That many countries have gradually turned to migrant remittances as a form of development finance is no secret. Migrant remittances make up an important component of development finance, often surpassing flows of foreign direct investment and official development assistance, growing rapidly from $167 billion in 2005 to $336 billion in 2008, without counting the in-kind cash, food, cell phones and computers that migrants bring back with them upon their return. Moreover, through their role in household-to-household flows, they are typically more resilient to negative economic shocks than other flows. They help families in poor countries afford much needed food, medicine and education—a combination of goods, which determine the difference between extreme poverty and decent living.
It should come as no surprise then that the Gulf Cooperation Council (GCC) countries have also gradually become important players in the global fight for poverty reduction. The migrant population in the region has grown substantially in the last decade. From 8.5 million in 1995, today there are an estimated 15 million migrants among the 39 million residents of the six member countries of the GCC—Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Oman and Bahrain, the UAE and Kuwait each have a number of immigrants as a proportion of their population of 70 percent or more. Because most immigrants to the region come to work, this number swells when immigrant numbers are compared to the labor force in these countries. About 77 percent of Bahrain's 594,000 workers, for instance, come from other countries. Without a doubt, the Arabic Peninsula is one of the most important migrant destinations in the world.
These developments coincide with the rise of an emigration culture in South-East Asia. In that same 1995-2010 period, remittances increased substantially to countries in South-East Asia. Remittances to Bangladesh, for instance, rose to $10.7 billion in 2009, equivalent to 12 percent of GDP. That total is 20 percent in Nepal. Sri Lanka and the Philippines saw similar increases, all notably due to the rising demand for labor in the GCC countries. The biggest player, however, has been India, where a whopping $50 billion in migrant remittances arrive each year. In Bahrain, the number of Indians is estimated at 300,000; it is 1.5 million in Saudi Arabia.
Prior to the financial crisis many countries around the world, notably those of high income, had engaged in a political balancing act between importing their need in human resources while fighting general xenophobia in their home countries. Many in fact had turned to “temporary migration” and “assisted return” schemes.
The financial crisis changed the trend, at least temporarily. While fewer people left their home countries to find work abroad during the economic crisis, migrant workers mainly stayed put in their host countries despite weaker job markets; most tried to continue sending money home by cutting living costs. Unsurprisingly, migrant source countries generally did not fare well due to the lack of remittances, which conceivably reinforced the economic downturn already at play. Remittances dropped remarkably, for instance, in Latin America, the Caribbean countries and North Africa. Remittance flows to Mexico declined by 13.4 percent in the first nine months of 2009 and by 20 percent in Egypt. Morocco experienced a similar rate of decline.
Despite the fact that total world remittances continued to fall during the crisis, the corridor between the GCC countries and Southeast Asia showed resilience. Remittances continued to grow, albeit slower than in previous years, despite a decrease in migrant departures. Remittances to Pakistan increased by 24 percent in the first eight months of 2009, while flows to Bangladesh and Nepal increased by 16 percent and 13 percent, respectively. The Philippines also recorded record numbers of departures and remittance flows in 2009.
The World Bank’s latest figures in July 2010 show that year-to-date remittance growth rates remained higher in South-East Asian countries than in Latin America. Nepal (19.9 percent), Bangladesh (7 percent) the Philippines (6.6 percent) and Pakistan (4.9 percent) for instance grew quicker than Colombia (-12.8 percent), Mexico (-4.6 percent), Honduras (1.9 percent) and El Salvador (2.5 percent). Because migration is corridor-specific, these trends were suggestively buoyed by the fact that the Middle East was able to thwart some of the negative effects of the recession. The continued growth of the economies in the Middle East, and the reliance on South-East Asian labor partially accounts for the resiliency in remittance flows in that region.
The chance to seize the opportunity has not been missed by the countries’ policy–makers. Bangladesh announced earlier this year the creation of an Expatriate Welfare Bank to facilitate the transaction of remittances, and pledged to better train migrants for jobs overseas. In Nepal, the Ministry of Finance announced plans to issue infrastructure development bonds, only available to labor migrants abroad, which would be channeled towards local investment. In India, reform was announced through the Emigration Management Bill, including the creation of the Indian Community Welfare Fund, which will facilitate the financial engagement of the diaspora community in times of difficulty. Not surprisingly, the fund has been made available in all the Gulf countries.
The Southeast Asia-to-Middle East migrant corridor is a typical example of the emerging economic development phenomenon taking place between Southern countries. South-South migration is not new, but rarely has it been viewed as an avenue for economic and social development. Notably, this corridor already features some of the lowest remittance-sending costs in the world. The rise of influential and powerful economies in Brazil, China, India and South Africa ensures that this trend will form the backbone of a future development paradigm.
Critics are quick to point to weaknesses in this argument. Human rights advocates have argued for years that the current global governance of migration ignores the human cost of migration. Not a single high-income country has signed the 1990 UN Convention on the Protection of the Rights of Migrant Workers & Members of their Families, and although the situation is changing on some fronts, human rights violations in the GCC countries have not received a good standing. Reports regularly surface on abusive bosses. Resentment is growing based on the sentiment that foreigners are being selected over nationals for local jobs. The Kafala system, the sponsorship system in the GCC countries upon which migration policies are based, has traditionally not allowed debate on notions of citizenship, integration and participation.
But there is reason to believe things are changing. Bahrain signed a memorandum of understanding with India in which the protection of Indian migrants was central, and recently changed its sponsorship program to make the government responsible for migrants rather than employers. In Abu Dhabi, efforts to improve housing for migrants and enforce regular salary payments are underway. The moving and shaking is mutual; many countries in South-East Asia have moved to negotiate Memoranda of Understanding with the GCC countries and taken steps that may yet ensure a win-win situation involving migration. India and Saudi Arabia have even talked about expanding their current understanding when it expires later this year. Many of those decisions are taken during the Colombo Process meetings, which have been postponed until next spring in Dhaka.
Bahrain and the UAE might be two of the more progressive countries in the region, but neighboring countries have often followed suit in the past. In which case, perhaps a new powerful center of South-South development is in the making.
Jason Gagnon - Policy analyst on migration and development at the OECD Development Centre in Paris. He is also affiliated to the Paris School of Economics. The views expressed in this article are those of the author and do not necessarily reflect those of the organizations.
