By Isagani de la Paz
OFW Journalism Consortium, Inc
Tuesday, 19 July, 2005
The World Bank will release this month its general principles for international remittance systems as it and the International Monetary Fund (IMF) attempt to capture migrant workers money flowing through informal channels.
Marilou Uy, World Bank director for financial sector operations and policy, revealed this in a paper she presented to more than a hundred financial executives during the second Asia Pacific Economic Cooperation (APEC) policy dialogue held on May 26-27 in Bangkok, Thailand.
The dialogue centered on the role of the private sector in shifting from informal to formal remittance systems and came in the wake of the WB report, Global Development Finance 2003, saying that remittances have become an important and stable source of financial inflows to developing countries.
According to copies of the papers given to the OFW Journalism Consortium, Uy said that remittances to developing countries reached more than $120 billion by the end of 2004 from less than $40 billion in 1990.
She defined remittances as the sum of workers remittances, compensation of employees, and migrant transfers. In the Philippines alone, OFW remittances hit $8.54 billion in 2004, which is 52.65 percent of the country's gross international reserves and roughly 14 percent of the Philippines gross domestic product, according to Bangko Sentral ng Pilipinas Deputy Governor Nestor A. Espenilla Jr. who spoke at the Bangkok conference.
He also cited six key regulatory challenges in OFW remittance flows namely money laundering channels, low transaction cost, convenience and access, consumer protection, operational risk management, and proper recording and monitoring.Uy presentation, meanwhile, emphasized five key issues for public policy and remittances and underscored the international lender seriousness in tackling the issue of remittances, so much so that the WB Global Economic Prospects 2006 for release this year would center on international remittances and migration.
A key issue that the WB considers in its policy recommendation to be included in its report is reducing remittance costs through improved financial systems and infrastructure.
Uy said this is important since reducing remittance fees is likely to increase annual remittance flows to developing countries. Uy added, To date, remittance costs remain regressive and high on average.
On the average, sending money to the Philippines and Mexico through Moneygram and Western Union is higher compared to the rates of other remittance firms.
Sending $100 through Moneygram and Western Union to the Philippines from the US exacts above 14 percent in fees. Other remittance firms charge below that range.
However, the two firms charge less for every $1,000 sent to Mexico from the U.S. compared to other remittance companies.Another key issue for public policy on remittances is the regulatory regime for anti-money laundering and financing terrorism.