Think Tank Promotes Immigration As Development Aid

Young women in Ghana. Seventy percent of respondents in a CIGI survey of Canadian immigrants from countries in Southern Africa said they remit money to relatives in their country of origin

The Centre for International Governance Innovation (CIGI), a think tank established by the founder of Canadian firm Research in Motion, Jim Balsillie, released a study this week that finds immigration source countries benefit from the migration of their skilled workers to the developed world due to the foreign remittance, investment and philanthropy that their emigrants give back.

The study proposes redefining immigrant communities as “diasporas”, to emphasize the links immigrants maintain with their countries of origin, and help dispel the belief that the emigration of skilled workers from a country is a “brain drain” or “poaching”, and instead frame migration as a development tool that helps immigrants, developed countries, and developing countries.

The researchers’ primary area of focus in the study was Canadian immigrants from Southern African Development Community (SADC) countries, and they found that 70 percent of survey respondents from these countries, with the exception of those from South Africa, reported remitting money back to their home country.

Over half of survey respondents had given serious consideration to moving back to their home country, despite rating Canada favourably, demonstrating the strong links they have to their countries of origin.

The study noted that global remittance, at US$440 billion in 2010, is three times more substantial than official development aid as a source of income for countries “and almost as large as foreign direct investment”.

The diaspora communities that had the highest rates of individuals providing foreign remittance were those from the Philippines (60 percent), Haiti (60 percent), Jamaica (50 percent), and Nigeria (47 percent). The communities with the lowest percentage providing foreign remittance were those from South Korea (5 percent), the United Kingdom (7 percent), France (9 percent), Iran (11 percent) and Iraq (15 percent).

Diasporas and foreign direct investment

Besides remittance, the study says diasporas benefit the developing world as sources of investment, with a recent OECD study finding a one percent increase in the size of a diaspora population leads to a 0.1-0.25 percent increase in foreign direct investment in the country they originate from.

The researchers also found that nearly half of survey respondents in Canada’s SADC diaspora had engaged in economic activity in their country of origin since migrating to Canada, including 25 percent who had exported Canadian goods to the country and 11 percent who had invested in a business there.

Combined with studies estimating that 70 percent of China’s and 26 percent of India’s foreign direct investment during particular time frames originated from their respective diasporas, the researchers conclude that immigration could potentially have a major impact on foreign investment into the developing world.

Seeing immigration in light of the economic benefit it provides to its source countries can dramatically change the debate on the immigration of skilled workers into Canada say the study authors, by leading to immigration being linked with Canada’s official development policy, while shedding it of its negative image in the developed world as a zero sum “brain drain”. (This story was first broken by Postmedia News)

Immigration Causes Canada to Have Highest Per Capita Remittance Rate in the World

A money transfer office in New Jersey used by immigrants to send money to family overseas

According to an article published on Tuesday in Maclean’s, a Canadian weekly news magazine, Canada leads the world in per capita outgoing remittance, as a consequence of its proportionally large and well-skilled immigrant population.

In 2012 an estimated $23.4 billion was sent overseas, according to new World Bank figures which track remittances. On a per capita basis that’s double what flows out of the United States or the United Kingdom. India was among the countries receiving the largest chunk of that money, while China and the Philippines were other top recipients.

Globally, Canada is behind only Australia in its per capita immigration rate, and its highly selective immigration programs result in most of those immigrants being skilled workers. These factors combine to account for high remittance rates.

Remittance is now one of the largest sources of income for many developing countries. For example, foreign remittance accounts for 45 percent of the GDP of Tajikistan, a small country in Central Asia, making it the primary source of income for a significant portion of its population.

Due to the enormous volume of foreign remittance, estimated at $400 billion in 2012, many international development experts consider it an important type of foreign aid, which makes a substantial contribution to economic development in poorer countries.

Some have even argued that increasing immigration is a better way for the developed world to assist developing countries, by way of increasing remittance, than providing government aid.

The author of the Maclean’s article, Rosemary Westwood, suggests that to bolster the aid remittance provides to the less-developed world, the developed world should make it easier for its citizens to send money to family-members living abroad, and notes that Canada has made some effort to this end:

along with other G20 countries in 2011, [Canada] agreed to try to reduce remittance fees paid to banks and transfer firms to five per cent—they often reach as high as 24 per cent.

Remittance options limited but growing

There is still much room for improvement, as international remittance to some parts of the world continues to be slow and very expensive, with firms like Western Union charging a fee of up to 20% for transferring to more remote countries.

The advent of new financial services promises to reduce these fees however. Bank of America (BoA) for instance eliminated fees for remittance from the U.S. to Mexico in 2005, leaving only a 1.74 percent currency exchange fee for such transfers.

Competition and investment in new financial networks is spurring an increasing number of companies around the world to offer lower priced remittance services like BoA, leading to remittance becoming more cost-effective and practical for immigrants and migrant workers.

As financial friction is reduced and immigrant populations increase, it’s likely that remittance flows will only grow larger and play an increasingly significant role in developmental economics.