News / Economy

Remittances Can Help Economies of Poorest Countries Grow

A boy carries a goat along a road near the town of Sake, about 27 kilometers west of Goma, DRC, November 27, 2012.A boy carries a goat along a road near the town of Sake, about 27 kilometers west of Goma, DRC, November 27, 2012.
x
A boy carries a goat along a road near the town of Sake, about 27 kilometers west of Goma, DRC, November 27, 2012.
A boy carries a goat along a road near the town of Sake, about 27 kilometers west of Goma, DRC, November 27, 2012.
Lisa Schlein
A new United Nations report argues that the world’s poorest countries could lift their populations out of poverty if they used remittances to improve their productive capacities. The Least Developed Countries Report 2012 published by the United Nations Conference on Trade and Development (UNCTAD) also explores ways to reverse the so-called “brain drain.”

Remittances mean big money. The U.N. Conference on Trade and Development reports citizens of the world’s poorest countries working abroad sent home some $27 billion in 2011. The report says that in the last decade, remittances have outstripped inflows of foreign direct investment to the least developed countries (LDCs).  

Research shows that most of the money sent home is spent directly by families on vital needs, such as food and housing.  Although such expenditures are essential, U.N. economists argue it would be beneficial if more of the remittances could be channeled into local infrastructure development, vocational training projects and the like.

Reducing transfer costs

The report recommends these significant flows of money be used to improve the productive capacities in LDCs, to enable their economies to produce greater varieties of goods and services and more sophisticated goods, for domestic use and export.

UNCTAD Secretary-General Supachai Panitchpakdi said a major reason why remittances are not widely used for investments in home countries is because the transfer costs are exceptionally high.  

“The average is around 20 percent. It ranges from four to 25 percent and that is why it is forcing people to send it informally," said Supachai. "So, the purpose of this exercise is to advise these countries that if it goes informally, you are not benefiting much. The individuals may receive it, and of course, the families use it for consumption. But, if you somehow create the situation where people are sending it formally, than the country at large will benefit because that will be foreign exchange available through the bank for the government to use for import technology and other things.”  

High return on investment

UNCTAD estimates in 2010, remittances sent to sub-Saharan Africa could have generated an additional $6 billion for recipients, if the costs of transferring money had matched the global average of about nine percent.

The report says post offices, savings and credit cooperatives, as well as microfinance institutions can play an important role in expanding access, especially for rural populations, to remittances and financial services in LDCs.

A major downside associated with remittances is the so-called brain drain. UNCTAD reports that more than 2 million educated and highly qualified people have emigrated abroad.  

The report finds an average of 18.4 percent of LDCs' highly skilled people leave home in search of more lucrative work in foreign countries. U.N. economists argue the adverse effects of these high levels on the poorest countries can outweigh the benefits from remittances.  

Retaining skilled workers

Taffere Tesfachew is director of UNCTAD’s Division for Africa, LDCs and Special Programs. He said UNCTAD is attempting to persuade LDCs to establish new international measures to help reverse this brain drain and turn it into a brain gain.

“So, we have a little initiative that we are proposing, based on a tried and tested scheme from other countries, which is that there are a lot of highly skilled, knowledgeable individuals from LDCs that are willing to go back and initiate knowledge-based activities," said Tesfachew. "But, the problem, apart from the fact that the local policy environment may not be that conducive - there is also another problem. The problem is taking a risk is usually a problem. They have knowledge. They have ideas, but resources are a difficulty.”  

Tesfachew said UNCTAD is proposing a scheme of public-private partnership to encourage professionals abroad to return back home.  

He said such a scheme might provide these people with preferential access to seed money for investments back home. It also would make financing available at preferential interest rates.  

He added that the knowledge transferred by homecoming nationals would be useful for the country as a whole.

You May Like

Beijing Warns Hong Kong Protesters, Cracks Down at Home

In suppressing protest news, China reportedly has arrested more than 20 people on the mainland who acted in support of Hong Kong pro-democracy protesters More

Competing Goals Could Frustrate Efforts to Fight Islamic State

As alliances shift and countries re-define themselves, analysts say long-standing goals of some key players in Middle East may soon compete with Western goals More

Child Sexual Exploitation to Worsen in SE Asia

Southeast Asia’s planned economic integration is a key step for boosting the region’s productivity, but carries downsides as well More

This forum has been closed.
Comment Sorting
Comments
     
by: jethc cruz from: philippines
November 27, 2012 8:50 PM
Remittances...a nation sending its own people(indirect way) in abroad to work is a sign that that state/nation's economy is in trouble.Remittances may help but it is not the solution,the solution a nation must have a concrete ECONOMIC PLANS such as temporarily cancelling its foreighn debt payment and used that FUNDS to invest in PHYSICAL ECONOMY such as building infrastructures that will boost tourism, irrigation canals to boost food production, build more power plants(renewable hydro & nuclear).With these projects a nation's economy will certainly boost up!

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
The Legacy of Jimmy Carter: The Preacher from Plainsi
X
October 01, 2014 10:45 AM
It is common in the United States to see tourists flock to sites associated with America's presidents. Some are privately owned and others are run by the National Park Service or the National Archives -- but most have helped draw business and people into the towns and cities where they are located. As VOA’s Kane Farabaugh reports, there is one particular presidential hometown that is unique in what it has to offer those who make the trip.
Video

Video The Legacy of Jimmy Carter: The Preacher from Plains

It is common in the United States to see tourists flock to sites associated with America's presidents. Some are privately owned and others are run by the National Park Service or the National Archives -- but most have helped draw business and people into the towns and cities where they are located. As VOA’s Kane Farabaugh reports, there is one particular presidential hometown that is unique in what it has to offer those who make the trip.
Video

Video Hong Kong Protests Draw New Supporters on National Holiday

On the 65th anniversary of the founding of Communist China, Hong Kong protesters are hoping to stage the largest pro-democracy demonstration since the 1989 Tiananmen protests. VOA's Brian Padden visited one of the protest sites mid-day, when the atmosphere was calm and where the supporters were enthusiastic about joining what they are calling the umbrella revolution.
Video

Video India's PM Continues First US Visit

India's prime minister is on his first visit to Washington, to strengthen political and economic ties between the world's oldest and the world biggest democracies. He came to the U.S. capital from New York, the first stop on his five-day visit to the country that denied him an entry visa in the past. From Washington, Zlatica Hoke reports Modi seemed most focused on attracting foreign investment and trade to increase job opportunities for his people.
Video

Video Malaysia Struggles to Stop People Joining Jihad

Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Could US Have Done More to Stop Rise of Islamic State?

President Obama says airstrikes against Islamic State militants in Syria will likely continue for some time because, in his words, "there is a cancer that has grown for too long." So what if President Obama had acted sooner in Syria to arm more-moderate opponents of both the Islamic State and the Syrian government? VOA State Department Correspondent Scott Stearns reports from the United Nations.
Video

Video Treasure Hunters Seek 'Hidden Treasure' in Central Kenya

Could a cave in a small village in central Kenya be the site of buried treasure? A rumor of riches, left behind by colonialists, has some residents dreaming of wealth, while others see it as a dangerous hoax. VOA's Gabe Joselow has the story.
Video

Video Ebola Patients Find No Treatment at Sierra Leone Holding Center

At a holding facility in Makeni, central Sierra Leone, dozens of sick people sit on the floor in an empty university building. They wait in filthy conditions. It's a 16-hour drive by ambulance to Kailahun Ebola treatment center. Adam Bailes was there and reports on what he says are some of the worst situations he has seen since the beginning of this Ebola outbreak. And he says it appears case numbers may already be far worse than authorities acknowledge.
Video

Video Identifying Bodies Found in Texas Border Region

Thousands of immigrants have died after crossing the border from Mexico into remote areas of the southwestern United States in recent years. Local officials in south Texas alone have found hundreds of unidentified bodies and buried them in mass graves in local cemeteries. Now an anthropologist and her students at Baylor University have been exhuming bodies and looking for clues to identify them. VOA’s Greg Flakus has more from Waco, Texas.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid

World Currencies

EUR
USD
0.7866
JPY
USD
109.25
GBP
USD
0.6139
CAD
USD
1.1120
INR
USD
61.428

Rates may not be current.