Migration and Remittances for Development Asia

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• Publisher: Asian Development Bank
• Year: 2018
• ISBN:
  9789292611293
• Topic: Law
• Subtopic: Labour & Employment Law
• Index: Law

Asia and the Pacific has a significant rise in migration: about one in three migrants comes from Asia according to the United Nations. Currently, over 80 million people from Asia and the Pacific live and work outside of their countries of origin. Migration and remittances have both positive and negative effects. For the countries, remittances became an important source of foreign exchange. At the household level, remittances enable families to spend more on education and health. However, migration also has a negative social impact, including the exploitation and abuse of workers. This report explores ways to enhance the welfare of migrant workers as well as ways to improve the productive investments of remittances to support the countries' growth and development.

CHAPTER 1
Introduction and Overview

Mayumi Ozaki

1.1 Background and Objective of the Report

Asia and the Pacific region experienced a dramatic rise in migration during the last few decades. The wave of migration increased from the 1970s when the oil price surge provided the impetus for the oil-producing Middle East to scale up their infrastructure investments. From the mid-1980s, countries in the region, such as Singapore and the Republic of Korea, started receiving migrant workers. While the region sent out a significant number of highly skilled workers, the majority of migrants from the region are low-skilled or semiskilled workers.

There were over 247 million stock of migrants in the world in 2013. Of the total migrant stock, 80 million, or about 30% of the total migrants, were from Asia and the Pacific region. The top three migrant origin countries are the People’s Republic of China, with emigrant population of 13.8 million; India, 9.6 million; and Bangladesh, 7.5 million. In terms of the percentage of the population, the top three are the Pacific island countries of Samoa, with emigrant population of 60.2% of the total population; Tonga, 53.6%; and Tuvalu, 39.3%. Major migrants’ destination countries include the United States and other high-income Organisation for Economic Co-operation and Development countries, as well as Middle East countries such the United Arab Emirates, Saudi Arabia, Kuwait, and Qatar. The region also has significant numbers of intraregional migrations such as from Bangladesh to India, from Myanmar to Thailand, and from Indonesia to Malaysia.

Corresponding to the rise of migration, remittance inflow to Asia and the Pacific region also drastically increased. The total remittance inflow to the region increased from $104 billion in 2006 to $244 billion in 2016, and reached $252 billion in 2017.¹ The top three remittance-receiving countries are India with $72.2 billion; the People’s Republic of China, $63.9 billion; and the Philippines, $29.7 billion. In terms of the percentage of gross domestic product (GDP), the Kyrgyz Republic was expected to receive 37.1%, followed by Tajikistan with 28.0% and Nepal with 27.2% in 2017.² However, those are officially recorded figures and, if informal remittances—that is, remittances channeled through informally—are included, the actual amount of remittances is considered to be much higher. For many developing countries in the region, remittances are the lifeline of the economy and the most important foreign exchange source.

The region’s growing migration and remittances are expected to continue as long as significant income disparities exist between migrants’ home countries and host economies. However, to date, efforts to understand migration’s dynamics and remittances’ effect on the countries’ long-term development are rather limited.

The Asian Development Bank (ADB) hosted an international forum on Promoting Remittances for Development Finance on 18–19 March 2015.³ The Forum’s objective was to increase the knowledge on migration and remittances in the region, and maximize remittances’ potential for the receiving economies’ growth and development. The Forum identified key policy recommendations. To enhance the benefits of remittances, the countries should (i) enhance access to formal remittance services while bringing informal remittance flows into the formal financial system, (ii) leverage remittances by channeling to productive public and private investments, and (iii) improve impact of remittances by developing innovative remittance-linked financial products.

This report intends to provide updates on emerging subjects on migration and remittances and offers insights on how to maximize the economic benefits of remittances while minimizing the social costs of migration. The remittance-receiving countries’ continued policy attentions on the issues of migration and remittances are essential to capture the benefits of remittances and improve the welfare of migrant workers.

1.2 Organization of the Report

The report consists of eight chapters on the different aspects of migration and remittances across the regions. The key highlights are as follows:

Appropriate policies can enhance the economic benefits of migration for both sending and receiving countries (Chapter 2). Remittances that migrants send can stabilize both household and national incomes (Chapter 3). To better mobilize this resource, however, migrants and their family members who are left behind would gain from financial literacy programs (Chapter 4). More cost-efficient and accessible financial transfer mechanisms would further improve their welfare (Chapter 5).

Majority of Asian migrants are low-skilled, and the small amounts of money that they send back home tend to be used largely for consumption. However, given the large numbers of migrant workers overseas, the total amounts they send add up to large sums. Channeling these remittances to public investments in recipient countries will contribute to their economic growth, expand employment opportunities, and promote overall living standards. This would require effective rules and regulations and necessary infrastructure for financial development (Chapters 6 and 7).

Chapter 2 focuses on the impact of migration and remittances as well as rules and regulations governing labor migration. It assesses on low-skilled labor migration issues that hamper bringing economic benefits to both sending and receiving countries. This chapter argues that, despite the general perception, low-skilled worker migration can contribute to the economic growth if the host countries’ policies and environments are flexible and accommodating to the migrant worker inflow. The chapter provides policy recommendations on managing the worker migrations, while protecting the workers’ rights and welfare with the aim of enhancing economic gains from migration.

Chapter 3 analyzes the behavior of remittances over the business cycle in comparison with other inflows such as foreign direct investment (FDI), portfolio equity, and official development assistance. It also examines the remittance behavior during the sudden stops and financial crisis. The author reviewed the cyclical features of remittances for a set of 109 countries for the period 1980–2012. The chapter found that remittances are acyclical in comparison with FDI and portfolio and equity, but stable during the time of sudden economic shocks and financial crisis. The chapter indicates remittances can be a stable source of income for receiving households even at the time of economic distress.

Chapter 4 introduces examples of financial literacy programs targeting migrants and remittance recipients and empirical findings on impacts of financial literacy programs on people’s financial behavior. Based on these empirical findings, the chapter summarizes good practices for better financial literacy programs. The chapter argues that lessons from good practices could be used to improve financial literacy programs to increase the positive impacts on the financial behaviors of migrants and their families.

Chapter 5 identifies the issues in the traditional banking system in extending access to remittance services to migrant workers. It introduces various online platforms and solutions which can provide cost-efficient and accessible mode of remittances for migrant workers. The chapter also describes diaspora bond and future flow securitization as means to mobilize long-term financing through remittance inflows.

Chapter 6 discusses on the measures to channel remittances for productivity enhancing investments. The chapter identifies key areas of support to promote remittances for investments, including (i) conducive regulations, (ii) payment system that can support technology-based remittance services, (iii) linkages to microfinance institutions (MFIs), (iv) remittance-linked investment instruments, and (v) information and financial literacy. The chapter comments on how to provide incentives for migrant workers to channel remittances through, and invest in, the formal financial system.

Chapter 7 provides details on the future flow securitization of remittances to raise long-term financing for various types of investments. Remittance-receiving countries can potentially raise a large sum of money by selling rights of remittances’ future flow. The chapter explains the basic structure, benefits, and required legal and regulatory framework for financial institutions to structure such transactions.

Chapter 8 summarizes the chapters and provides recommendations on (i) safe and efficient migrations beneficial to both sending and receiving countries; (ii) regulatory, institutional and policy measures to promote financial inclusion and financial sector development to leverage remittances for public investments; and (iii) effective financial literacy training programs for migrant workers and their families.

CHAPTER 2
Magnitude and Pattern of Migration and Remittances

Dilip Ratha, Soonhwa Yi, and Seyed Reza Yousefi

2.1 Introduction

Migrants from Asia stand at an estimated 70 million, accounting for one-third of the total international migrants. Migration patterns reflect the wide income and demographic disparities within the region and with other parts of the world. While Asia is a major source of skilled migrants to advanced countries, most Asian migrants tend to be low-skilled. And all migrants contribute to the economic development within Asia as well. Remittances resulting from migration—estimated at $250 billion in 2016—represent more than half of the total remittances to developing countries. These remittances support macroeconomic stability, as well as contribute to reducing poverty and building human capital.

Key destinations of most Asian workers, especially the low-skilled, tend to be within Asia including neighboring countries. While facing strong competition of its talents with the Russian Federation and other developed countries, Kazakhstan has attracted low-skilled workers from neighboring Kyrgyz Republic and Uzbekistan. While the Russian Federation is still a predominant destination, Tajiks are increasingly turning their feet toward Kazakhstan. While most South Asian low-skilled workers go to the Middle East region, India is a magnet for Nepalese. Thailand is a host of most people from Myanmar, the Lao People’s Democratic Republic, and Cambodia who fill agriculture and fishery jobs. Malaysia and Singapore remain a key destination for Indonesians, e.g., occupying plantation and manufacturing jobs in Malaysia. Filipinos, who have been globe-trotters, have established a dominant presence in neighboring Hong Kong, China, Singapore, and other East Asian countries as well as in the Middle East. Thanks to skill upgrades, Filipinos increasingly work in the health sector in Japan and in other advanced economies in the world—a development supported by aging population in these destination countries.

This chapter focuses on the impact of this dynamic migration and resulting remittances as well as rules and regulations governing labor migration.⁴ Given that the impact of migration and remittances has been widely explored, this chapter adds value to the literature by discussing policies related to low-skilled labor migration, as barriers to such migration flows hamper economic development of both labor-receiving and -sending countries. Unlike public perception, the benefits of low-skilled labor migration can outweigh costs in host economies as long as labor and capital markets are flexible enough to adjust to inflows of migrants (Dadush 2014).

Labor migration policies of host countries in Asia remain geared toward attracting skills and filling labor shortages, in part owing to aging population. Their migration regimes vary by skill level: skilled, semi-skilled, and low-skilled. While offering skilled migrants the opportunities to resettle, they accept low-skilled labor migrants on a more temporary basis, despite their positive contributions to the economy. This temporary migration system aims to fill labor shortages through circulating labor between sending and receiving countries, but existing irregular migration problems (including overstays) that host economies face seem to suggest that the system is ineffective in controlling inflows and helping workers to return in time. Evidence suggests that more work is needed to curb irregular migration as it could lead to eroding social protection.

On the other hand, origin countries in Asia tend to have the youth population bulge and have been proactive in promoting overseas employment of workers and in protecting their labor rights. Workers have actively pursued overseas employment to earn higher income. Nonetheless, governments and workers alike face challenges associated with high migration costs and ensuring workers’ rights and safety abroad. Out-migration brings in foreign exchange earnings (remittances), which supports macroeconomic stability and economic growth through augmenting migrant-household’s income, increasing expenditures on human capital accumulation, and raising investments. On the other hand, it can weaken the countries’ competitiveness through real exchange rate appreciation and, possibly, increased skills mismatch.

Key emerging policy recommendations are as follows: countries, especially sending countries, should strengthen institutional capacity to tighten up enforcement of migration-related rules and regulations and, as a result, to reduce migration costs and to improve migrant worker protection. Receiving countries should increase labor market flexibility to allow timely adjustments of inflows of migrant workers through better collection of migration data and labor market analyses. Sending countries should focus on formulating coherent migration-related policies and regulations to address market failures in migration.

This chapter is organized as follows. Section 2.2 reports stylized facts on migration and remittances. Section 2.3 reviews the impact of migration and resulting remittances on both host and origin countries. Section 2.4 describes policies associated with managing labor migration. Section 2.5 concludes with policy recommendations.

2.2 Labor Migration—Stylized Facts

2.2.1 Drivers of Migration

International migration can be broadly classified into long-term and short-term migrations. Long-term migration encompasses permanent labor/investment migration, repatriation, marriages and family reunions, and refugees/asylum seekers. Short-term migration includes temporary or circular labor migration, traders, and students. This chapter largely focuses on short-term labor migration.

From a demand-side perspective, the different demographic trends and the increasing demand for...

Table of contents

• Front Cover
• Title Page
• Copyright Page
• Contents
• Table and Figures
• Foreword
• Acknowledgments
• Abbreviations
• Contributors
• 1 Introduction and Overview
• 2 Magnitude and Pattern of Migration and Remittances
• 3 Dynamics of Remittances
• 4 Financial Literacy Programs for Remittances
• 5 Leveraging Remittances for Financing for Development
• 6 Channeling Remittances and Diaspora Savings for Investments
• 7 Future Flow Remittance Transactions
• 8 Conclusion—Promoting Migration and Remittances for Development in Asia
• Footnotes
• Back Cover