Remittances to developing countries to stay robust this year, despite increased deportations of migrant workers

Washington, April 14- International migrants from developing countries are expected to send $436 billion in remittances to their home countries this year, despite more deportations from some host countries, says the World Bank’s latest issue of the Migration and Development Brief.

This year’s remittance flows to developing countries will be an increase of 7.8 percent over the 2013 volume of $404 billion, rising to $516 billion in 2016, according to revised projections from the latest issue of the brief. Global remittances, including those to high-income countries, are estimated at $581 billion this year, from $542 billion in 2013, rising to $681 billion in 2016.

Remittances remain a key source of external resource flows for developing countries, far exceeding official development assistance and more stable than private debt and portfolio equity flows. For many developing countries, remittances are an important source of foreign exchange, surpassing earnings from major exports, and covering a substantial portion of imports. For example, in Nepal, remittances are nearly double the country’s revenues from exports of goods and services, while in Sri Lanka and the Philippines, they are over 50 per cent and 38 percent, respectively. In India, remittances during 2013 were $70 billion, more than the $65 billion earned from the country’s flagship software services exports. In Uganda, remittances are double the country’s income from its main export of coffee.

"Remittances have become a major component of the balance of payments of nations. India led the chart of remittance flows, receiving $70 billion last year, followed by China with $60 billion and the Philippines with $25 billion. There is no doubt that these flows act as an antidote to poverty and promote prosperity. Remittances and migration data are also barometers of global peace and turmoil and this is what makes World Bank’s KNOMAD initiative to organize, analyze, and make available these data so important," said Kaushik Basu, Senior Vice President and Chief Economist of the World Bank.

The brief notes that while the medium term outlook for remittances is strong, downside risks loom mainly from migrants’ return to their home countries as a result of conflict or deportation from host countries. Last year saw an intensification of deportations, with more than 370,000 migrants sent back to their home countries from Saudi Arabia alone in the five months since November 2013. Many of these migrants were from Ethiopia, Egypt and Yemen. In the US, over 368,000 people (mostly migrants seeking entry into the US and apprehended at the border) were deported to their home countries in Latin America and the Caribbean (LAC), particularly Mexico, El Salvador, Guatemala and Honduras.

In addition, asylum-seekers have surged, as a result of strife and conflict. According to a recent report by the United Nations High Commissioner for Refugees (UNHCR), asylum claims in 44 industrialized countries reached 612,700 in 2013, a 28 percent increase over 2012, and the second highest level in the past 20 years. In Europe, the number of asylum applications rose by 32 percent to 484,560 in 2013, with Germany the largest recipient of asylum requests (109,600). The vast majority of asylum applicants are from Syria, Russia, Serbia and Kosovo.

This trend is accompanied by a rise in anti-immigration sentiment, which appears to be gaining momentum in several European countries, including France, Germany, and the United Kingdom. In Switzerland, a referendum held in February 2014 on imposing immigration quotas passed, albeit with a slim majority.

During 2013, remittance flows were generally robust in all regions except LAC, and the Middle East and North Africa (MENA), where the two largest remittance-recipient countries, Mexico and Egypt, saw declines in remittance inflows, due in part to removals and deportations from the US and Saudi Arabia, respectively. However, both countries retained their rankings in the top 10 remittance-receiving countries globally.

India remained in the top spot, with $70 billion in remittances in 2013. Other large recipients were China ($60 billion), the Philippines ($25 billion), Mexico ($22 billion), Nigeria ($21 billion), Egypt ($17 billion), Pakistan ($15 billion), Bangladesh ($14 billion), Vietnam ($11 billion) and Ukraine ($10 billion).

In terms of remittances as a share of GDP, the top recipients were Tajikistan (52 percent), Kyrgyz Republic (31 percent), Nepal and Moldova (both 25 percent), Samoa and Lesotho (both 23 percent), Armenia and Haiti (both 21 percent), Liberia (20 percent) and Kosovo (17 percent).

“In addition to the large annual flows of remittances, migrants living in high income countries are estimated to hold savings in excess of $500 billion annually. These savings represent a huge pool of funds that developing countries can do much more to tap into,” said Dilip Ratha, Manager of the Migration and Remittances Team at the Bank’s Development Prospects Group.

Nigeria is readying a diaspora bond issue to mobilize diaspora savings and boost financing for development.

Continued efforts are required to lower the cost of sending money through official channels, although inroads are being made. During the first quarter, the global average cost for sending money fell to 8.4 percent of the transaction value, compared with 9.1 percent a year earlier. However, the average cost of remittances to Sub-Saharan Africa has remained stubbornly high at around 12 percent. Also, South-South remittances, which are on the rise, are in many cases either not permitted or very costly due to outward exchange controls in many developing countries, such as Gambia, Ghana and Venezuela.

The closure of bank accounts of money transfer operators serving Somalia and other fragile countries is also worrying, notes the brief. Remittances provide a lifeline to ‘fragile and conflict-affected situations’ where they are more than 5 times larger than foreign aid, foreign direct investment and other sources of international finance. More needs to be done to ensure that anti-money laundering and combating the financing of terrorism (AML/CFT) regulations do not unduly undermine development objectives and harm the poor.

“As development experts debate the post-2015 agenda, they also need to turn their attention to reducing the high cost of migration, particularly exorbitant fees paid by low-skilled workers to recruitment agents to secure jobs overseas,” said Ratha.

Recognizing the close links between migration and development, the World Bank Group is deepening its engagement on the issue. Central to its involvement is its leading role in establishing and advancing the Global Knowledge Partnership on Migration and Development (KNOMAD) program, which is envisaged as a hub of knowledge and policy expertise on migration. KNOMAD’s work program is undertaken through 12 thematic working groups: data; skilled labor; low-skilled labor; integration issues in host communities; policy and institutional coherence; security; migrant rights and social aspects of migration; demography; remittances; diaspora resources; environmental change; and internal migration. It also covers four cross cutting themes: gender, monitoring and evaluation, capacity building, and public perceptions.

Regional Trends

Remittance flows to countries in the Latin America and the Caribbean (LAC) region grew slightly by 1.9 percent in 2013 to reach $61 billion. Following a 13-month decline, remittance flows to the region began recovering in the second half of 2013.

However, remittances to Mexico, the largest remittance-recipient country in the region, contracted in 2013. The positive impetus from the US economic recovery was partly offset by removals of migrants from the US.

The economic slowdown and unemployment in Spain and Italy, which are also large destinations of Latin American migrants, contributed to the slowdown in remittances to the region. In the medium term, improving employment conditions in the US point to stronger growth in remittances, which are expected to reach $81 billion by 2016.