Towards the 5x5 Objective: Setting Priorities for Action

Transcription

1 Towards the 5x5 Objective: Setting Priorities for Action Global Remittances Working Group Meeting April 23, Washington DC Massimo Cirasino Head, Payment Systems Development Group

2 The 5x5 Objective In many remittances corridors the cost of sending remittances is still high relative to the often low incomes of migrant workers and their families Reduction in cost would generate a net increase in income for migrants and their families in the developing world, estimated at 15 billion USD. In light of this, the Global Remittance Working Group (GRWG) led by the World Bank has promoted the 5x5 objective: the reduction of the average cost of sending remittances globally by 5 percentage points over 5 years In July 2009, at L Aquila summit, the G8 Head of States endorsed the 5x5 objective and made a pledge to achieve in particular the objective of a reduction of the global average costs of transferring remittances from the present 10% to 5% in 5 years through enhanced information, transparency, competition and cooperation with partners The World Bank Remittance Prices Worldwide database was accepted as a reference for monitoring progress on this objective on a biannual basis 2

3 Priority Framework During the Rome Conference on Remittances in November 2009, the GRWG members requested the Secretariat to develop a framework that will allow the group to set priorities towards the 5x5 objective The Secretariat has elaborated a data matrix to identify priority countries as well as a mapping exercise of what is already being done Country Prioritization Matrix: A matrix of sending and receiving countries according to cost and volume allows to identify the low-hanging fruits i.e. countries that combine important outflows/inflows and high costs Mapping of Remittance Activities Worldwide: Collecting information on 130 activities in the remittance sphere from the multilateral and bilateral organizations most active in this field 3

4 Remittances Outflow Volume (Billion USD 2008) Remittance Sending countries Remittances Cost for 15 major Sending Countries (66% of the registered outflows) UNITED STATES U.A.E.*** RUSSIA SAUDI ARABIA SPAIN ITALY GERMANY NETHERLANDS MALAYSIA UNITED KINGDOM CANADA* JAPAN* FRANCE CZECH REPUBLIC AUSTRALIA Average Total Cost of Sending Remittances from (% 1Q 2010) 4

5 Remittance Sending countries 50,000 Top 20 Remittance Sending Countries in the World 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - In blue, the countries covered in the Remittance Prices Worldwide database 5

6 Receiving Countries: Average Cost and Volumes 50,000 45,000 Top 20 Receiving Countries: Cost x Volume Linear scale India China 40,000 35,000 30,000 25,000 20,000 15,000 Philippines Mexico 10,000 5,000 0 Bangladesh Nigeria Pakistan Egypt Poland Romania Indonesia Vietnam Lebanon Morocco Serbia Ukraine Brazil Colombia Guatemala

7 Volume in Million USD Receiving Countries: Fees and Volumes Remittances Fees for Receiving Countries 50,000 45,000 India China 40,000 35,000 30,000 25,000 20,000 Philippines Mexico 15,000 10,000 5,000 0 Bangladesh Nigeria Egypt Pakistan Poland Romania Indonesia Lebanon Morocco Serbia Colombia Ukraine Brazil Guatemala Jordan El Salvador Fee in % (1Q 2010, to send 200USD) 7

8 Remittances as a percentage of GDP(%) Receiving Countries: Remittances to GDP Tajikistan Receiving Countries Top 20 (Remittances as a % of GDP x Cost) Moldova Tonga Kyrgyz Republic Nicaragua Jordan Honduras El Salvador Philippines Bangladesh Nepal Albania Guyana Jamaica Senegal Vietnam Haiti Lesotho Lebanon Samoa Bosnia and Herzegovina Average Total Cost of Sending Remittances (%) 8

9 Success Stories: Mexico The Role of the Authorities in Mexico was essential to establish a comprehensive framework of activities which have allowed more competition in the market and a reduction of costs from 15% in 2000 to less than 6% in 2009 The measures were: Creation of a national database for remittance prices Creation of a financial ombudsman to protect financial service clients, including remittance recipients ACH connection between the Federal Reserve ACH and Banxico s SPEI (Directo a México) Establishment of the Institute for Mexicans Abroad by the MoFA to promote financial education Development of the Consular ID (Matrícula consular) and negotiations with Financial Institutions for acceptance as a valid ID to open accounts and perform transactions. Low registration requirements for Non banks to pay remittances as direct agents or sub-agents The private sector also played an important role with the development of new products (Visa cards) and the entrance of more than 100 market players in the last 10 years. Also new niche market players have developed operating in specific migration corridors from one area in the US to certain areas in Mexico. 9

10 Success Stories: The Philippines In the Philippines the authorities have established one of the most sophisticated environment to facilitate migration and remittance flows. The average total cost in the Philippines was 5.6% in In particular, the following activities have been important in improving the efficiency of the market: Special Agencies for Overseas Filipino Worker (ex: Philippino Overseas Employment Administration) Pre-departure training programs provided by the government, including financial education training The BSP in a move to improve the regulatory framework allowed the use of various identity documents that can be accepted for verification purposes, thus increasing access to remittance services Banks and Non-banks are allowed to pay remittances The Private sector has also been very active in the Filipino market. In particular with the development of new products and access channels such as remittances sent through Western Union to mobile operators (G-Cash). Also, the Phillippines is the receiving country where Xoom, the leading internet-based RSP, has the largest market penetration. 10

11 Mapping of Remittance Activities Worldwide The mapping contemplates a wide range of activities either financed or directly undertaken: research papers, remittance price databases, legal and regulatory reforms, payment infrastructure development, financial education, as well as projects to upgrade private sector initiatives in this field. Some of the activities are still in the pipeline It compiles 173 activities in 55 countries across every region: Regions We have received information from the following governments/institutions: Germany France Italy Japan The Netherlands UK US Activities Sub-Saharan Africa 36 Latin America and the Caribbean 62 Europe and Central Asia 13 Middle East and North Africa 9 East Asia Pacific 4 South Asia 4 African Development Bank European Commission IFAD IDB IOM The World Bank 11

12 Mapping of Remittance Activities Worldwide The analysis shows that reported activities are not concentrated in specific countries but spread out across different countries # Countries Activities # Countries Activities 1 Afghanistan 1 28 India 1 2 Albania 2 29 Indonesia 1 3 Algeria 3 30 Kosovo 1 4 Argentina 1 31 Lebanon 1 5 Armenia 1 32 Malaysia 1 6 Bangladesh 1 33 Mali 4 7 Belarus 1 34 Mexico 2 8 Benin 1 35 Moldova 3 9 Bolivia 3 36 Morocco 3 10 Bulgaria 1 37 Nepal 1 11 Burkina Faso 1 38 Netherlands 2 12 Cameroon 1 39 Niger 1 13 Cameroon 2 40 Nigeria 1 14 Cape Verde 1 41 Pakistan 1 15 Colombia 2 42 Peru 2 16 Costa Rica 1 43 Philippines 4 17 Dominican Rep 1 44 Romania 1 18 Ecuador 2 45 Rwanda 1 19 Egypt 1 46 Senegal 5 20 El Salvador 2 47 Serbia 1 21 Ethiopia 2 48 Sierra Leone 1 22 France 2 49 Suriname 1 23 Georgia 1 50 Syria 1 24 Germany 2 51 Tadjikistan 1 25 Ghana 3 52 Tunisia 2 26 Guatemala 1 53 Turkey 1 27 Haiti 1 54 Uganda 2 55 UK 1 12

13 Remarks on Priority Countries By combining the Matrix and the Mapping, we have identified that the following high priority countries have no activities reported: China Vietnam Bosnia-Herzegovina Lesotho Considering the limited resources and the 5x5 commitment to reduce the cost, we suggest that activities should focus on the 8 sending countries where the impact can be higher: Japan, Germany, The Netherlands, Australia, Brazil, South Africa, France, Canada We also recommend focusing the efforts of the GRWG on some important sending countries such as China, Brazil, Lebanon, Serbia where, considering the volume of inflows, the initiatives of the GRWG would be most cost-effective 13

14 Thank you! 14