x Abu Dhabi, UAEWednesday 17 January 2018

More expats means more cash sent to developing countries

Migrant workers sent almost Dh2 trillion back home last year. In his book, Migrant Remittances and Development in the Global Economy, Mexican sociologist Manuel Orozco examines the mostly positive role this money plays for both the receiving and sending economies, Paul Hockenos writes

Cashier Rashmi D'Souza, left, helps customers exchange money at a UAE Exchange branch on Hamdan Street in Abu Dhabi. Developing countries rely heavily on the remittances sent back by expat workers. Silvia Razgova / The National
Cashier Rashmi D'Souza, left, helps customers exchange money at a UAE Exchange branch on Hamdan Street in Abu Dhabi. Developing countries rely heavily on the remittances sent back by expat workers. Silvia Razgova / The National

Migrant Remittances and Development in the Global Economy

Manuel Orozco

Lynne Reinner Publishers

Never before have so many people lived and laboured outside the borders of their homelands than do today in our intensely globalised world. Nor has so much money flowed from migrant diasporas to their loved ones back home: over $534 billion (almost Dh2 trillion) in 2012 alone, according to the World Bank.

In developing nations, remittances are crucial assets, tallying over three times the amount provided by official development assistance. In distraught countries such as Haiti, Lesotho, Samoa, and Moldova, remittances constitute between a fifth and - in the case of Tajikistan - nearly half of their GDPs. Remittance totals are growing fast in the Mena region, with Egypt, Lebanon, Morocco, Jordan and Tunisia out in front. These monies contribute mightily to balancing lopsided current accounts and stimulating domestic demand, to say nothing about keeping families out of poverty's reach.

The way that transnational workers and their earnings are thought about has come a long way since the days when threadbare gastarbeiter from Italy, Greece, and Spain flocked to northern Europe to man the assembly lines in the booming postwar factories. Europe's guest workers were considered temporary manual labourers who'd work the low-paid jobs that the Germans didn't want to - and then return home.

What they did with their Deutschmarks didn't concern anybody but them. For the most part, the funds they sent back went towards the basics: food, health care, and bricks and mortar for new houses. Then came the white goods, used cars, and satellite televisions. But this leap forward in terms of living standard barely dented the structures that had kept the "sending-regions" trapped in poverty for generations. "Modernisation without development" was the catchphrase that experts devised for the phenomenon of regions so addicted to the remittances from overseas workers that they stop trying to better their situations on their own. Generation after generation of brain drain bled the best and brightest from these places, leaving the grandparents and children behind in the new houses.

The past decade or so has witnessed a veritable revolution in globalised labour flows, as well as a new academic science that seeks to explain their impact and help leverage their benefit for everyone involved. As it turns out, the transnational toing and froing of émigré workers has broad repercussions not only for the economy, but for migrant-sending and receiving societies, politics at home and abroad, and even international affairs. Indeed, most of the gastarbeiter never went home, and countries such as Germany will forever look different because of it. The three million people in Germany with a Turkish background, for example, are a factor in Frau Merkel's deliberations over education, gender, family and other social policies, as well as in Germany's relations with Turkey and the EU. Increasingly, they vote, too.

One person at the forefront of the academic investigations into migrations and remittances is Manuel Orozco, the author of Migrant Remittances and Development in the Global Economy.

Orozco is a Mexican sociologist who has crisscrossed the globe researching transnationalism's peculiarities from Albania to Nigeria, and from the Caucasus to the Philippines. He is considered an expert on the topic, and no study is complete without addressing his many assumptions and prolific findings.

Fortunately though, Migrant Remittances is not a dense, scholarly book, but a primer for those new to the topic. Orozco brings readers up to date on the field and imparts some wise words about the way forward.

In contrast to the past, migrants today are directly involved in their countries of origin in a vast number of ways. Remittances are not viewed narrowly in terms of poverty alleviation but rather as the seeds of development, which when planted in the homeland might take root and flower into a small business that enables fathers and mothers to raise their families at home and provide for their needs at the same time.

This has been made possible by scholars like Orozco teaming up with international organisations such as the World Bank and microfinance facilities on the ground in poor countries. They brought informal remittance transfers (from cash to Western Union) into official financial systems, enabling the people to use banks to save costs sending money and then availing properly banked families access to interest, small business loans, and advice on investment. Many - but by no means all - have been able to build up assets and then invest wisely in micro-businesses that both support the family, provide productive jobs, and develop their environs.

Key to making this work is involving governments on both sides of the migration equation, as the United States and Mexico have done with notable success. "Policy initiatives," writes Orozco, "should focus on improving opportunities for small-scale investment in the creation of new businesses, thereby responding to the desire of migrants and their families to invest. This means offering opportunities for remittance recipients to transform subsistence agriculture into commercial farming, and encouraging an environment favourable for migrants to invest."

In reaching out to diasporas, governments tap an important source of financial and social capital. Indeed, migrant diasporas are more than just the money they send back, but also worldliness, networks, expertise, and a source of seasonal tourism.

As neatly as Orozco brings us up to the present, it was a little disappointing that he didn't go just one step further to talk about some of the best best-practices, such as the types of policies that encourage "circular migration". Under such programmes, developed countries can call upon non-nationals to fill short-term labour shortages - with no offer of permanent residence - while the migrants learn valuable skills that can be put to work upon their return. This is called a "triple-win scenario", providing benefits for the host country, the home country, and the migrants themselves.

Nevertheless, Orozco is on the right track in Migrant Remittances and didn't set out to write an exhaustive survey. For those interested in following up in more depth, there is now a vast cache of literature, policy examples, and case studies. In good part, at least, Manuel Orozco is to thank for that.

the review@thenational.ae

Paul Hockenos is the author of Joschka Fischer and the Making of the Berlin Republic: An Alternative History of Postwar Germany.