 Haiti 68.0 Fiji 61.9 Trinidad and Tobago 66.1 Angola 53.7 Mozambique 52.3 Cyprus 53.3 Mauritius 50.1 Mauritius 53.2 Barbados 47.1 Mozambique 47.1 Fiji 42.9 Ghana 45.1 Gambia 42.3 United Rep. Of Tanzania 41.7 Congo 33.7 Uganda 36.4 Sierra Leone 32.4 Kenya 35.9 Ghana 31.2 Burundi 34.3 Kenya 27.8 Sierra Leone 33.3 Cyprus

12 Figure 3: Physicians per 100,000 People, Source: Human Development Report 2005 Table 8: Density of Foreign Students in Selected Countries Source: OECD 2001, Table 11.2 Country FS per 1,000 Enrolled Students Country FS per 1,000 Enrolled Students Australia Japan 6.0 Austria Korea 1.0 Belgium 40.1 New Zealand 36.7 Canada 27.9 Norway 31.6 Denmark 60.1 Switzerland France 73.0 United Kingdom Germany 81.6 United States 32.4 Italy 12.4 OECD mean 60.3 One area of concern in brain drain migration relates to the increasing numbers of students from less developed countries who migrate to OECD nations to study but who subsequently remain in those countries after graduation (Tremblay 2004). Table 8 shows the main OECD destination nations, although south-south student migration is increasing and Asian countries like Malaysia, South Korea, Philippines and Singapore have thriving international student programmes. It is estimated that around 2 percent of the world s 100 million university students are enrolled outside their country of birth and citizenship. Most of the latter are south-north migrants with the largest origins being India and China (Migration News, April 2005). The United 11

13 States remains the pre-eminent destination with 586,000 foreign university students in 2002 although its dominance may be eroding due to increasingly aggressive marketing of international education as an export industry by other countries, especially the English speaking nations like the United Kingdom, Canada, Australia and New Zealand (Migration News January 2005). In addition, increased security and slowing of issue of visas following 9/11 2 has stabilised the number of students in the United States while numbers continue to rise in other OECD countries. South-north student migration is potentially a contributor to the development effort at home both through many students being able to work at their destination and remit money home, through knowledge transfer and the enhancement of national human resources when they return home after completing their studies. In reality, however, it often has become a net loss to development in origin countries. On the one hand there is a significant south-north flow of money for fees and living costs with the total paid to host nations each year by foreign students being US$30 billion (Migration News, April 2005). On the other there is a growing nexus between south-north student migration and permanent settlement in north countries. Many student migrants see their movement as the first stage to settlement while several OECD nations have immigration regulations which favour recruitment of these students as they are seen as ideal migrants having qualifications recognised at the destination and first hand experience of the destination country labour and housing markets and living situations. Moreover the host nation hasn t paid for their training. The growing linkages between student migration and permanent settlement is a major component in the increasing incidence of south-north brain drain. Australia has become an important education destination, being second only to Switzerland, in the proportion that foreign students make up of the national tertiary student population. Figure 4 shows that there has been an exponential growth of foreign students with Asia the predominant source. Until the late 1980s the bulk of Asian students in Australia came under the Colombo Plan, which meant that their costs were met by Australia s Development Assistance Funds. Moreover, these students were compelled to return to their home country on completion of their studies. The late 1980s saw a major shift with the development of an education export industry which not only saw a massive growth in foreign student numbers but the imposition of fees on them and it is now estimated that student migration generates A$4 billion 3 annually for the Australian economy. Then in 2001 the Australian government made it easier for some foreign students to convert to Permanent Resident Status by granting additional points for Australian qualifications to applicants for immigration. Accordingly, in , some 16,485 of the 123,424 immigrants to Australia were in fact students who had applied for, and received, permanent residence in Australia. Figure 5 shows that the overwhelming majority of these on-shore migrants were from Asia. 12

14 Figure 4: Overseas Students in Australian Universities, Source: DETYA Students: Selected Higher Education Statistics, various issues 250, , , ,000 50, Number Overseas Students from Southern and Central Asia Overseas Students from Northeast Asia Overseas Students from Southeast Asia Other Overseas Students Total Overseas Students ( ) Year Figure 5: Source: Australia: Overseas Students Transferring to Permanent Residence by Country of Citizenship, DIMIA unpublished data NUMBER OF STUDENTS 3,500 2,000 1, less than 10 13

15 What is also clear is that students from less developed nations are becoming an increasingly larger part of the postgraduate student population as is evident in Figure 6. Figure 6: Foreign PhD Students as a Percentage of Total Enrolment, 2000 Source: Trewin 2004, 71 Nevertheless, this does not preclude OECD nations taking a more ethical approach to skilled south-north migration and this is increasingly discussed among development assistance and professional communities in those nations. One suggestion is that receiving countries make payments of some kind either in cash or investment in training/education in the country of origin for every skilled migrant accepted, in recognition of the costs invested by origin nations in the development of the human capital encapsulated in each migrant. This of course would forge a link between immigration and development assistance policies and ministries in receiving nations which usually are currently quite separate operations. Such investments could be earmarked for the creation of training institutions to replace the skills lost. While some could argue this would simply produce more potential OECD bound migrants, the raison d etre should be the recognition that destination nations have a responsibility to meet development costs of human capital paid for in origin nations. Thus the investment could be tied aid in the sense that it is targeted to particular areas of activity in the origin nation. In some ways this is analogous to the levies at 14

16 present placed on migrant workers by some immigrant countries to fund domestic training programs. Singapore, for example, imposes such a levy to be paid by the employers of skilled foreign workers and the funds generated are put into the training/education of Singaporeans so that skill shortages in the long term can be met internally. It is not too large a jump to envisage a similar payment to and/or investment in the training/education system in origin countries. There also have been other suggestions such as: Developing a Code of Conduct for OECD nations to follow in recruiting skilled workers. Developing circularity in this movement by encouraging temporary residence in the destination, incentives to return, portability of benefits, etc. At the same time, encouraging the development of domestic training institutions to obviate the need for recruitment from south countries. Imposing limits on the proportion of workers in particular sectors who are from overseas to encourage domestic training. Imposition of levies on employers of south professionals to generate funds for training both at home and abroad. Lucas (2005, 7-8) has identified that the departure of highly skilled people from south countries imposes three elements of costs on those nations: Productivity losses he points to the correlation between average years of schooling and the rate of economic growth in nations but points out that it is contentious whether educational expansion causes growth or expanding incomes permit educational expansion. Loss of key professions not allowing basic needs to be met the loss of key groups may lower access to health care and quality education for future generations. Fiscal losses this involves two elements the loss of any net contribution the educated migrant would have made to the fiscal balance had they remained at home, and secondly, the loss of such a migrant exports the returns to the public investment made to their education. However, despite these potential costs there is growing evidence that not all southnorth migrations result in losses or even net losses to the sending countries, although there is a lack of accurate and relevant data and dearth of systematic research in the area. One econometric study based on Philippines data indicated that the country would receive a net benefit by training and exporting physicians who would remit significant amounts of money home (Goldfarb, Havrylyshyn and Mangum 1984). Nevertheless, it is apparent that much depends on context and that undoubtedly many countries experience the losses due to migration. We will now turn to some of the evidence that south-north migration can have positive development impacts in the south. Remittances Revisionist views of the impact of international migration upon development have been driven by a new appreciation of the scale and impact of remittances. Diasporaled development in origin nations incorporates a much wider range of impacts than remittances but there is little doubt that in development organisations like the World 15

17 Bank and the Asian Development Bank, remittances are at the centre of concern (Terry and Wilson 2005). Remittances have been associated with migration from time immemorial, why is it that they have suddenly gained the attention of development economists? The reasons are several: Firstly, there has been a new appreciation of the scale of remittances, which have been dismissed by many as peripheral and of limited scale and effect. However, while there has been a strong appreciation that only a fraction of total global remittances are accounted for in official statistics, the level of global remittances has expanded exponentially with both the increase in migration and the increasing extent to which remittances flow through official channels. The latest estimates by the International Monetary Fund and the World Bank put global remittances at US$130 billion, $79 billion of which go to developing nations, while the International Organisation of Migration estimates that if transfers through informal channels are included, remittances could be as high as $300 billion (Asian Migration News, January 2005). Remittances have long been larger than Foreign Development Assistance and probably now are larger than Foreign Direct Investment in less developed countries (Figure 7). Figure 7: Resource Flows to Developing Countries (in billions of US$) Source: Bridi FDI BILLION DOLLARS (US) Net Official Flows Remittances Capital Market Flows In the past the impact of remittances on development has been dismissed because field evidence indicated that the bulk of remittances were not invested in productive enterprises but are spent on consumption, especially the meeting of basic needs and the building and refurbishment of houses. However, it has been shown (Taylor, et al. 1996) that a dollar spent in such activity has multiplier effects, which ripple through local and regional economies having significant poverty reduction and developmental impacts. There has been a realisation that remittances are effective in poverty reduction at a grass roots level because they are passed directly from the migrant and received by families and individuals in less developed countries so that they 16

18 can be readily used to improve the situation of those people. On the other hand, FDI and FDA are mediated by an array of institutions which can dilute their impact at the level of individual communities and families. Hence, of all south-north financial flows, remittances are not only the largest but also that with the greatest impact upon improving the situation of ordinary people. Migrants from south nations are not drawn randomly from the entire population but tend to come from selected areas so that the impact of remittances tends also to be concentrated in particular parts of a country where its effect is amplified. These are often peripheral areas where remittances are the only source of foreign exchange and of capital inflow for development. With an increasing focus on regional and decentralized development in south nations, there has been an enhanced realisation of the significance of remittances. What is the impact of remittances? Assessing the effects of remittances in macroeconomic terms is rendered extremely difficult by the poor quality of remittance data at the national and regional level. One indication of the general failure to capture remittance flows in official statistics is seen in a statement made by the Pakistan finance minister in He placed the total value of remittances at US$6 billion, of which only $1.2 billion goes through official channels (Business Recorder, 25 May 2001). In the Philippines, the National Census and Statistics Office routinely increases the balance of payments total for OCW (Overseas Contract Workers) remittances by 50 percent when it calculates their funds as a proportion of GNP. This was based on a survey of OCWs which found (Tiglao 1991, 56): 40 percent of remittances flow through official channels. 23 percent were used to purchase commodities shipped to the Philippines. 22 percent sent home using a money-courier system by which remittances are paid to the workers families in pesos. 13 percent were carried home by workers on their return. Despite the quality of the data, Figure 8 shows the upward trend in remittances in a number of Asian labour exporting economies. Similar trends are evident where there are permanent settlements of expatriates in foreign nations. Hence, Figure 9 shows the growth in the inflow of remittances from the 3 million overseas Vietnamese (Viet Khu). The Vietnamese government has undertaken a number of initiatives in recent years to encourage the Viet Khu to remit to their homeland (Nguyen Anh 2005). Remittances can and do have an impact on the balance of payments of nations. Table 9 relates official estimates of remittances to the value of total merchandise exports and imports over the last two decades in several major migrant origin countries in Asia and the effects vary considerably. Remittances are generally small in relation to export earnings in the largest countries of the region, especially China and Indonesia. An exception though is India, where remittances have represented an important share of foreign exchange earnings, especially in recent years. In all the countries of South Asia remittances are significant especially in Sri Lanka and Bangladesh, and in Pakistan they are also a fifth the size of merchandise export earnings. In the Philippines remittances have made up a major share of foreign exchange earnings for many years. 17

19 Figure 8: Source: Growth of Remittances to the Philippines, Thailand, Indonesia, Bangladesh, India and Sri Lanka, IMF Balance of Payments Statistics Yearbooks; Bank of Thailand; Chalamwong 2005, 3; Soeprobo 2005, 10; Scalabrini Migration Center 1999; Dimzon 2005; World Bank 2004 Philippines Sri Lan ka Million $US Year Millio n $US Year Thailand India Million Baht ($US1=38.5 Baht) Year Millio n $US Year Indonesia Bangladesh Million $US Year Million $US Year Figure 9: Remittances Sent by Overseas Vietnamese to Vietnam Source: State Bank of Vietnam, Far Eastern Economic Review, 16 January 2003, 48; Gundzik 2005; Voice of Vietnam News, 22 December ,900 3,600 3,300 3,000 2,700 2,400 2,100 1,800 1,500 1,200 DOLLARS (millions) '91 '92 '93 '94'95 '96 '97 '98 ' '01 '02 '03 '04 18

20 Table 9: Source: Main Asian Labour Exporting Countries: Workers Remittances Relative to Exports and Imports in US$ Million, Hugo, 1995; World Bank Development Report, various volumes and Country Data, Soeprobo 2005, 10; Chalamwong, 2002; IMF Balance of Payments Statistics Yearbook, various; Dimzon 2005; World Bank 2004 Country Year Workers Total Merchandise Remittances Exports (X) Imports (M) R X R M Indonesia ,908 10, ,815 27, ,180 57,159 31, Philippines ,744 8, ,222 9,790 15, ,640 37,065 39, Thailand ,240 7, ,500 32,473 40, ,718 90,947 81, Bangladesh , ,903 2, ,200 6,820 9, Pakistan ,038 2,958 5, ,566 7,264 9, ,200 11,901 13, India ,756 11,265 17, ,891 19,795 22, ,400 54,700 69, Sri Lanka ,293 2, ,487 3, ,500 5,060 6, China ,875 19, ,940 80, , , , In nations with large inflows of remittances the macro economic impacts can be considerable. Between 1990 and 1999, remittances contributed an average of 20.3 percent of the Philippines export earning and 5.2 percent of GDP (Go 2003, 5). In 2000, the Philippines government appealed to Overseas Filipinos to remit more dollars to salvage the depreciation of the Peso (Asian Migration News, 16 November 2000). However, the diaspora also can withhold sending home remittances when there is instability in home currencies as was the case in the Philippines during a period of political instability in November 2000 (Asian Migration News, 30 November 2000). A corollary of the dependency of nations on remittances is that if those flows are suddenly stopped they can impact dramatically on the home country. Iraq s invasion of Kuwait caused distress in Pakistan and a 17.6 percent decline in remittances in the Philippines in late 2001 was attributed to the events of 9/11 and the military strikes on Afghanistan (Asian Migration News, 31 October 2001). On the other hand, some suggest that over-reliance on remittances can retard origin countries because it allows them to delay badly needed structural change in the domestic economy. Tiglao (1997, 40) argued that in the Philippines remittances has insulated a backward agriculture sector from modernisation and diverted attention 19

21 away from the need to attract foreign investment in manufacturing while other Asian nations had made these changes. Remittances can also lead to the so-called Dutch disease which creates greater vulnerability to external shocks by stimulating imports and reducing the incentive to develop exports (Quibria 1996; Athukorala 1993). Examination of remittances at national level doesn t always reflect their true impact. Most remittances focus on particular sub areas which send out large numbers of migrants. In Indonesia, for example, one of the poorest provinces (Nusa Tenggara Barat) is a major source of migrant workers who are estimated to send Rp100 billion in remittances, which was significantly higher than the entire province s budget (Rp80 billion) (Indonesian Observer, 18 March 1995). In a sub provincial area of a neighbouring province, Eki (2002) found remittances to be 36 times higher than the exports from the region and four times higher that the provincial budget. Remittances and Policy Policy concerns in south nations with respect to remittances are of two types: To maximise the inflow of remittances To mobilise remittances to enhance development With respect to the first, one issue is the exorbitant costs which have often been involved in the process of sending money home. In 2000 the average cost of sending remittances to Latin America was 15 percent of the value of the transaction. However since then greater competition, advances in technology and greater awareness among relevant government agencies has halved the costs and made available an additional US$3 billion each year to receiving families (Terry 2005, 11). The fact remains, however, that transaction costs are often too high and remitters are at the mercy of predatory institutions and individuals both at sending and receiving ends. There is much that can be done by governments at both ends of the process to maximise the proportion which gets through and the speed and security of the process. As Orozco and Wilson (2005, 380) point out remittances remain financial flows in search of financial products. Too few financial institutions offer transnational families affordable financial products and options. Terry (2005, 11) also makes the point that remittances are often the initial point of entry of poor families into the formal financial system to open a savings account, or obtain a loan or mortgage. This is the critical first step to entering the financial mainstream for individual families and reaching the goal of financial democracy for a country. Turning to the second issue of how to mobilise remittances to enhance development, it has been shown that there is significant developmental impact if there is an increase in the proportion of remittances that flow through formal financial systems (Terry 2005, 12). Yet what is clear is that government authorities (national, regional and local) in origin countries have often failed to create contexts which can lever remittances to achieve developmental goals. Some countries have attempted to tax remittances at various times but the main effect has been to divert more remittances through non-official channels. In 2002 Sri Lanka announced that it would impose a 15 percent tax on the US$1.2 billion received each year but was quickly forced to withdraw the measure when there was a public outcry (Migration News, January 2003). A number of innovative programmes have been introduced in Mexico with success. These include programs where federal and state governments match 20

22 remittances to undertake developmental activity in depressed regions (Zarate-Hoyos 2005). However, these target remittances sent by groups of migrants from the same area, the so-called hometown associations and the bulk of remittances still are received by individual families. In some contexts there has been a failure to realise the potential role of remittances in regional development. For example, in an Eastern Indonesian case study (Hugo 1998) there have been few flow-ons from migrations which have involved investments generating local production for export to other regions or expanded local job opportunities. While there can be little doubt that households and villages with migrant workers have benefited considerably the region remains among Indonesia s poorest areas. It is a peripheral area with limited agricultural potential with low levels of education and which is neglected by the central government (Hugo 1998). The reasons for the limited impact of remittances on regional development are: The remittances are focused on an isolated peripheral area. The illegality of the migrants sending the remittances. The lack of sufficient physical infrastructure, especially transport infrastructure, which would create a favourable environment for small investors. The lack of integration of the remittance recipients into regional planning efforts. The lack of appropriate training/education programs to assist returning migrants in making effective investment decisions. It is somewhat paradoxical that while the export of labour has been explicitly incorporated into national planning efforts in Indonesia (Hugo 1995) in a poor province where labour migration is one of the few sources of funds into the region, it is not being considered at all in regional development planning. Hence, it is not only at national levels that public authorities have failed to lever remittances for development, Orozco and Wilson (2005, 386) have argued that an adequate policy response for improving the development impact of remittances will involve an effort and partnership between an array of stakeholders transnational families, money transfer companies and financial institutions, public authorities, civil society and international organisations. They advance a number of core principles for three of these stakeholder groups: Remittances Institutions Improve transparency Promote fair competition and pricing Apply appropriate technology Seek partnerships and alliances Expand financial services Public Authorities Do no harm Improve data Encourage financial intermediation Promote financial literacy Civil Society Leverage development impact Support social and financial inclusion 21

23 Most tellingly they conclude, remittances remain private flows in search of public opportunity for so long the sign of a broad problem, now (they) have potential to be part of a far reaching solution. The Diaspora and Development Much of the migration and development discourse focuses on the scale and impact of remittances. However, there is a growing realisation that the developmental effects of migration are more complex. The networks which are often set up by migrants between their destination and origin countries can be conduits for more than remittances and the developmental implications of these other flows need to be considered. As Lucas (2001) points out, there is a growing appreciation that a highly skilled diaspora may play several important roles in promoting development at home. Two important questions arise here To what extent do the transnational networks linking diaspora communities link with their origins to influence development? To what extent can policy intervention facilitate and enhance such impacts? There is also a fundamental underlying issue in a rapidly globalising world for many nation states there is a growing mismatch between their citizen population and the population residing within their national boundaries. For some countries their diaspora is a substantial and significant part of their citizenry and their involvement in national development effects is only part of a wider project of their incorporation in the mainstream of national life. What are some of the ways in which diaspora from south countries are influencing developments in their homelands? One of the most prominent is that the diaspora can be an important element in promoting FDI from their new home to the origin country. Lucas (2001, i) maintains that the diaspora can act as middlemen enhancing information flows, lowering reputation barriers and enforcing capital arrangements resulting in an expansion of capital inflows from foreigners as well as from the diaspora and of trade links too. Biers and Dhume (2000, 38) report several overseas Indians who had reached upper management positions in Western Multinationals helped convince their companies to set up operations in India. Hewlett Packard, being a prime example. However cases par excellence here are China and Taiwan where the spectacular economic growth of recent years has been heavily influenced by investment from a diaspora of perhaps 30 million overseas Chinese (Lucas 2003). There has been discussion of how Chinese business and social networks have overcome barriers to international trade. Rauch and Trindade (2002) found that ethnic Chinese nationals have a quantitatively important impact on bilateral trade. Rubin (1996) has shown how Chinese entrepreneurs in the United States are taking their businesses into China. The Indian diaspora, second in size only to that of China, is of around 20 million people with an income of US$160 billion more than a third of India s GDP (Sharma 2003, 29). However, it has not been mobilised as effectively as the Chinese diaspora, contributing only 9.15 percent of $4 billion FDI compared with half of China s $48 billion. The Indian government is now developing a diaspora program to (Sharma 2003, 32): attract back expatriates; heighten their cultural attachment through events; 22