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REMITTANCES to developing countries, including those to
the Philippines, may soar to $240 billion by year-end,
according to the World Bank’s (WB) latest brief on
remittance flows.
The WB
Migration and Development Brief 3 said worldwide flows
of remittances are expected to reach $318 billion in
2007. Of this amount, the brief stated that remittances
sent home by migrant workers are expected to exceed $240
billion in 2007, an increase of 8 percent from 2006’s
$221 billion and 107 percent from 2002’s $116 billion.
In 2007,
the top five recipients of remittances are India with
$27 billion, Mexico with 25.7 billion, China with $25
billion, the Philippines with $17 billion and France
with $12.5 billion.
As a
share of GDP, however, remittances to these countries
were about 0.5 percent or less in 2007. In contrast, the
top recipients in terms of the share of remittances in
GDP included
Tajikistan,
Moldova, Tonga, the Kyrgyz Republic and the Honduras,
where remittances exceeded a quarter of the GDP.
This
amount, the bank said, only reflected officially
recorded transfers, and stated that the actual amount,
including unrecorded flows through formal and informal
channels, is believed to be significantly large.
“Recorded remittances are more than twice as large as
official aid and nearly two-thirds of foreign direct
investment [FDI] flows to developing countries.
Remittances are the largest source of external financing
in many poor countries. Also, remittances have been less
volatile than other sources of foreign-exchange earnings
in developing countries,” the bank stated.
“Recorded remittances are more than twice as large as
official aid and nearly two-thirds of FDI flows received
by developing countries,” said World Bank Development
Prospects Group Senior Economist Dilip Ratha in a
statement.
The
brief stated that countries in
South Asia and
East Asia are experiencing robust growth in remittances. In the
Philippines, the report noted, remittances rose by 15
percent year-on-year in the first nine months of 2007
while Bangladesh and Pakistan reported over 20-percent
growth in remittances during the period.
“High
oil prices and strong economies in the oil-exporting
Middle Eastern countries are contributing to strong
demand for migrant labor. In India, the largest
remittance-recipient developing country, private current
transfers grew by 30 percent in the first half of 2007.”
The
brief also noted structural changes in the remittance
industry, such as the advent of cell phone and
Internet-based remittance instruments. However, much
needs to be done in clarifying key regulations for new
remittance instruments and in decreasing remittance
costs.
The bank
also said regulations have also increased the
documentation requirements for opening bank accounts.
Large money-transfer operators have already benefited
from the shifting flows.
More
recently, the brief noted, the remittance industry has
also seen the introduction of cell phone-based
remittances and several pilots involving
remittance-linked financial products which may imply a
shift from cash-based remittances to account-based
remittances in future.
Further,
mobile banking and partnerships with cell-phone
companies can potentially extend remittance services to
millions of people in remote, rural areas. In the
Philippines,
G-Cash and SMART provide deposit, credit and money
transfers through mobile phones.
“Regulations relating to anti-money laundering and
countering the financing of terrorism appear to have
become a constraint to reducing remittance costs,
especially for smaller remittance-service providers
dependent on correspondent banks. These regulations are
also affecting banks and cell-phone companies interested
in providing international remittances and mobile
banking services. It is time now for policymakers to
find ways for harmonizing telecom and financial services
regulations,” the brief stated.
On the
other hand, average remittance costs in the US-Mexico
corridor, one of the largest remittance corridors, fell
dramatically by nearly 55 percent between 1999 and 2004,
but appear to have leveled off in recent years.
“Remittance costs have fallen, but not far enough,
especially in the South-South corridors,” said World
Bank’s Development Prospects Group and International
Trade Department Director Uri Dadush, who heads the
World Bank’s Working Group on Migration. |
