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A New Surge of Interest in Migration and Development

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A New Surge of Interest in Migration and Development

The intersection of international migration and development is not a simple crossroads. It more strongly resembles a complex modern freeway intersection, with multiple levels, on- and off-ramps, and many opportunities to take the wrong direction.

But the intersection also offers an efficient way to move toward a destination, and increasing numbers of governments and institutions are determined to ride international migration toward a future of greater prosperity. Unfortunately, at this point they have no roadmap.

From small beginnings in the late 1990s, renewed interest in the impact of migration on development has burgeoned into a somewhat organized international debate.

In September 2006, the United Nations held an unprecedented meeting of the General Assembly to discuss the relationship, which produced an informal agreement among states to hold an annual Global Forum on Migration and Development, the first to be hosted by the government of Belgium in July 2007. A number of regional meetings on migration have been ongoing for several years.

Why the sharp resurgence of interest in migration and development? A triangle of concerns frame the debate: 1) optimism about positive impacts from remittances and other contributions by emigrants to their home countries, 2) concerns about negative impact from the loss of skilled people, and 3) an underlying hope on the part of some major destination countries that accelerated development might slow migration flows from the developing countries toward the North.

Learning about Remittances

The major contributor to the renewed interest in migration and development is a new awareness of the size and importance of remittance flows from migrants back to their countries of origin.

A brief chapter in the World Bank's Global Development Finance in 2003 created a sensation when it pointed out that, globally, remittances to developing countries amounted to $72.3 billion and surpassed the level of all official development assistance (see Figure 1).

 


Figure 1. Remittances by Income Level of Destination Country, 2003
Source: World Bank Development Indicators Online, 2006.


Since then, the volume of remittances reported officially has soared — in part because migrants are sending more money home and in part because reporting has improved (see Table 1). The latest estimates from the World Bank are that global remittances for 2007 will surpass $300 billion. In reality, the official reports of remittances are always underestimates, because migrants also use unofficial channels to send money home, and these sums are not recorded.

 


Table 1. Global Inflows of International Migrant Remittances ($U.S. Billions)

Inflows 2001 2006 Percent change 2001-2006
All developing countries 96 199 107%
Low-income countries 26 47 81%
Middle-income countries (MICs) 70 152 116%
Lower MICs 48 101 110%
Upper MICs 22 41 128%
World 147 268 83%

Source: Sanket Mohapatra, Dilip Ratha, and Zhimei Xu, Remittance Trends 2006 Migration and Development Brief Development Prospects Group, Migration and Remittances Team
Authors' calculation based on data from IMF Balance of Payments Statistics Yearbook 2006.

Remittance flows have other significant characteristics beyond their volume. The 2003 World Bank report also noted that they are more stable than other kinds of external financial flows, and indeed seem to be countercyclical. In times of crisis, whether natural or man-made, migrants tend to send more money to their families to help them survive or recover, whereas foreign investment and lending tend to dry up.

In many developing countries, remittances are by far the largest source of foreign earnings and make up a significant share of gross domestic product (GDP). The Multilateral Investment Fund of the Inter-American Development Bank reports that, for Latin America and the Caribbean, remittances reached over US$45 billion in 2006. This amount exceeded the combined flows of all foreign direct investment (FDI) and official development assistance to the region, which is now the fastest growing and highest volume remittance market in the world.

Remittances were also larger than public and private capital inflows in 36 developing countries as well as the earnings from the most important commodity exports of 28 countries according to the World Bank. For example, remittances surpassed FDI in Mexico, tea exports in Sri Lanka, and tourism receipts in Morocco.

This sustained and stable source of foreign exchange has the potential to improve the receiving countries' credit ratings and the ability to pay for imports. Several countries have successfully used the prospect of future flows of foreign exchange from remittances to negotiate more favorable rates of interest on international loans.

The business of transferring remittances is a major industry, populated by banks, money transfer organizations, informal networks, microfinance institutions, credit unions, migrant associations, and other entities. Costs of transfers vary widely, and the ability to reduce them is a potentially important source of savings to people who send or receive remittances.

Yet remittances are often delivered with stunning inefficiency; as much as 20 percent of their value can disappear through high transfer fees and poor exchange rates. Some progress has been made in reducing transfer costs in the last few years as the remittance market has become more competitive.

Moreover, with the advance of technologies like cell-phone transfers and purpose-linked accounts, the potential of remittance transactions to serve particular spending, investment, or even social goals of the remitters and receivers is huge. The exposure to remittance-linked services is also a gateway to broader financial education and services that may benefit the poor. The size of the market provides an incentive for financial institutions to devise ways of serving migrants and their families.

The UN Development Program estimates that 500 million people — 8 percent of the entire population of the world — receive remittances. Remittances, although usually not that large (the average size of a transfer from the United States to Latin America is about $200) also have a direct impact on poverty reduction, since they tend to flow directly to poor (although not necessarily the poorest) households and are used primarily for basic needs such as food, shelter, education, and health care. A very small proportion of remitted funds seem to go into income-earning, job-creating investment.

The common observation that remittances are not used for "productive" investment misses the point that poor households rationally give priority to these basic needs, which represent an investment in human capital as well as needed consumption. Spending on basic needs also has a multiplier effect in the community as remittance receivers buy goods and services from local producers and suppliers. However, remittances may also increase inequality, encourage consumption of imports, and create dependency.

Despite the volume of remittance flows and other diaspora-related financial flows, some experts believe that labor migration does not significantly improve the development prospects of the country of origin. Source countries have had great difficulty in converting remittance income into sustainable productive capacity.

In addition, most states are unable to exercise much control over the composition of their labor exports — rather, it is determined by foreign labor markets and may bear no relation to "surplus" labor at home. A few countries have focused quite deliberately on "producing" skilled labor for foreign markets — Philippine nurses and Indian computer programmers come to mind — but most are passive in the face of international supply and demand.

Remittances are an important social safety net for poor families, possibly reducing additional out-migration in particularly difficult times. Governments in Central America recognize the safety-net aspects of migrant remittances. In the aftermath of the devastating Hurricane Mitch in 1998, the government of El Salvador asked the U.S. government not for additional humanitarian aid, but for extended permission for Salvadoran immigrants to stay legally in the United States so that they could send money to storm-affected relatives back home.

The relatively small portion of remittances that is used for investment (apart from human capital investment through education and health spending) reflects not only the immediate consumption needs of poor families, but also the discouraging investment climate for the poor.

Until problems such as bad infrastructure, corruption, lack of access to credit, distance from markets, lack of training in entrepreneurial skills, and disincentives to savings are tackled, it is unrealistic to expect remittances to solve the problem of low investment in poor communities. In the meantime, remittances lift many recipients out of poverty, if only for as long as the transfers continue.

Understanding the Brain Drain

If remittances are seen as a mostly positive aspect of the migration-and-development relationship, the down side is undoubtedly the brain drain.

The market for advanced skills has become truly a global market, and the most dynamic industrial economies are admitting and even recruiting significant proportions of the highly trained professionals from poor countries.

Ironically, emigrants from countries in which a very small proportion of people gain tertiary education are not only better educated than their compatriots, but also tend to be much more highly skilled than the people of their destination countries. A study of new legal immigrants to the United States by researchers Mihir Desai, Devesh Kapur, and John McHale found that 21 percent have at least 17 years of education — a level reached by only 8 percent of native-born citizens.

The loss of skilled people imposes several different kinds of costs on their countries of origin. The most obvious is perhaps the cost of the education itself, which in most cases the government has heavily subsidized. The emigration of the educated thus represents a transfer from the country of origin to the country of destination. There are also fiscal costs associated with the brain drain, in that the country of origin loses the tax revenue that these potential high-earners would have paid into the national exchequer.

The net developmental losses of the brain drain are more difficult to estimate. Losses of highly skilled professionals may, in the extreme case — in which dire economic mismanagement, conflict, poor working conditions, and low levels of reward conspire with opportunities abroad — be the final blow that cripples institutions and sectors of an economy.

The emigration of health-care workers is a particular concern. For example, three-quarters of doctors with Zambian nationality leave the country in just a few years, according to a European Commission report.

The impact of the departure of health-care workers on broad health outcomes is less certain, however. Michael Clemons of the Center for Global Development has found no correlation between the departure of doctors and broad health indicators such as mortality rates among children under age 5, the proportion of AIDS patients receiving modern treatment, or even the number of physicians still practicing in the country of origin.

Obviously, other factors are at work in this equation. Perhaps resident physicians in countries of origin are almost exclusively treating wealthier patients in the cities rather than poor patients in the countryside where burdens of disease are higher.

Scholars and some policymakers are challenging easy assumptions about the dire impacts of the brain drain. It is logical to assume that the developmental impact of the brain drain is most severe in source countries with weak human resource bases, where educational systems are not capable of replacing those who emigrate. Sub-Saharan African countries such as Zambia, Liberia, or Zimbabwe represent an extreme. But for countries in crisis, the brain drain is only one manifestation of the broader problems of an economy in free fall, and it may be more a symptom than a cause of problems.

Many other countries experiencing high levels of skilled emigration are beginning to think in terms of labor — and even skills — export as a comparative advantage, and to consider ways to maximize its benefits.

In the right circumstances, the employment abroad of skilled people may bring benefits to their countries of origin. Once they have migrated, highly skilled people do not necessarily abandon their home countries. Given the right opportunities, they invest in their home countries or outsource production to it. They can also contribute expertise.

Associations of business or migrant professionals, such as The Indus Entrepreneurs or the Association of Thai Professionals, contribute expertise and help keep researchers in the source country abreast of international advances. And highly skilled migrants sometimes return permanently, particularly if change in their home countries (democratization or economic reform) presents them with real opportunities to use their skills.

The case of Taiwan shows that emigration of the highly skilled can play a benign, and even positive, role in development. In terms of the number of emigrants, Taiwan has suffered from "brain drain" as badly as any developing country.

Over 90,000 Taiwanese left for study abroad in the second half of the 20th century, and in some years returns were less than 10 percent of departures, according to a study by the Organization for Economic Cooperation and Development (OECD). But these emigrants didn't carry large amounts of publicly subsidized education with them.

After World War II, Taiwan invested in primary, secondary, and vocational education; it only began to subsidize higher education more recently, as the domestic economy began to demand those skills. This forced Taiwanese students who wished to pursue a university education in the 1960s and 1970s to migrate, but their education abroad was financed privately — and often subsidized by the governments of their host countries.

Once gone, these emigrants were not forgotten. As Taiwan's high-tech sector grew and demanded more skills, emigrants abroad contributed their considerable expertise, experience, and business connections. They began to return, sometimes with the help of a government database that tracked skilled migrants and matched them with job opportunities in Taiwan.

Many returned to start businesses, particularly in places like the Hinschu Industrial Park, where the government built Western-style housing and sponsored international conferences in order to build a critical mass of well-educated returnees.

The lesson: Good public policy can be a catalyst for gains from skilled emigration when combined with a healthy economy that can make real use of the skills highly educated migrants have to offer.

In the Philippines, labor export has been an explicit part of the government's economic plan. The government's policy goals have been consistent: migration should be temporary and it should be done through official channels. All employment abroad must be approved by the Philippines Overseas Employment Administration (POEA), which also contracts directly with foreign companies and governments to provide temporary labor of all types.

Through POEA, workers can receive health and insurance benefits for themselves and their families, predeparture briefings and counseling, an ATM card that can be used to send remittances, and the right to make claims against their employer through an adjudication process. In addition, POEA makes some effort to verify the work conditions of official workers: it suspended labor migration to Hong Kong in March 2003 for a few weeks in response to the persistent abuse of Philippine domestic workers.

The government also tries to thicken the social and political links tying Filipinos to their homeland by allowing migrants to vote from abroad and sponsoring Philippine cultural events in host countries.

It is difficult to judge the impact of this activist policy in making emigration from the Philippines more temporary, legal, humane, and productive. The Commission on Overseas Filipinos estimates that 2.6 million temporary workers were abroad via official channels in 2004. However, an estimated 1.3 million Filipinos were abroad having moved irregularly, and 3.2 million Filipino citizens were permanent residents of another country.

Labor migration has become an important industry, with the International Monetary Fund reporting that official remittances amounting to about 8.9 percent of the Philippines' GDP in 2002. Other industries, such as education and tourism, derive a large part of their revenues from serving would-be and current migrants. But the return of temporary workers has been disappointing as a development tool (see Linking Temporary Worker Schemes with Development). Although studies show that migrants often return with useful new skills, they generally stay unemployed until their next deployment abroad.

Other examples of the benefits of what in earlier times would have been called a brain drain were reported in Science magazine in May 2004. One case recounted the experience of a Chinese-born geneticist educated in the United States:

At 35, [Bruce] Lahn is an assistant professor at the University of Chicago and a Howard Hughes Medical Institute (HMMI) investigator. But he's also serving as chief scientific adviser to a new primate research facility in Guangzhou. The $1 million Center for Stem Cell Biology and Tissue Engineering comprises a laboratory at Sun Yat-sen University and a primate-breeding facility an hour's drive away. Directed by Lahn's former postdoc Peng Xiang, the center aims to develop transgenic primates and isolate hundreds of lines of monkey and human stem cells.

Another example of cross-border collaboration cited by Science comes from the field of AIDS research:

[Alash'le] Abimiku [from Nigeria] received her doctorate in 1988 from the London School of Hygiene & Tropical Medicine and came to the United States in 1991 to work with AIDS pioneer Robert Gallo, then at the National Cancer Institute in Bethesda, Maryland. That year the two founded the International Center for Scientific Culture--World Laboratory AIDS Research Center in Jos (Nigeria), which is funded primarily by the Plateau state government. Abimiku, who is director of the center…. (and) her group isolated the strain of HIV prevalent in western Africa. Funding from the Bill and Melinda Gates Foundation has helped her expand her efforts in Nigeria.

Collaboration between emigrant scientists and institutions in their home countries is becoming more common and more extensive in scope. Rather than simple exchange visits, ambitious efforts at institution building in both private and public sectors are fueled by the contributions of emigrants and their descendents.

Conclusion

The debate about the relationship between migration and development goes far beyond the trade-offs between remittances and the brain drain. Diasporas have more to offer their countries of origin than remittances; in the long run, their skills, investments, and social networks may have more important effects.

Governments and other public and private institutions may help create a framework in which the positive aspects of the migration-development relationship can be strengthened and the negative ones reduced in impact. What is clear is that policy, to be effective, needs to be based on evidence, and that the evidence base for the links between migration and development is still very weak. Public and private institutions will be well advised to make the coming years a period of analysis, data-gathering, experimentation, and evaluation.

Although migration is an intrinsic part of human behavior, from the very origin of our species, many people argue that, today, migration is different from the movements of the past. In at least one way, this is true. One of the distinctive characteristics of international migration today is that it does not necessarily represent so dramatic a break with the home country as it did before the second half of the 20th century.

The advent of the jet plane and the communications satellite have put long-distance transportation and communication within the reach of even relatively poor people. Cheap flights, telephone calls, and e-mail allow international migrants to maintain ties with the families and communities they left behind. Scholars now study the growth of "transnational communities" as social spaces uniting two or more countries, where migrants may establish themselves in a new country without leaving the old one behind.

The dense networks of interactions between countries of origin and migrant-receiving countries are a significant feature of international migration in our time, and give reason for some optimism that migration could become an ever more important engine of development.

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Luo, Yu-Ling and Wei-Jen Wang. "High-skill migration and Chinese Taipei's industrial development." In: OECD, International Mobility of the Highly Skilled. Paris: OECD, 2002.

Meyers, Deborah Waller. "Migrant Remittances to Latin America: Reviewing the Literature", paper commissioned by the Inter-American Dialogue and the Tomas Rivera Policy Institute. Washington DC, 1998.

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