1. Migration, Remittances, and Development: Policy Options Dilip Ratha Migration and Remittances Team Development Prospects Group World Bank Lowy Institute, Sydney July 16, 2008

2. Outline A. Stylized facts B. Development impact of international migration C. Policy implications

3. A. Stylized facts 1. Only 3% of world population are international migrants; 97% are not. 2. Economic migrants account for 93% of global migant stock.

4. Income differences are a powerful motivation for migration Median wage levels for workers in the same occupation, relative to high-income economies (1988-92, adjusted for purchasing power) Source: Freeman and Oostendorp 2000

5. A. Stylized facts 1. Only 3% of world population are international migrants; 97% are not. 2. Economic migrants account for 93% of global migant stock. Economic migration is set to increase in future. 3. South-South migration is as high as as South-North migration.

6. South-South migration is almost as large as South-North migration Source: Ratha and Shaw (2007) Destination of migrants from the South

7. B. Development impact of international migration 1. Migration benefits all parties – the migrants, the destination country, and the origin country.

8. Migration boosts welfare for most households. Global income gains of $356 billion ( 0.6%) Change in real income in 2025, $ billion Source: Global Economic Prospects 2006

9. B. Development impact of international migration 1. Migration benefits all parties – the migrants, the destination country, and the origin country. 2. Benefits to countries of origin are mostly through remittances.

10. Private debt and portfolio equity FDI ODA Recorded Remittances Remittances are large, have continued to increase

11. Top recipients of remittances $ billion, 2007% of GDP, 2006

12. Remittances reduce poverty  Evidence from a few household surveys shows that remittances reduce poverty  Remittances also finance education and health expenditures, and ease credit constraints on small businesses

13. Remittances have reduced poverty in Nepal Source: World Bank, DFID, ADB Study 2006, Glinskaya and others 2006

14. Remittances help reduce poverty in Sri Lanka % of Sri Lankan households that moved up to a higher income decile after receiving remittances, 1999-2000* Income Decile

15. Remittances tend to rise following crisis, natural disaster, or conflict Remittances as % of private consumption

16. Downside of remittances  Large remittance flows may lead to currency appreciation and adverse effects on exports; but sterilization of inflows may not be an appropriate policy response  Remittances may create dependency  Remittance channels may be misused for money laundering and financing of terror

17. Migration and remittances in the Pacific 1. Remittances to Pacific Island countries were about $500 million in 2006 Tonga $91 mn or 39% of GDP Samoa $67 mn or 14% of GDP Fiji$165 mn or 6% of GDP 2. Outward remittances from Australia $2.8 bn or 0.4% of GDP, New Zealand 0.9 bn or 0.8% of GDP in 2006

18. B. Development impact of international migration 1. Migration benefits all parties – the migrants, the destination country, and the origin country. 2. Benefits to countries of origin are mostly through remittances. 3. Emigration of skilled people may be a problem in small countries 4. Diasporas also provide business contact, trade network, technology, and capital to the origin country.

19. US Treasury 10-year Israel DCI bond Discount on Israel diaspora bonds Israel and India have raised nearly $40 billion via diaspora bonds

20. Outline A. Some stylized facts B. Development impact of international migration C. Policy implications

21. 1. The international remittances agenda

22. International remittances Agenda 1. Improve monitoring, analysis, projection (MAPping) 2. Improve retail payment systems:  reduce remittance costs

23. High remittance fees are a drain migrant income Source: Condusef, Mexico

24. South-South remittance costs tend to be higher than North-South costs

25. Cost of remittances to Pacific Islands often exceed 20%

26. International remittances Agenda 1. Improve monitoring, analysis, projection (MAPping) 2. Improve retail payment systems:  Reduce remittance costs  Improve competition in remittance industry  Share networks - avoid exclusivity contracts  Avoid overregulation of remittance industry  Introduce new technology 3. Leverage remittances for financial access for households 4. Leverage remittances for improving access to capital markets for institutions/countries

27. International Remittances Agenda 1. Monitoring, analysis, projection 2. Retail payment systems 3. Financial access for households 4. Capital market access for institutions

28. International Remittances Agenda 1. Monitoring, analysis, projection -Size, corridors, channels -Counter-cyclicality -Effects on poverty, education, health, investmen -Policy (costs, competition, exchange controls) 2. Retail payment systems -Payment platforms/instruments -Regulation (clearing and settlement, capital adequacy, exchange controls, disclosure, cross- border arbitration) -Anti-money laundering/Countering financing of terrorism (AML/CFT) 3. Financial access for households -Deposit and saving products -Loan products (mortgages, consumer loans, microfinance) -Credit history for MFI clients -Insurance products 4. Capital market access -Private banks and corporations (securitization) -Governments (diaspora bonds) -Sovereign credit rating

29. G8 Global Remittances Working Group

30. C. Policy implications 1. The international remittances agenda 2. Know your migrants/diaspora 3. Help potential migrants acquire globally marketable skills 4. Ethical recruitment policies may be ineffective, and unethical – 5. Improve transparency in recruitment of migrants 6. Border control policies should be revisited

32. Migration Curve

33. Income difference

34. C. Policy implications 1. The international remittances agenda 2. Know your migrants/diaspora 3. Help potential migrants acquire globally marketable skills 4. Ethical recruitment policies may be ineffective, and unethical – 5. Improve transparency in recruitment of migrants 6. Border control policies should be revisited 7. Migration is not a substitute for employment creation at home

35. Development implications of migration and remittances  Migration and remittances continue to increase. South-South migration may be as large as South- North migration  Migration generates substantial welfare gains and reduces poverty. Benefits to countries of origin are mostly through remittances, and also through trade, investments, and transfer of knowledge, skill and technology  Migration and remittances can be leveraged for the development of poor countries, but they are not a substitute for development at home

36. World Bank work program Research and publications Global advocacy Country analytic work/Operations Africa migration project Pacific Islands labor mobility program

37. www.worldbank.org/prospects/migrationandremittances References: At Home and Away: Expanding Job Opportunities for Pacific Islanders through Labour Mobility Migration and Remittances Factbook 2008

38. International Remittances Agenda 1. Monitoring, analysis, projection -Size, corridors, channels -Counter-cyclicality -Effects on poverty, education, health, investmen -Policy (costs, competition, exchange controls) 2. Retail payment systems -Payment platforms/instruments -Regulation (clearing and settlement, capital adequacy, exchange controls, disclosure, cross- border arbitration) -Anti-money laundering/Countering financing of terrorism (AML/CFT) 3. Financial access for households -Deposit and saving products -Loan products (mortgages, consumer loans, microfinance) -Credit history for MFI clients -Insurance products 4. Capital market access -Private banks and corporations (securitization) -Governments (diaspora bonds) -Sovereign credit rating