x Abu Dhabi, UAEWednesday 26 July 2017

Remittances are the most effective aid

Remittances are a powerful tool for self-help and economic equality. They deserve the world's wholehearted encouragement.

The world's whole flow of official foreign aid, most of it coming from taxpayers in rich countries, is only a fraction of the sum that flows to poor countries from a much humbler source, the World Bank has reported. While "official development aid" for 2012 is estimated at $114 billion (Dh419 billion), remittances from expatriate workers around the globe reached $406 billion. And these remittances actually increased through the recent years of global slowdown, while foreign aid totals shrank or stagnated.

The numbers are eye-opening, but the idea that remittances are big business will be no surprise to anyone in the UAE. The well-known norm is that labourers, clerks and other workers from Asia, Africa and indeed across the world routinely send money home to their kinsfolk.

This is especially vital when formal aid dries up, as appears to have happened in some Arab Spring countries. The World Bank study notes that in 2012, remittances to the Middle East and North Africa increased by 8.4 per cent, to $47 billion; of all the world's regions, only South Asia recorded a bigger percentage increase in money sent home last year.

This is surely best understood as an increase in payments from expatriate Syrians, Egyptians, Libyans and Yemenis to family members in their troubled homelands. The published report did not provide statistics for bilateral flows of funds, but the authors do mention that remittances to Egypt, in particular, "have soared since 2010".

All these numbers, taken together, suggest that the UAE and other GCC countries can give troubled Mena states meaningful help simply by adding more of their people to the workforce. Every labourer hired becomes a source, however modest, of vital foreign exchange for his homeland. And while official foreign aid is scarce and often misdirected, remittances have the advantage of going right to where they are intended.

Expatriates from poor countries are literally, as well as metaphorically, building the UAE. One way the country can reciprocate is by keeping the cost of sending money home low. And here, the World Bank paper says, the UAE has done well: the cost of remitting money from here is less than 5 per cent, against a global average of almost 9 per cent - a figure that the promise of mobile-phone banking may soon reduce worldwide.

Remittances are a powerful tool for self-help and economic equality; they deserve the world's wholehearted encouragement.