South-South Diasporas and Remittances: The Trade & Entrepreneurship

Dimension

Presentation atSouth-South Migration And

Development: Discussing New Evidence From The Acp

Observatory On Migration Brussels, Belgium

June 3-4, 2014

Keith NurseExecutive Director

UWI Consulting & WTO ChairUniversity of the West Indies

Cave Hill CampusBarbados

keithnurse@me.com

Despite the disproportionate attention that has been given to immigration pressures on the United States and other OECD countries, there have been other major migration streams around the world. These too have been driven by a combination of demographic and economic fundamentals as well as by political events. ... The future rise of South-South migration will, no doubt, take those analysts who ignore history by surprise. It will not take economic historians by surprise. After all, when those 50 million Europeans left home before 1914, there were at the same time far more than 50 million who left China and India for jobs elsewhere in the periphery. South-South migration is not new. It is just ignored by economists.

Source: What fundamentals drive world migration?Timothy J. Hatton and Jeffrey G. Williamson NBER Working Paper Series, 2002

The Global Middle Class and the Rise of the South (UNDP 2013)

2009 2020 2030

Europe 664 703 680

Central & South America

181 251 313

Asia – Pacific 525 1740 3228

Middle East & North Africa

105 165 234

North America 338 333 322

Sub-Saharan Africa 32 57 107

Remittances and Migration in the ACP (Source: ACP Human Mobility Report 2011)

Regions/Indicators

Remittances Share (%)

Migrants Share (%)

Population Shares (%)

Africa 73 76 94.5

Caribbean 25.5 22 4.4

Pacific 1.5 2 1.1

South-South Remittances in Perspective

• Remittances to developing countries are estimated at $404 billion in 2013, up 3.5 percent compared with 2012.

• Growth in remittance flows to developing countries is expected to accelerate to an annual average of 8.4 percent over the next three years, raising flows to $436 billion in 2014 and $516 billion in 2016.

(Source: World Bank, Migration & Development Brief 22, 2014).

• South-South remittances are a significant share of this but the data capture in this area is very weak due to the nature of the transactions and the low level of reporting in developing countries.

• Estimates range from a low of 9.3% to a high of 29.5% and an intermediate rate of 18.2%.

(Source: Ratha & Shaw 2007).

South-South Remittances(based upon the methodology outlined in Ratha & Shaw (2007))

Allocation rule based on migrant stocks

Allocation rule based on migrant stocks and host-country incomes

Allocation rule based on migrant stocks, host- country incomes, and sending-country incomes

Remittances from the South

29.5%

$119.18b

9.3%

$37.57b

18.2%

$73.53b

Remittances from the North

70.5%

$284.82b

90.7%

$366.43b

81.8%

$330.47b

Total Remittances to Developing Countries (2013)

USD 404 billion

South-South Remittances, 2005 and 2013 (Source: Ratha & Shaw 2007 and own estimates)

0

40

80

120

20052013

Remittances are Impacted by a Range of Factors – Case of Bangladesh

In Bangladesh, the fall in remittances stems from a combination of factors, including fewer migrants finding jobs in the Gulf Cooperation Council (GCC) countries, more migrants returning from GCC countries due to difficulties in resolving legal status, and the appreciation of the Bangladeshi taka against the US dollar. (Source: World Bank, Migration & Development Brief 22, 2014).

The Cost of Remitting is determined by the Business Context

Often remittance fees vary significantly in the same bilateral corridor depend- ing on the direction of the flow. For example, the cost of remitting $200 from Kuala Lumpur to Jakarta is about 6 percent, whereas that from Jakarta to Kuala Lumpur is more than 13 percent. Similarly the cost of sending money from Kiev to Moscow is more than double the cost of remitting in the reverse direction.Source: Ratha & Shaw 2007

Strategies for Reducing the Cost of South-South Remittances

(Source: Ratha & Shaw 2007)

• South-South remittance costs tend to be higher than North-South remittances because of lack of competition in the remittance market in both the sending and the receiving countries.

• Often remittance fees vary significantly in the same bilateral corridor depending on the direction of the flow.

• Remittance costs can be reduced by encouraging competition in the remittance market: – by encouraging banks, microfinance institutions, credit unions, and post office

saving banks to offer remittance services;

– by sharing existing payment platforms and networks;

– and by avoiding exclusive partnership arrangements between major money transfer operators and post office networks.

Key Issues in the Money Transfer Business of relevance to S-S Remittances (Source: Orozco 2012)

Cost to remit• Fees• Exchange

rate difference

• Exchange rate commission

Scope• Products on

offer• Number of

countries in operation

• Presence in migration corridor

Payment points• Number &

share of locations

• Type of payment points, e.g. banks, MFIs, etc.

Competition• Market

share• Rural/urban

presence• Quality of

customer service

Trade in Services

Trade in Services and the Diasporic Economy

Diasporic Tourism:- Festivals- Medical

- - Education

Diasporic Investment:

- Remittances- - Newspapers- - Transport

Provision of services: - Telecoms- ICTs

- Media- Mobile banking

CSS & IP:- Health professionals - Creative industries- Music industry

Mobile Money Transfers – The Role of Firms

French telecom operator Orange is a pioneer in the South-South remittance market. Last July, Orange launched an international money transfer service that allows customers to send funds between Mali, Senegal, and Cote D’Ivoire using only their mobile phones. (The three countries have a long history of intraregional migration, and share a common language and currency.) While other telecom operators provide some remittance feature, usually within the mobile-to-bank account or mobile-to-agent models, the Orange service is the first international, direct mobile-to-mobile transfer system. In 2012 remittance flows from Cote D’Ivoire to Mali alone were $153 million (compare that to flows from France to Mali at just $73 million) so there is big earnings potential for Orange. Source: http://www.financialaccess.org

Remittances (official)

Remittances (unofficial)

Diaspora Savings

Mobile Banking

Mortgage Payments

Earnings from MTOs

Remittances – Just the tip of the Iceberg

Thank you for your kind attention.

Check out the ten minute version of the documentary Forward Home – The Power of the Caribbean Diaspora

http://vimeo.com/56997742(http://www.youtube.com/watch?v=cj0vLkUyRtU).

The research was published in a Special Edition of the Canadian Foreign Policy Journal (2011: 17.2) http://www.tandf.co.uk/journals/rcfp.