The development and impact of remittances in Asia

Overseas employment is a significant contributor to Asian economies and the well-being of workers’ families, who often depend on remittances to meet their basic needs. In 2017, Asia and Europe were the regions of origin for the largest numbers of international migrants — 106 million and 61 million, respectively. According to the April 2019 Migration and Development Brief from the World Bank, remittance flows to East Asia and Pacific ($143billion), Europe and Central Asia ($59billion) and South Asia ($131billion) region are estimated to be $333billion for the 2018.

Migration from Asia can be traced way back to the 1970s when the discovery of oil led to infrastructure developments in the Middle East which led to a need to expand the local workforce. In the 1980s, Singapore, Korea and other countries within Asia itself began to attract migrants. From the moment that migration took off in 1970s, Asian countries recognised the economic importance of remittances and sought to help migrants. Many countries created independent government agencies to assist migrant workers and to oversee recruitment agencies. Examples include the Philippines’ Commission on Filipinos Overseas; the Bureau of Manpower, Employment and Training in Bangladesh; and the Sri Lanka Bureau of Foreign Employment.

A closer look at remittance flows to Asia reveal that in terms of value, India has the highest inflows, with the World Bank recording US$79 billion in 2018, followed by China (US$67 billion). Other Asian countries like the Philippines (US$36 billion), Pakistan (US$21 billion), Vietnam (US$16 billion) and Bangladesh (US$15.5 billion) rank among the top 10 global remittance recipients in 2018. The above figures reiterate the importance of remittances to Asian countries as it helps meet day-to-day needs and improve health, education and housing, raising the standard of living in what are mostly rural and underdeveloped communities. In addition, the extra income can help families to save towards long-term goals and boosts domestic consumption — a fundamental for economic growth. However, while the positive effects of migration and remittances are clear to see, there is scope for improvement in a few areas.

The cost of remittances is one area that needs attention. Even though remittances are a lifeline for many people in Asia, there is often a high price to pay. The global average is around 7%, which is already too high, but recent World Bank figures show that costs are well over 10% in some Asian corridors, such as Thailand to India, Thailand to China and Singapore to Pakistan. Remittance costs have a long way to go to be aligned to the World Bank’s aim of achieving a global average of 3% by 2030.

Risk concerns and lack of competition are among the factors that keep prices high. The practice of de-risking means that some banks are closing their doors to money service providers, which increases costs in related corridors. Governments, regulators, financial institutions, remittance-receiving countries and money transfer operators should work together to safeguard remittances and at the same time promote competition and innovation. Increasing the accessibility and attractiveness of formal remittance channels by harnessing the latest technologies will go a long way in increasing financial inclusion and lowering costs.

Having said that, the ground reality is that majority of remittances are still cash-based. Mostly remittances help in meeting household consumption expenses, which result in remittances not being strategically channelized towards savings or investments. According to the ‘Migration and Remittances for Development in Asia’ report, issued in 2018, by the Asian Development Bank and the World Bank, Asian countries taking a more enlightened approach towards saving and investment of remittances would make the most of the high volume of remittances received. The report cites the example set by countries such as the Philippines, Indonesia and India, which have launched national strategies to improve the financial literacy of their migrant populations. 

Remittances to Asia will continue to grow in volume and variety as technology connects corridors in new ways and more people seek work overseas. Money transfer operators are at the heart of this transformation, creating global networks that maximise the speed, convenience and cost-efficiency of remittances. As financial education and government policies catch up with technological progress, we can expect remittances to fulfil a much wider role and become more than simple cash transfers.

Reference : https://www.asiatimes.com/2019/05/article/asias-record-remittances-show-globalization-alive-and-well/