1. International Migration, Remittances and Development in Europe and Central Asia Dilip Ratha Development Prospects Group World Bank GDLN Migration Policy Series: Europe and Central Asia February 5, 2009 Washington DC

2. 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  Migration and remittances can be leveraged for the development of poor countries, but they are not a substitute for development at home

3. Top recipients of remittances $ billion, 2008e% of GDP, 2007

4. Destination of migrants from ECA Source: Ratha and Shaw (2006) Stock of emigrants: 47.6 million or 10% of population

5. Europe and Central Asia top migration corridors Millions Source: Ratha and Shaw (2007)

6. Migration in Europe and Central Asia  Top 10 migration corridors: Russia-Ukraine, Ukraine- Russia, Turkey-Germany, Kazakhstan-Russia, Russia- Kazakhstan, Belarus-Russia, Uzbekistan-Russia, Serbia and Montenegro-Germany, Azerbaijan-Russia, Russia-Belarus Stock of immigrants: 31.1 million or 6.5% of population (compared to 190.6 million or 3% for the world) Refugees as percentage of immigrants: 2.2% (compared to 7.1% for the world) Source: Migration and Remittances Factbook 2008

7. Private debt and portfolio equity FDI ODA Recorded Remittances Remittances to developing countries are large, have continued to increase US$ billion

8. Private debt and portfolio equity FDI ODA Recorded Remittances Remittances and other resource flows to ECA US$ billion

9. Emigration from ECA countries Millions Source: Ratha and Shaw (2007) Within ECA Out of ECA

10. High-skilled emigration (of tertiary educated) from Europe and Central Asia Percent of tertiary educated in the origin country

11. Remittances in Europe and Central Asia, 2007 US$ billion % of GDP

12. Remittances reduce poverty  Evidence from a few household surveys shows that remittances reduce poverty  Cross-country evidence shows that a 10% increase in per capita remittances leads to a 3.5% decline in the share of poor people  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 also increases trade and investment links  Diaspora networks facilitate: –Trade –Investment –Skill and technology transfer

18.  Reduce remittance costs - Outward remittances not allowed in many countries in the region - Money order charges are very high in India or Nepal - Domestic remittance markets well developed – inefficiency in the sending end Policy implications

19.  Reduce remittance costs  Prudential banking regulations and AML/CFT regulations may need rebalancing  Leverage for financial access of households Policy implications

20.  Reduce remittance costs  Prudential banking regulations and AML/CFT regulations may need rebalancing  Leverage for financial access of households Policy implications

21. Remittances sent through banks can bring benefits  Account-to-account transfers promote savings compared to cash transfers or hand-carry  Allows migrants and remittance recipients to develop a credit history based on past transfers  Banks can provide their remittance clients housing and business loans, insurance, pension products... however, implicit cost of "free" bank transfers often high

22.  Reduce remittance costs  Prudential banking regulations and AML/CFT regulations may need rebalancing  Leverage for financial access of households  Leverage for foreign borrowing and reducing country risk Policy implications

23. Policy recommendations  Diaspora bonds can potentially raise development financing

24. US Treasury 10-year Israel DCI bond Discount on Israel diaspora bonds

25. Policy recommendations  Governments should not tax remittances or direct the allocation of expenditures financed by remittances  Remittances are not a substitute for official aid

26.  Know your diaspora  Provide training and support to potential and existing migrants  Help potential migrants acquire globally marketable skills  Improve transparency in recruitment process  But migration is not a substitute for employment creation at home Policy recommendations

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

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 -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. www.worldbank.org/prospects/migrationandremittances