THE NUMBERS: Remittances as share of GDP* –
|West Bank & Gaza||20.1%|
* World Bank estimates for 2013 when available, otherwise 2012.
WHAT THEY MEAN:
These are the year’s busiest days for small banks and wire services in Salvadoran-American communities – Maryland’s Wheaton and Langley Park, LA’s Pico Union, Houston’s Gulfton, New Jersey’s Elizabeth – as Christmas money pours into the north end of the wire and begins to flow south. According to the World Bank, Salvadoran-Americans will send about $4.3 billion in “remittances” to families and relatives this year (a record total, averaging $2,200 per person, from a population whose median income is $20,000), with about a sixth of the money arriving in the weeks before Christmas.
The Salvadoran wires offer a miniature picture of the remittance world. Remittances are small, usually counted in tens or hundreds of dollars rather than millions or billions. But when combined they are very large – again according to the World Bank, the world’s 213 million immigrants will send $582 billion in remittances home in 2014, including $435 billion to low- and middle-income countries. This is about 0.5 percent of global income, or alternatively $200 per immigrant per month. Though the largest amounts of money flow to big countries – $71 billion to India, $64 billion to China, $28 billion to the Philippines, $24 billion to Mexico –the countries most reliant on remittances are (a) places with geographic challenges, in particular small island states and land-locked countries such as Samoa, Jamaica, Nepal, and Lesotho; and (b) countries in regions troubled by violence, such as Central America, the Middle East, and eastern Europe. Comparing remittances with foreign aid and business investment provides a wider-lens perspective on their significance in the global economy:
1. Governments and Foreign Aid: The OECD’s annual tally of foreign aid finds its 31 members sending $138 billion in development aid, emergency relief, technical assistance and other aid programs in 2013. As the OECD observes, this aid total is “the highest level ever recorded, despite continued pressures on budgets in OECD countries since the global economic crisis.” Aid programs outside the OECD add more: $5 billion for the UAE, $3.2 billion for Turkey, $1 billion for Taiwan, uncertain totals for China and Saudi Arabia, smaller levels for ASEAN members. Overall, then, remittance flows are likely about three times the value of all foreign aid programs combined.
2. Businesses and Foreign Direct Investment: UNCTAD’s annual count of private direct investment flows finds the world’s multinational businesses investing $778 billion to acquire companies, set up sales offices, build plants and labs, etc., in developing countries. This figure is actually too high, since UNCTAD’s definition of “developing country” quirkily includes Hong Kong, Singapore, Taiwan, Korea, Saudi Arabia, and the Caribbean tax havens. Taking these high-income places out, FDI flows to middle- and lower-income countries come to $560 billion, with the highest figures going to Brazil, China, and a few other big countries near the top of the scale. This makes remittances roughly equal to business direct investment.
Nationwide, at the south end of the wire, remittances account for a sixth of Salvadoran GDP; home by home, rural Salvadoran families who receive $100 per month or more in remittances are twice likely as other families to keep their children in school. Other countries differ in detail, but not in the basic effects.
Which raises a question: Who changes the world? Governments, intellectuals, entrepreneurs, NGOs and charities, scientists, and other influential types doubtless do their part. But the populist force of tens of millions of blue-collar and services workers – expatriate Filipina nurses, Indonesian maids in Hong Kong, Haitian restaurant-workers in Miami, West African taxi drivers in Paris, Thai cooks and Lebanese accountants, DC’s Salvadoran construction-workers – appears to be their match.
The World Bank’s remittances page has figures by region and country for 2014: http://www.worldbank.org/en/news/press-release/2014/10/06/remittances-developing-countries-five-percent-conflict-related-migration-all-time-high-wb-report
Countries & regions –
The Salvadoran Embassy: http://www.elsalvador.org/
And the Silver Spring Gazette (2010) on immigrant life, remittance flows during the financial crisis, and cross-country links and stresses in suburban Maryland: http://ww2.gazette.net/fracturedpipeline/
A look at remittance flows to the Pacific Islands: http://www.cgap.org/blog/what-next-remittances-and-money-transfers-pacific
For comparison –
The OECD’s Development Assistance Council page details $138 billion in aid for 2013: http://www.oecd.org/newsroom/aid-to-developing-countries-rebounds-in-2013-to-reach-an-all-time-high.htm
The U.S. Agency for International Development’s data-book has figures by country, project, and topic: http://gbk.eads.usaidallnet.gov/
And UNCTAD’s 2014 World Investment Report: http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=937
And a bit of data on cost –
A separate World Bank data-base offers a quick look into the financial-services world of blue-collar immigrants. As a point of reference: American money-management firms charge fees roughly of 0.5 percent to 1.5 percent for managing a $200,000 retirement account. This noted:
1. Most costly: The world’s most expensive remittance services are intra-African wires: according to the World Bank’s figures for the autumn of 2014, a Malawi miner sending $200 home will lose 20.5% of his money, or $41, to banking and wire fees.
2. Most efficient: The cheapest remittances are wires from Singapore. A Thai cook at a hotel will lose only 1.06% of her $200, or $2.12 – roughly speaking, treatment comparable to American money-management firm fees for middle-class clients.
3. United States: America’s average remittance fees are about 6.4 percent; rates for El Salvador are lower, at about 4.4 percent, meaning that this week’s $200 Christmas wires will cost about $8.29. Not bad by world standards; still much more costly than high-dollar investment management. The database: http://remittanceprices.worldbank.org/