PAGE Blog Business Weekly Magazine
Over the years increase in remittances received in Pakistan has become a talking point. The successive governments take credit of this increase but when compared with other countries, Pakistan’s share look miniscule. While it is true that Pakistani’s are hard working, the negative image of the country often becomes the biggest hurdle. Added to this is the role being played by agents operating in Pakistan, taking the people on tempered documents. Pakistan’s share in global remittances can be increased by ensuring people travel on legal documents.
According to a report during 2013 India has the global chart of remittances with a whopping US$71 billion received, just short of three times the FDI it received in 2012. Top recipients of officially recorded remittances for 2013 following India were China ($60 billion), the Philippines ($26 billion), Mexico ($22 billion), Nigeria ($21 billion) and Egypt ($20 billion). Other large recipients include Pakistan, Bangladesh, Vietnam and Ukraine. As a percentage of GDP, the top recipients of remittances, in 2012, were Tajikistan (48%), Kyrgyz Republic (31%), Lesotho and Nepal (25%) and Moldova (24 per cent).
For a country like Tajikistan they constitute half the GDP. For Bangladesh remittances provide vital protection against poverty. Remittances act as a major counterbalance when capital flows weaken as happened in the wake of the US Fed announcing its intention to reign in its liquidity injection program. Also, when a nation’s currency weakens, inward remittances rise and, as such, they act as an automatic stabilizer.
According to the estimates, India and China alone will represent nearly a third of total remittances to the developing world over the years to come. Remittance volumes to developing countries, as a whole, are projected to continue growing strongly over the medium term. Global remittances, including those to high-income countries, were estimated to touch $550 billion and reach a record $707 billion by 2016 according to some projections made by the bank. Remittances to the developing world are expected to grow by 6.3 percent this year to $414 billion and are projected to cross the half-trillion mark by 2016, the report said.
Some of the estimates reflect recent changes to The World Bank Group’s country classifications, with several large remittance recipient countries, such as Russia, Latvia, Lithuania and Uruguay no longer considered developing countries. In addition, the data on remittances also reflects the International Monetary Fund’s changes to the definition of remittances that now exclude some capital transfers, affecting numbers for a few large developing countries like Brazil.
Growth of remittances has been robust in all regions of the world, except for Latin America and the Caribbean, where growth decelerated due to economic weakness in the United States. Remittances are the most tangible and least controversial link between migration and development.
The high cost of sending money through official channels continues to be an obstacle to the utilization of remittances for development purposes, as people seek out informal channels as their preferred means for sending money home. The global average cost for sending remittances is 9 percent, broadly unchanged from 2012. While remittance costs seem to have stabilized, banks in many countries have begun imposing additional fees on incoming remittances. Such fees can be as high as 5 percent of the transaction value. Some international banks are also closing down the accounts of money transfer operators because of money laundering and terrorism financing concerns.
These developments mark an unwelcome reversal of recent gains in the facilitation of cross-border remittances by migrants. This runs contrary to the G20 commitment to lower remittance costs. The world development community, as it debates the post-2015 agenda, also needs to turn its attention to the high cost of migration, including recruitment costs and fees for visas, passports and residency permits.
The World Bank Group expresses its committed to continue its engagement on this important aspect of development, as evidenced by the recent establishment of the Global Knowledge Partnership on Migration and Development (KNOMAD), which is envisaged as a hub of knowledge and policy expertise on migration.
KNOMAD’s work program focuses on 12 key thematic areas including skilled and unskilled labor migration; integration issues in host communities; policy and institutional coherence; migration, security and development; migrant rights and social aspects of migration; and Internal migration and urbanization. In addition, KNOMAD will also address cross-cutting themes of gender, monitoring and evaluation, capacity building, and public perception and communication. Drawing on global expertise, KNOMAD’s outputs will be widely disseminated and will be available as global public goods.
No one can deny the importance of remittances and these become all the more important for a country like Pakistan that suffers from paltry exports, ever growing imports and lavish spending of the ruling junta. Policymakers can do much more to maximize the positive impact of remittances by making them less costly and more productive for both the individual and the recipient country.
It is good to see that Pakistani banks are trying hard to bring the cost and the government is also contributing part of the cost. There is growing feeling that cost be brought down significantly by increasing the volume being handled.
