Friday, September 7, 2007
Today's NY Times features a story about migration, remittances, and their impact on the Indian state of Kerala -- splitting up families so they can afford telephones, refrigerators, and cars. The article discusses the high incidence of migration to the United Arab Emirates (where my cousin and her Keralite husband live), but doesn't discuss a major finding of a recent World Bank report -- that 50% of South Asian immigrants migrate to the global South rather than to high-income countries. Moreover, nearly half of all immigrants from the developing world live in other developing countries, and 9 to 30% (depending on the measure of financial flows used) of remittances come from the developing world. Notably, the World Bank study finds that the cost of South-South remittances are even higher than the exorbitant fees (averaging 13% and often as high as 20%) charged in the global North. Given that "[r]emittances are now are second only to foreign direct investment (around $133 billion) as a source of external finance for developing countries," the international community needs to prioritize ensuring that these remittances flow smoothly and are subject to reasonable fees in the developing world as well as the developed world. Of course, the challenges are legion -- many of the money transfer mechanisms are informal, making them not only difficult to regulate but also subject to abuse by money launderers and terrorist organizations. And critics have noted that over-regulation might clam up informal remittance flows or send them further underground. It seems that the best solution is to increase access to and desirability of formal networks in host and recipient countries, by providing migrants with legal status and necessary documentation and ensuring not only low fees but also efficiency, reliability, and convenience.