International Fund for Agricultural Development (IFAD) Topic C: Global Forum on Remittances as it relates to agricultural development It is both expensive and inconvenient to be poor. Sending Money Home to Asia, 2013 A remittance is loosely defined as goods sent back to the home country from expatriates living abroad. These goods take the form of food, toys, supplies, and especially money. Typically speaking, the remittances received help populations living in smaller, more rural communities where access to basic education, food, health care, and governmental services is dangerously limited. However, remittances do more than simply provide money to rural populations. Along with money and food, overseas foreign workers (expatriates) send toys and goods from the host country; intrinsically sending culture back to these minute pockets across oceans. The global dependence (over 15% of gross domestic product [GDP] in some countries) means that countries that would normally be self-sufficient are now tied to an external revenue source. A remittance is unique in nature as it is a direct flow of cash from one person to another that may not pass through any bank institutions. Background The Universal Declaration of Human Rights The word remittance is never actually mentioned in the Declaration of Human Rights but several inferences can be made depending on the working definition of remittances. Article 13, section 1 and 2, state: Everyone has the right to freedom of movement and residence within the borders of each state. Everyone has the right to leave any country, including his own, and to return to his country. Ten articles later in Article 23, we find the following sections: 1. Everyone has the right to work, to free choice of employment, and to just and favourable conditions of work and to protection against unemployment. 2. Everyone, without any discrimination, has the right to equal pay for equal work. 3. Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection. 4. Everyone has the right to form and to join trade unions for the protection of interests. 1 Remittances and migrant workers pose certain challenges to these rights. First off, it is nearly impossible to form a union over international borders. Secondly, Different counties have different discrimination laws. Lastly, the social protection rules of a certain country may only apply to workers within that country and not their families if those 1 http://www.un.org/en/documents/udhr/ 1
families are not in said country. Basically, an entire family would have to uproot itself and move to another country to get better social protection than in the home country. International Forum on Remittances For centuries, people have been migrating domestically from rural to urban areas, and from domestic countries to foreign countries. A remittance is a natural extension of that migration and represents the human face of migration. In 2007, the International Fund for Agricultural Development (IFAD) coupled with the Multilateral Investment Fund (MIF) and organized the first International Forum on Remittances. The end result of this forum hoped to shed light on the global transfers of remittances. The UN had little research on the global remittance trade until very recently, when, in the year prior (2006), research showed that the remittance flow into Latin America totaled $63 billion, more than the combined total of all Direct Foreign Investment to that area. 2 Since 2007, IFAD and various other monetary development agencies (African Development Bank [AfDB], Inter-American Development Bank [IADB], and the Association of Southeast Asian Nations [ASEAN]) have collaborated with IFAD to produce and create programs that target nation-specific remittance problems. Held biennially, these conferences rotate around the world and help to illuminate monetary based problems from remittances. Sending Money Home, 2007 The first in a series of UN reports, Sending Money Home outlines the increase economic dependence on remittances as a portion of GDP. It is a global remittance analysis of the cash flow from host country to home country and is sweeping in nature. As of 2006, 150 million workers sent $300 billion to families in the developing world. 3 These families represent approximately 10% of all families in the developing world that receive remittances. More startlingly is the amount of separate transactions (1.5 billion) are sent annually. However, transactions rarely exceed $500 each. Sending Money Home to Africa, 2009 African abroad represents a smaller portion of the global migrant population. At 30 million members, they represent about 1/5 of the total migrant population of overseas workers. The challenge facing Africans abroad is not the ability to send money home as 90% of the countries in Africa obtain $40 billion in remittances; it is the high cost of doing so. Sending money across borders in Africa cost, on average, from 12%- 25% of the amount sent. 4 2 http://www.ifad.org/remittances/events/forum07.htm 3 Sending Money Home, 2006. International Fund for Agricultural Development. 4 Sending Money Home to Africa, 2009. International Fund for Agricultural Development. 2
Sending Money Home to Asia, 2013 Most recently, IFAD and the World Bank published their 2013 report entitled Sending Money Home to Asia: Trends and Opportunities in the world s largest remittance marketplace. In 2013, Asia was the focus of the remittance world, and has only grown into 2014. Nine countries in Asia receive more than 10% of their GDP from remittances, including Tajikistan, which receives over 50%. 5 India, China, and the Philippines account for 75% of the payment points in Asia. 6 Lastly, Asia lacks the infrastructure to properly bank and manage this mass influx of remittances, especially in rural areas where less than 10% of the population has savings accounts. 7 Asian migrants represent about 40% (60 million people) of the total migrant population, but send back about 60% of the global remittance amount (260 million). As of 2009, 150 million migrant workers traveled halfway around the world to work in another country. In 2013, these 150 million migrant workers sent back $410 billion back to their home countries; the majority of these remittances went to rural families and has brought 1 in 10 families out of absolute poverty. Obviously, this is more than a monetary issue. 8 Remittances as they relate to poverty eradication Created in 2006, the Financing Facility for Remittances (FFR) helps to increase economic opportunities for the rural poor through the supper and development of innovative and cost effective remittance services. The FFR seeks to promote the following: Reduce the transfer costs of remittances Develop institutional partnerships Bank the unbanked rural population Promote innovative remittance and financial services Promote productive rural investment of migrants capital in their countries of origin With more than 50 projects in 40 countries, the FFR combines an international approach with sustainable and local projects to help alleviate those in the most extremely impoverished conditions. All of the aforementioned projects some how fall under the bullet point above and all seek to improve the effectiveness of remittances and the ease of obtaining them. The UN, in general, supports remittances as a way to help populations who would normally be living in abject conditions away from major sources of income. 5 Sending Money Home to Asia, 2013. International Fund for Agricultural Development. 6 Sending Money Home to Asia, 2013. International Fund for Agricultural Development. 7 Sending Money Home to Asia, 2013. International Fund for Agricultural Development. 8 Note: Data suggests that despite that this number is not rising, many of the workers are either undocumented, or brought into the country illegally; therefore the actual number is probably much higher. 3
This is not to say that all families who receive remittance monies live in rural areas, but it is in the rural areas that their effect is most greatly felt. Current Issue While there is no current plan for another global forum at this time, the next location, given previous centers, will either be in Europe or somewhere in Latin America. A majority in the world lives in the cities, but those same populations rely on farmers who live on a subsistence farm. Many families who cannot make a living on farming alone rely on sending a relative abroad who can make money to send back to the home country to supplement agricultural income. With less people living in rural areas, there are fewer means of income generation. To make matters worse, as the amount of money transferred increases each year, the amount of lending institutions, transfer points, and financial carriers increases as well. This increase in economic activity is not always geared toward helping rural families get their money. These institutions act as choke points where cash flows intersect, leading to lose, fraud, and general thievery of remittances. Between 2006 and 2013, the cash flow saw a 700% increase in obstacles that prevent smooth transfers. Technology has played a key role in circumnavigating these obstacles. In the Philippines, it is now possible to transfer money entirely over one s mobile phone. Micro-lending companies help to prop small families on their feet when remittances become tied up. However, even combined, technology and micro-lending institutions cannot help everyone. The majority of the remittances sent back to domestic families are either spent on family needs or the needs of the farm. Very little of it is saved, though remittances do allow for more savings potential. Because the remittances are usually the bulk of the income for the rural, farming families, their livelihood it tied to them as a consistent and substantial cash flow. Any fluctuations or sudden cease in money could be catastrophic. Future Outlook As of the end of the 2013 Sending Money Home to Asia Conference on Remittances, no location, date, time or even subject was set for the next meeting. As aforementioned, the next conference will probably be in Latin America or Eastern Europe. IFAD and its affiliates are taking proposals around the globe for investments and ideas as to make the process of sending and procuring money quicker, easier, and more secure. However, since the 2008 global economic downturn, many families have found themselves without this source of income. Many millions of people lost their jobs abroad and were forced to go home to continue living without a major source of income. This presented a unique problem for families who now had to find new means of income 4
generation. The farmers (as it was the rural folk who were most devastatingly impacted) who had previously had a massive source of income to put back into the farm now lost their primary income and were forced to either sell out or lease their land. This, in turn, caused the 2008 food crisis that swept the globe. Despite this incident, IFAD and the Development Banks around the globe are faced with a duality in policy. On one hand, a remittance is a relatively easy source of income that helps to bring almost anyone in society out of poverty. Logically, IFAD should take every effort to keep these transactions both expedited and cost effective. On the other hand, they are potentially volatile and can be erratic. The source of income depends on the employer and different countries have different employment laws. A stable, global economy is the ideal goal for a remittance rich world were people from developing countries move to the developed world and send money back home. This, however, is not the case. Focus Questions This debate is neither right nor is it wrong. Does leaving one s family to make a better living outweigh the tragedy of leaving one s family? The moral issues are clear here, but a solution to the situation lies in the gray area between morality and economy. Your task is to come up with programs, policies, or actions that can help balance both sides of the coin. Ask yourself these following questions: 1. What percentage of my country s population relies on remittances as a major source of income? 2. Who deals with the flow of remittances? Is it a domestic bank or international conglomerate? What sort of charges does it place on remittances? Can these charges be removed or subsidized? 3. What programs are present in your country that helps to develop migrant workers or bring them home? 4. What cultural impacts does your country feel (from the family to national level) when someone leaves to find a better life abroad? This labor Brain Drain affects nearly every country across the globe in some way or another. More specifically, how does this mass labor migration affect agriculture? Above are some of the economic impacts that directly effect agriculture. Therefore, how do we as delegates mitigate these fluctuation and help to stabilize market variances? Is there a way to help to ensure that families receive the money these migrant workers send back both cheaply and securely? 5
Works Cited International Fund for Agricultural Development. Available at: http://www.ifad.org/remittances/events/forum07.htm International Fund for Agricultural Development. Sending Money Home, 2006. International Fund for Agricultural Development. Sending Money Home to Africa, 2009. International Fund for Agricultural Development. Sending Money Home to Asia, 2013. United Nations. Universal Declaration on Human Rights. Available at: http://www.un.org/en/documents/udhr/ 6