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 Editorials | At Issue | November 2005 
Migration Can Enrich all Sides if Interests are Shared
 Francois Bourguignon - Financial Times
Migration, though it has been with us for millennia, has only recently emerged as a way to reduce poverty in developing countries. The recent report by the Global Commission on International Migration urged that the role of migrants in economic growth and development be "recognised and reinforced."
The World Bank's 2006 Global Economic Prospects report, to be launched today, looks at how to enhance the poverty-reducing impact of remittances and migration. It follows another recently-published Bank research study, based on household surveys, that shows that remittances - which totalled $232bn (£133.6bn, €198.4bn) worldwide in 2005, of which $167bn went to developing countries - do reduce poverty.
With a growing population of migrants that is now almost 200m, we are witnessing demographic change on a global scale. Many developing countries have huge numbers of young people unable to find jobs at home, many of whom are drawn to migrate - even illegally - by the prospect of jobs that pay about five times what they would earn for the same work in their home countries. Once they have migrated, they remit as much as 20 per cent and more of their earnings to family members at home. These remittances can represent up to half the income of some families and are an important source of foreign exchange for several countries.
Putting aside the psychological costs separation imposes on migrant workers and their families, international migration raises global incomes and increases productivity.
But at the same time, migration also results in losses to some, especially small, low-income developing countries, of their best and brightest. Eight out of 10 Jamaican, Haitian and Guyanese college graduates have left their countries. In sub-Saharan Africa, only four per cent of the population has a post-secondary diploma, but such graduates make up 40 per cent of the region's migrants. These migrants send remittances home too, but the loss of their skills may outweigh the value of their remittances. We need to know more in order to design policies that maximise the positives, while attenuating whatever negatives may arise.
Migration also offers potential gains for receiving countries in the developed world, many of which face a demographic imbalance caused by an ageing population. There are shared interests here, but bringing them together requires enlightened policies informed by sound data and research.
With this in mind, the cost of transmitting remittances needs to be reduced, preferably by exposure to competition. The US-Mexico corridor offers a good example. In 1999, it cost a Mexican migrant an average of $26 to send $300 home; today, it costs about $11, a 56 per cent drop in six years. This is the result of greater competition among banks and others, generated in part by regulatory changes decided by the US and Mexican authorities in a co-ordinated way.
Such collaboration sets an example for others to follow. Nigerian migrants in the US or Europe pay, on average, about 12 per cent of the amount they send back to Nigeria in transaction costs. That is too high. Policy and regulatory reforms could reduce these fees. They could include, among others, lowering capital requirements on remittance services and opening up postal banking and retail networks to non-exclusive partnerships with remittance agencies. Some rich countries could help by liberalising licensing requirements to allow smaller players to enter the remittance market. An expanded cross-border banking network that includes domestic banks and credit unions from migrant-sending countries would enable migrants and their families to make remittance transfers more cheaply and, at the same time, gain access to financial services vital to their efforts to escape poverty.
Finally, remittances should not be categorised as development aid, as some have suggested. Remittances are private transfers of hard-earned money, typically from poor people to other poor people. They should not be subject to any special tax in the receiving countries, nor should the host countries seek to count them as development assistance and reduce their aid to developing countries. Such efforts to capture remittances are misguided, amounting to an unjustified additional tax on the earnings of the poor.
The challenge of international migration is not to capture "a piece of the action". It is to find solutions that are good for poor countries, good for rich countries and good for migrants.
The writer is senior vice-president and chief economist of The World Bank |
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