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Worker Remittances and Poverty in the Arab World
The Arab world has one of the highest proportions of migrant to local workers in the world, with over 32 million migrant workers in the Arab states in 2015 alone. In addition, the region has one of the largest diasporas in the world. This means that many skilled workers are emigrating to wealthier countries and sending money home via remittances. But what do remittances in the Arab World mean for the region and its inhabitants?

Brain Drain vs. Gain

In Lebanon and Jordan, unskilled labor is provided by growing numbers of refugees and foreign workers, totaling over five million in 2015. However, as more foreign workers enter the country, growing numbers of high-skilled Lebanese and Jordanian nationals are emigrating. This often occurs when opportunities are limited, when unemployment is high and economic growth slows. The phenomenon is dubbed ‘brain drain’ as opposed to ‘brain gain’, whereby an increasing stock of human capital boosts economies. A drain occurs while poor countries lose their most high-skilled workers and wealthier countries in turn gain these educated professionals.

Remittances in the Arab World

These expatriates commonly work to improve their own living situations while also helping to support their friends and families. This is where remittances come into play. As defined by the Migration Data Portal, remittances are financial or in-kind transfers made by migrants to friends and relatives in their communities of origin. Remittances often exceed official development aid.  They are also frequently more effective in alleviating poverty. In 2014 alone, the Arab states remitted more than $109 billion, largely from the United States followed by Saudi Arabia and the United Arab Emirates.

There is no denying that remittances can be a strong driving force for the socioeconomic stability of many Arab countries. But not all the influences are positive. Some experts argue that remittances can actually hurt the development of recipient countries. Their arguments cite potential negative effects of labor mobility and over-reliance on remittances. They emphasize that this can create dependency which undermines recipients’ incentive to find work. All this means an overall slowing of economic growth and a perpetuation of current socioeconomic status.

The Force of the Diaspora

The link between remittances in the Arab world and poverty is clear. Brain drain perpetuates and high amounts of remittance inflow and outflow persist if living conditions remain unchanged. Policymakers are therefore focusing efforts on enticing emigrants to return to their countries of origin. By strengthening ties with migrant networks, and implementing strategies like entrepreneurial start-up incentives and talent plans, the initial negative effects of brain drain could be curbed.

Overall, though brain drain and remittances can seem to hurt development in the short-term, if policies can draw high-skilled workers back, contributions to long-term economic development can erase these negative aspects altogether. Young populations that have emigrated to more developed countries acquire education and valuable experience that is essential to promote entrepreneurship in their home countries. Moreover, their experiences in advanced democracies can bolster their contribution to improved governance in their countries of origin. The Arab world’s greatest untapped potential is its diaspora, and it could be the key to a more prosperous future, if only it can be harnessed.

Natalie Marie Abdou
Photo: Flickr

Tongan Emigrants
Tonga is an archipelago in the South Pacific and the last surviving Polynesian kingdom. While isolation, limited markets, frequent earthquakes and cyclones pose a threat to native Tongans, emigration has had a positive economic impact both on Tongan emigrants and native Tongans. Here are nine facts about Tongan emigrants you should know:

  1. Tonga has retained much of its heritage despite 70 years of British colonial rule. The country gained independence and became a member of the British Commonwealth in 1970. Immigration patterns have helped maintain Tongan culture overseas: Emigrants have brought their families abroad, resulting in high concentrations of Tongans in cities like Auckland, New Zealand or Oahu, Hawaii where Tongan language and customs are preserved.
  2. One of the first motivations for Tongans to emigrate was population growth. In 1976, Tonga’s population tripled what it had been in the 1930s. The country’s relatively little land combined with a potential food shortage and greater educational opportunity abroad drove most Tongan emigrants to New Zealand, Australia and the U.S.
  3. Many early Tongan emigrants converted to Mormonism. The Church of Latter Day Saints conducted extensive missionary efforts in Tonga, and converts were offered free plane tickets to the U.S. This led to the creation of one of the first Tongan-American communities in Salt Lake City, Utah.
  4. Today, half of roughly 216,000 Tongans live abroad.
  5. Thirty percent of Tonga’s GDP comes from remittances, or sums of money sent from Tongans abroad to their families at home. Remittances come in the form of cash as well as material goods such as appliances and clothing. They are essential to the Tongan economy as Tonga has few exports, there are few salaried jobs available to young adults and unemployment is common in rural areas.
  6. However, remittances do have their drawbacks—money flowing into the country has caused a spike in material consumption, which has in turn caused inflation.
  7. Even Tonga’s tourism industry is bolstered by Tongan emigrants. Large families who have moved away visit Tonga frequently and support the country’s economy by spending money at local businesses.
  8. The longevity of remittances as the basis of Tonga’s economy currently lies in doubt. As more Tongans are born abroad, some fear that young Tongans’ connections to their home country could be weaker and that remittances could diminish.
  9. Another factor that contributes to economic instability in Tonga is the common occurrence of natural disasters. Tonga is part of the “Ring of Fire,” an area prone to earthquakes and volcanic eruptions near the basin of the Pacific Ocean. In addition, Tonga’s tropical cyclone season takes place November through April, though cyclones can occur at any point during the year. The variety and frequency of natural disasters in Tonga could threaten Tonga’s agricultural export infrastructure.

While Tonga’s economy faces some challenges, the Tongan population has been steadily increasing for decades. Notably, the rate of population increase spiked from 0.35 percent in 2013 to 0.82 percent in 2017. Tongans born abroad will have complex and varied relationships to their native country as time goes on, but the fact their numbers are increasing suggests that Tonga will be able to count on its emigrants for remittances for years to come.

Caroline Meyers
Photo: Flickr

How_Do_Remittances_Help_Poor_Communities
Immigrants come to work in the U.S. from around the world, particularly from Latin America and the Caribbean. A lot of foreign workers send money back to their families in their home countries and these remittances play an important role in alleviating poverty and helping poor communities develop.

The economies of developing countries in the western hemisphere are incredibly dependent on these remittance flows. Remittances to Haiti account for 25 percent of the country’s GDP. Remittances to Honduras account for nearly 20 percent and remittances to El Salvador account for more than 15 percent of GDP. Remittances to Guyana and Nicaragua also account for more than 15 percent of GDP.

These remittance flows serve as the primary source of income for many poor families in the region. They allow them to buy basic necessities such as food and clothing. Many families use the remittances to invest and better their lives. They use them to build a new house or to expand their business or start a new one. In many poor communities in Mexico, Central America and the Caribbean, the entire economy depends on these remittance flows. Remittances are used to finance all local investment and construction in many villages.

Around $60 billion worth of remittances are sent back to Latin America every year. More than one-fifth, around $12 billion, goes to Central America. This is four times more than the amount of development aid provided by the World Bank and foreign donors. It’s also three times more than the total amount of foreign direct investment in the region.

Since the economies of so many countries in the region depend so heavily on remittances, they are very intertwined with the U.S. economy. During the recession, the economic downturn spread through Central America, the Caribbean and parts of Mexico as remittance flows decreased. This had a major impact and resulted in several years of slow growth for many countries in Central America. Since the U.S. economy has recovered, remittance flows have increased and economies in the region have started growing again.

This highlights the importance that immigration plays in poverty reduction. These remittance flows create new jobs, infrastructure projects and opportunities for business expansion that are helping poor communities pull themselves out of poverty. This shows that a more open and structured immigration policy in the U.S. could potentially have a huge impact in the fight against global poverty.

– Matt Lesso 

Sources: The Wall Street Journal, The World Bank, Americas Quarterly, Lonely Planet Guatemala
Photo: Flickr

africa-remittances
Every day, people make the difficult decision to travel across the globe in search of better opportunities for their families and for themselves. They risk deportation, social stigma and alienation, and work in areas that native-born citizens would scorn.

More than 230 million people live outside of their country of birth, many of whom send part of their income to relatives and friends living in their home countries. Known as remittances, these cash flows accounted for an estimated $404 billion sent to developing countries in 2013, equivalent to more than three times the size of official development assistance.

This process is generally viewed as favorable to all parties involved, including the world economy which benefits from the exchange of ideas and optimization of worker productivity. However, a recent report by the Overseas Development Institute (ODI) reveals that not all overseas workers benefit equally from current remittance practices.

African immigrants living in the European Union and United States are typically charged 12 percent for each $200 money wire, nearly twice as much as the global average. Equivalent to $1.8 billion annually, ODI reports the elimination of this super tax could pay for the education of approximately 14 million sub-Saharan African primary school children, improved sanitation for 8 million, or clean water for 21 million.

Furthermore, these remittances account for 2 percent of the region’s GDP, or $32 billion. With international aid to the region expected to stagnate in the coming years, lowering the wire charges down to the G8 and G20’s pledge of 5 percent would increase the overall flow of transfers and a greater proportion of the transfer would reach the intended beneficiaries.

Factors such as Africa’s poor infrastructure are often blamed for the high cost of transfer rates. However, organizations such as the ODI argue that “in an age of mobile banking, internet transfers and rapid technological innovation, no region should be paying charges at the levels reported for Africa.’

In a realm of cryptocurrency, where Bitcoin may be a viable alternative to the vast surcharges accrued by African migrant money wires, having such a large discrepancy between overseas remittances seems more than archaic. Instead of blaming undeveloped aspects of Africa as the reason for these high percentage rates, companies should be investing in innovative techniques to bring African migrants’ remittance rates down to the rest of the global standard.

– Emily Bajet

Sources: ODI, World Bank, Aljazeera
Photo: The World Bank

aid_opt
Millions of Africans live in migrant communities around the world, and a large number of these regularly send money to family back home. In 2010, the total amount of these remittances topped $50 billion – and possibly up to three times that, as much of the money is sent informally. For comparison, official development assistance that year was $43 billion, according to the World Bank. There is a difference too in the manner of aid. Because remittances are sent directly to family members, they are targeted and aimed at specific needs, be they schooling, or essentials like food and medicine. A recent study showed that nearly half of the population of Somalia, among many other countries, is dependent on money sent from abroad and that the total amount of remittances sent annually reaches $350 billion.

In some ways, money sent directly to families in developing countries can be better spent than official international assistance, as there is no bureaucracy to go through and people can address their needs directly. However, this does not allow for infrastructural development and other government driven projects. And if the income of many people is generated abroad, then local governments receive no benefit from taxation. Therefore, international aid is still important as a facilitator of broader governmental programs in conjunction with the individually distributed remittances.

– David M Wilson
Sources: The Economist, BBC
Photo: Zehabesha