Posted: 5:00 PM
Sept. 12, 2005
Agence France-Presse with XFN-Asia
OVERSEAS remittances from workers in developed countries have outstripped foreign direct investment (FDI) and official development aid (ODA) as sources of funds for developing countries, financial experts said Monday.
Total overseas workers' remittances to developing countries are conservatively estimated at 200 billion dollars a year," said Donald Terry, manager of the Multilateral Investment Fund (MIF) of the Inter-American Development Bank.
In contrast, foreign direct investment amounts to about 125 billion dollars a year and official development assistance is only some 50-60 billion dollars annually, Terry told an international conference on remittances in Manila.
He estimated the number of workers sending remittances overseas at about 125 million worldwide.
This huge transfer of funds had been hidden because financial institutions were not aware how large the total was, said Robert Bestani, director-general of the Asian Development Bank (ADB) private finance department.
It was also not widely acknowledged because it was "very controversial," he added.
"It's wonderful to talk about the free flow of goods but it's not wonderful to talk about the free flow of people," said Bastani.
He said this situation could increase as more of the poor sought work in developed countries while richer regions, like Europe and Japan, suffered a shortage of young workers.
India, Mexico and the Philippines were the three countries which got the largest amount of remittances from their nationals overseas, said Bastani at the opening of a joint conference on how such remittances could lower poverty.
The forum, sponsored by the ADB, the UN Development Programme (UNDP) and the MIF at the ADB headquarters in Manila, will look into ways of tracking such remittances and how they can be harnessed to help the poor.
Terry remarked that the total amount of overseas remittances to poor countries was officially placed at 126 billion dollars but that all studies showed that there were still vast amounts going through unofficial channels.
The amount officially recorded as going to Asia is about 50 billion dollars a year, said Terry, about equal to the amount going to Latin America.
But considering the large amounts still going through unofficial sources, the total for Asia would more likely hit 75 billion or even 100 billion dollars a year, said Terry.
Bestani said the overseas remittances were very effective as the money was going to the poor who need it most.
However the experts said the money could have a wider multiplier effect and could also be put to better use by the recipients if they were only aware of their financial options.
Terry cited India and Ecuador where remittances were being routed through micro-finance institutions and were being used in different financial services like home mortgages.
The challenges facing financial institutions is to find ways to lower transaction costs for remittances and learn how to channel more of the money into investment, Bestani said.
The experts also warned governments against excessive intervention like taxation or forcing people to use their remitted funds in certain ways.
Bestani said it was highly unlikely that terrorists and criminals were relying on overseas remittances to launder funds, remarking that individual amounts being sent home were too small.