Remittances to Caribbean can play greater role in poverty reduction – UN

An estimated 27.5 million least developed countries citizens live and work abroad.

GENEVA, Switzerland, Tuesday November 27, 2012 – A new United Nations report says remittances to the world’s least developed countries (LDCs), including the Caribbean, play a greater role in reducing poverty while also empowering the economies in those countries to grow.

In the 2012 edition of its LDC report, the UN Conference on Trade and Development (UNCTAD) notes that with remittances forecast to grow over the medium-term, the world’s poorest nations should ensure better banking and financing services to allow for greater domestic investment, small business development and job creation among their increasingly urbanized populations.

The report, entitled “Harnessing Remittances and Diaspora Knowledge to Build Productive Capacities,” notes that remittances, the money sent by migrants to their home countries, have grown eight-fold between 1990 and 2011, and are now worth US$27 billion dollars on a global scale.

Moreover, the report says that remittances have continued to rise despite the impediments posed by the 2008 global economic crisis and consequent fears of financial stagnation.

The report also urges governments to reduce the transfer costs associated with remittances, which often run as high as 12 per cent.

The potential pay-off for LDCs posed by remittances is “significant,” the report notes, considering that some 27.5 million LDC citizens live and work abroad.

Over the past decade, remittances have steadily surpassed the value of foreign direct investment to LDCs, the report added.

UNCTAD’s Secretary-General, Supachai Panitchpakdi, added to the report’s call for LDC governments to take greater action in freeing up liquidity provided by remittances and guiding it towards domestic development opportunities.

“LDCs cannot always remain dependent on official development assistance (ODA),” Panitchpakdi told reporters here, noting that Overseas Developmental Assistance (ODA) continued to exceed remittances as a source of foreign financing.

“They have to make their own effort to mobilize their own capital.”

UNCTAD warns, however, that with the growing danger of global economic stagnation and deflation, LDCs must escalate their policy rethink of how remittances can promote industrial development and structural transformation through a freer channel of investment.

“This may entail a range of policy interventions, such as domestic and regional development policies aimed at inducing private investments,” the UN report notes, adding that new measures could also include “appropriate financial and regulatory reforms designed to reduce transaction costs and promote greater financial inclusions and credit provision for small- and medium- sized enterprises”

UNCTAD says while money flows from LDC migrants are crucial to the advancement of the world’s poorest nations, it is the migrants’ very departure which often contributes to the further debilitation of an LDC’s chances of development.

According to the report, the impact of “brain drain” on LDC countries appears to reinforce international inequalities in the availability of qualified personnel, and to damage LDCs’ prospects for long-term economic growth.

“Brain drain causes great damage to impoverished countries by removing the very people who could most help in stimulating economic growth,” the report states, adding that skilled, highly educated citizens are needed in the poorest countries to help them cope not only with development challenges but also the rising threat of climate change and its after-effects.

In an effort to counter the negative effects of the brain drain, UNCTAD has proposed a knowledge-transfer scheme , known as the “Investing in Diaspora Knowledge Transfer” aimed at enabling highly skilled members of the LDC Diaspora, including an estimated two million university-educated migrants, to drive learning and investment in home countries.

UNCTAD says the initiative would provide Diaspora members with preferential access to the seed capital required to initiate investment back home at preferential interest rates.

 

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