HIMALAYAN NEWS SERVICE
KATHMANDU: Nepal was one of the highest receivers of remittance on the basis of per cent to gross domestic product (GDP) in 2011.
The large remittance recipient countries as a share of GDP include Tajikistan (47 per cent), Liberia (31 per cent), Kyrgyz Republic (29 per cent) Lesotho (27 per cent), Moldova (23 per cent), Nepal (22 per cent), Samoa (21 per cent) and Tonga (20 per cent) in 2012, according to an estimation of the World Bank.
Though the top recipients of officially recorded remittance in 2011 were India ($64 billion), China ($62 billion), Mexico ($24 billion), and the Philippines ($23 billion), remittance sent home by migrants to developing countries are three times the size of official development assistance and can have profound implications for development and human welfare, it added.
Remittance can contribute in lowering poverty and to the building up of human and financial capital for the poor, according to the latest issue of World Bank’s Migration and Development Brief.
Despite the current global economic weakness, remittance flows are expected to continue growing, with global remittance expected to reach $615 billion by 2014, of which $467 billion will flow to developing countries. Although remittance costs have fallen steadily in recent years, they still remain high in small nations where remittance provides a lifeline to the poor.
Reducing the cost of remittance transfers produces significant benefits to migrants and their families, and to receiving countries more broadly as the steady stream of foreign currency improves a country’s creditworthiness for external borrowing.
The World Bank has made considerable strides in developing financial instruments for leveraging migration and remittance for national development purposes. Diaspora bonds can be a powerful financial instrument for mobilising diaspora savings to finance specific public and private sector projects, as well as to help improve the debt profile of the destination country.
South Asia comes second to Sub-Saharan Africa in the cost of sending money that is one of the obstacles to growth of remittance flows, it said. “The cost of sending remittance is a key driver of remittance flows.”
Cost of sending remittance to South Asia stood at 6.5 per cent — in the third quarter of 2012 — though average cost masks variation across countries, it said, adding that Sub-Saharan Africa is the most expensive region to send remittance to, with a transfer costing about 12.4 per cent of the amount transferred.
The average cost, however, stood at 7.5 per cent in the third quarter of 2012 for the top 20 bilateral remittance corridors and nine per cent for all countries for which cost data are available, it added.
The global average remittance price — average based on all countries for which price data is available — has declined over the same period from 9.81 per cent in 2008 to 8.96 per cent in the third quarter of 2012.
Russia is, by far, the cheapest source country with a weighted average remittance cost of two per cent.
Likewise, in many large remittance source countries like Gulf Cooperation Council (GCC), US and UK, the average cost is around five per cent. By contrast, Japan ranks among the highest cost corridors. As of the third quarter of 2012, the weighted average cost of sending remittance from Japan to its five top remittance receiving countries was about 17 per cent of the remittance amount.
Similarly, Germany is the next most expensive country, among the top remittance source countries, with the transfer costs consuming, on average, about 14 per cent of the remittance amount.
Likewise, the report noted that regions and countries with large numbers of migrants in oil exporting countries continue to see robust growth in inward remittance flows, compared with those whose migrant workers are largely concentrated in the advanced economies, especially Western Europe.
Thus, South Asia, MENA and East Asia and Pacific regions, with large numbers of workers in GCC countries, are seeing better-than-expected growth in remittance.
For South Asia, remittance in 2012 is expected to total $109 billion, an increase of 12.5 per cent over 2011. Remittance to developing countries is estimated to have reached $372 billion in 2011, an increase of 12 per cent over the previous year. Global remittance flows, including those to high-income countries, were an estimated $501 billion in 2011.