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

    Republicans Struggle With Reality of Trump Nomination

    Despite calls for unity by presumptive presidential nominee, analysts see inevitable fragmentation of party ahead of November election and beyond

    Despite Cease-fire, Myanmar Landmine Scourge Goes Unaddressed

    Myanmar has third-highest mine casualty rate in the world, according to Landmine and Cluster Munition Monitor, which says between 1999 to 2014 it recorded 3,745 casualties, 396 of whom died

    Goodbye Ketchup, Hello Sriracha?

    From meat and potatoes to avocados, how immigrants transform American cuisine

    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.
    Press Freedom in Myanmar Fragile, Limitedi
    X
    Katie Arnold
    May 04, 2016 12:31 PM
    As Myanmar begins a new era with a democratically elected government, many issues of the past confront the new leadership. Among them is press freedom in a country where journalists have been routinely harassed or jailed.
    Video

    Video Press Freedom in Myanmar Fragile, Limited

    As Myanmar begins a new era with a democratically elected government, many issues of the past confront the new leadership. Among them is press freedom in a country where journalists have been routinely harassed or jailed.
    Video

    Video Taliban Threats Force Messi Fan to Leave Afghanistan

    A young Afghan boy, who recently received autographed shirts and a football from his soccer hero Lionel Messi, has fled his country due to safety concerns. He and his family are now taking refuge in neighboring Pakistan. VOA's Ayaz Gul reports from Islamabad.
    Video

    Video Major Rubbish Burning Experiment Captures Destructive Greenhouse Gases

    The world’s first test to capture environmentally harmful carbon dioxide gases from the fumes of burning rubbish took place recently in Oslo, Norway. The successful experiment at the city's main incinerator plant, showcased a method for capturing most of the carbon dioxide. VOA’s Deborah Block has more.
    Video

    Video EU Visa Block Threatens To Derail EU-Turkey Migrant Deal

    Turkish citizens could soon benefit from visa-free travel to Europe as part of the recent deal between the EU and Ankara to stem the flow of refugees. In return, Turkey has pledged to keep the migrants on Turkish soil and crack down on those who are smuggling them. Brussels is set to publish its latest progress report Wednesday — but as Henry Ridgwell reports from London, many EU lawmakers are threatening to veto the deal over human rights concerns.
    Video

    Video Tensions Rising Ahead of South China Sea Ruling

    As the Philippines awaits an international arbitration ruling on a challenge to China's claims to nearly all of the South China Sea, it is already becoming clear that regardless of which way the decision goes, the dispute is intensifying. VOA’s Bill Ide has more from Beijing.
    Video

    Video Painting Captures President Lincoln Assassination Aftermath

    A newly restored painting captures the moments following President Abraham Lincoln’s assassination in 1865. It was recently unveiled at Ford’s Theatre in Washington, where America’s 16th president was shot. It is the only known painting by an eyewitness that captures the horror of that fateful night. VOA’s Julie Taboh tells us more about the painting and what it took to restore it to its original condition.
    Video

    Video Elephant Summit Results in $5M in Pledges, Presidential Support

    Attended and supported by three African presidents, a three-day anti-poaching summit has concluded in Kenya, resulting in $5 million in pledges and a united message to the world that elephants are worth more alive than dead. The summit culminated at the Nairobi National Park with the largest ivory burn in history. VOA’s Jill Craig attended the summit and has this report about the outcomes.
    Video

    Video Displaced By War, Syrian Artist Finds Inspiration Abroad

    Saudi-born Syrian painter Mohammad Zaza is among the millions who fled their home for an uncertain future after Syria's civil war broke out. Since fleeing Syria, Zaza has lived in Lebanon, Egypt, Jordan and now Turkey where his latest exhibition, “Earth is Blue like an Orange,” opened in Istanbul. He spoke with VOA about how being displaced by the Syrian civil war has affected the country's artists.
    Video

    Video Ethiopia’s Drought Takes Toll on Children

    Ethiopia is dealing with its worst drought in decades, thanks to El Nino weather patterns. An estimated 10 million people urgently need food aid. Six million of them are children, whose development may be compromised without sufficient help, Marthe van der Wolf reports for VOA from the Metahara district.
    Video

    Video Little Havana - a Slice of Cuban Culture in Florida

    Hispanic culture permeates everything in Miami’s Little Havana area: elderly men playing dominoes as they discuss politics, cigar rollers deep at work, or Cuban exiles talking with presidential candidates at a Cuban coffee window. With the recent rapprochement between Cuba and United States, one can only expect stronger ties between South Florida and Cuba.
    Video

    Video California Republicans Weigh Presidential Choices Amid Protests

    Republican presidential candidates have been wooing local party leaders in California, a state that could be decisive in selecting the party's nominee for U.S. president. VOA's Mike O’Sullivan reports delegates to the California party convention have been evaluating choices, while front-runner Donald Trump drew hundreds of raucous protesters Friday.
    Video

    Video ‘The Lights of Africa’ - Through the Eyes of 54 Artists

    An exhibition bringing together the work of 54 African artists, one from each country, is touring the continent after debuting at COP21 in Paris. Called "Lumières d'Afrique," the show centers on access to electricity and, more figuratively, ideas that enlighten. Emilie Iob reports from Abidjan, the exhibition's first stop.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.8691
    JPY
    USD
    106.57
    GBP
    USD
    0.6891
    CAD
    USD
    1.2750
    INR
    USD
    66.589

    Rates may not be current.