Devesh Kapur - UNCTAD

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT

G-24 Discussion Paper Series

UNITED NATIONS

277*190

Remittances: The New Development Mantra?

Devesh Kapur

No. 29, April 2004

G-24 Discussion Paper Series

Research papers for the Intergovernmental Group of Twenty-Fouron International Monetary Affairs

UNITED NATIONSNew York and Geneva, April 2004

UNITED NATIONS CONFERENCEON TRADE AND DEVELOPMENT

INTERGOVERNMENTALGROUP OF TWENTY-FOUR

Note

Symbols of United Nations documents are composed of capitalletters combined with figures. Mention of such a symbol indicates areference to a United Nations document.

*

* *

The views expressed in this Series are those of the authors anddo not necessarily reflect the views of the UNCTAD secretariat. Thedesignations employed and the presentation of the material do notimply the expression of any opinion whatsoever on the part of theSecretariat of the United Nations concerning the legal status of anycountry, territory, city or area, or of its authorities, or concerning thedelimitation of its frontiers or boundaries.

*

* *

Material in this publication may be freely quoted; acknowl-edgement, however, is requested (including reference to the documentnumber). It would be appreciated if a copy of the publicationcontaining the quotation were sent to the Publications Assistant,Division on Globalization and Development Strategies, UNCTAD,Palais des Nations, CH-1211 Geneva 10.

UNITED NATIONS PUBLICATION

UNCTAD/GDS/MDPB/G24/2004/5

Copyright © United Nations, 2004All rights reserved

iiiRemittances: The New Development Mantra?

PREFACE

The G-24 Discussion Paper Series is a collection of research papers preparedunder the UNCTAD Project of Technical Support to the Intergovernmental Group ofTwenty-Four on International Monetary Affairs (G-24). The G-24 was established in1971 with a view to increasing the analytical capacity and the negotiating strength ofthe developing countries in discussions and negotiations in the international financialinstitutions. The G-24 is the only formal developing-country grouping within the IMFand the World Bank. Its meetings are open to all developing countries.

The G-24 Project, which is administered by UNCTAD�s Division on Globalizationand Development Strategies, aims at enhancing the understanding of policy makers indeveloping countries of the complex issues in the international monetary and financialsystem, and at raising awareness outside developing countries of the need to introducea development dimension into the discussion of international financial and institutionalreform.

The research papers are discussed among experts and policy makers at the meetingsof the G-24 Technical Group, and provide inputs to the meetings of the G-24 Ministersand Deputies in their preparations for negotiations and discussions in the framework ofthe IMF�s International Monetary and Financial Committee (formerly Interim Committee)and the Joint IMF/IBRD Development Committee, as well as in other forums.

The Project of Technical Support to the G-24 receives generous financial supportfrom the International Development Research Centre of Canada and contributions fromthe countries participating in the meetings of the G-24.

REMITTANCES: THE NEWDEVELOPMENT MANTRA?

Devesh Kapur

Harvard Universityand

Center for Global Development

G-24 Discussion Paper No. 29

April 2004

viiRemittances: The New Development Mantra?

Abstract

Remittances have emerged as an important source of external development finance fordeveloping countries in recent years. This paper examines the causes and implications ofremittance flows. It first highlights the severe limitations in remittance data, in sharp contrastto other sources of external finance. It then examines the key trends in remittance flows, andtheir importance relative to other sources of external finance. The paper subsequently analysesthe many complex economic and political effects of remittances. It highlights the fact thatremittances are the most stable source of external finance and play a critical social insurancerole in many countries afflicted by economic and political crises. While remittances are generallypro-poor, their effects are greatest on transient poverty. However, the long-term effects onstructural poverty are less clear, principally because the consequences of remittances on long-term economic development are not well understood. The paper then concludes with some policyoptions. It suggests a role for an international organization to intermediate these flows to lowertransaction costs and increase transparency, which would both enhance these flows and maximizetheir benefits.

ixRemittances: The New Development Mantra?

Table of contents

Preface ............................................................................................................................................ iii

Abstract ........................................................................................................................................... vii

I. Introduction .............................................................................................................................. 1

II. Limitations of remittance data ............................................................................................... 1

III. Financial remittances: size, sources and destinations .......................................................... 3

IV. Why have remittances grown? ............................................................................................... 7

V. Effects of financial remittances .............................................................................................. 9A. Remittances as social insurance ........................................................................................ 10B. What is the problem? ......................................................................................................... 13C. Political effects .................................................................................................................. 14

VI. Policy options .......................................................................................................................... 16

VII. Conclusion: are remittances a new development paradigm or anotherdestabilizing force of globalization? ..................................................................................... 18

Notes ........................................................................................................................................... 19

References ........................................................................................................................................... 19

List of figures

1 Variation in remittance per foreign worker ............................................................................... 32a Financial flows to developing countries: net flows, 1990�2001 ............................................... 42b Financial flows of developing countries: net transfer, 1990�2001 ........................................... 4

3 Remittance inflows, 1990�2001 ................................................................................................ 64a Unweighted average of remittances as share of private consumption, unbalanced ................ 104b Unweighted average of remittances as share of private consumption, balanced .................... 10

5 25+ population with tertiary education.................................................................................... 12

List of tables

1 Remittance flows: percentage of cells for which no data is available ...................................... 22a Developing countries: net flows of external finance, 2001 ....................................................... 52b Developing countries: net transfers of external finance, 2001 .................................................. 5

3 Largest sources and recipients of remittances ........................................................................... 64 Some prominent source-destination dyads .............................................................................. 15

Box Informal Value Transfer Systems (IVTS) .................................................................................. 8

Page

I. Introduction

Remittances are emerging as an importantsource of external development finance. They havebeen growing in both absolute volume, as well asrelative to other sources of external finance. Perhapseven more important, they are the most stable sourceof external finance and are providing crucial socialinsurance in many countries afflicted by economicand political crises. But, as with all substantial ex-ternal resource flows, the effects of remittances arecomplex.

The paper examines this growing external re-source flows to developing countries. It firsthighlights the severe limitations in data, a sharp con-trast to other sources of external finance. It thenanalyses (based on this limited data), the key trendsin remittance flows. The paper then examines themany complex economic and political effects of re-mittances. It highlights that while the effects ofremittances are greatest on transient poverty, thelong-term effects on structural poverty are less clear,principally because the consequences for economicdevelopment in general are not well understood. Thepaper then suggests some policy options to enhancethese flows and maximize the benefits. Finally itconcludes with some suggestions for future work.

II. Limitations of remittance data

Remittances are financial resource flows aris-ing from the cross-border movement of nationals ofa country. The narrowest definition � �unrequitedtransfers� � refers primarily to money sent by mi-grants to family and friends on which there are noclaims by the sender, (unlike other financial flowssuch as debt or equity flows). In contrast to manyprevious analysis of remittances, data in this paperincludes two additional categories that are recordedseparately in a country�s balance-of-payments (BOP)statistics: �migrant transfers�, which arise from themigration (change of residence for at least a year)of individuals from one economy to another and areequal to the net worth of the migrants; and �com-pensation of employees�, which are funds send backby temporary workers (who work abroad for lessthan a year).1

This more encompassing definition is not with-out problems. The distinction between persons whoseearnings are classified as �compensation of employ-ees� and migrants who have become residents ofeconomies by virtue of being expected to live therefor a year or more is difficult in practice. Since �com-pensation of employees� includes contributions paidby employers, on behalf of employees, to social se-

REMITTANCES: THE NEWDEVELOPMENT MANTRA?

Devesh Kapur

2 G-24 Discussion Paper Series, No. 29

curity schemes or to private insurance or pensionfunds it overstates the resources transferred to thecountry of origin. On the other hand the data ex-cludes unrecorded and in-kind transfers, which arelikely to be substantial. It also excludes funds sentthrough the capital account by overseas residents,such as special savings accounts, which are thenwithdrawn in local currency.2

Considering their volumes and relative impor-tance, the quality of data on remittances is quite poor.The principal source of this data is the IMF�s Bal-ance of Payments (BOP). The most striking featureof a basic table of remittance inflows and outflowsby country and year, is the number of zeros � anindication of missing or unreported data in mostcases. Even considering only those countries with apopulation greater than a million, (since the abso-lute volume of remittances is likely to be modest forthe small countries), the lack of data is unusuallysevere even today (table 1). The IMF�s BOP data �which it gets from member countries � has manygaps in the matter of remittances. The most trou-bling gaps in data are in precisely the countries (likeAfghanistan, Haiti and Liberia), where economiccollapse has rendered remittances as a critical sourcefor household consumption and social insurance.Even countries like Cuba and Viet Nam show zeroremittance inflows while Hong Kong (China), Sin-gapore and Canada show zero or very little outflows,despite the large diasporas of the former and mi-grant workers in the latter. A majority of receivingcountries have incomplete data for several years overthe last two decades, making it difficult to do rigor-ous analysis. Different countries use different tech-niques to capture remittances, and it is unclear howcomparable the reported data are. Given that aconsiderable volume of remittances is transferredthrough unofficial channels, while those transferredthrough official channels incur high transaction costs,one might reasonably expect that reported remittanceoutflows (from the sending countries) would be con-siderably greater than reported remittance inflows.The figures actually show the opposite. Many coun-tries report sudden surges, which are inexplicableunder most plausible scenarios. At the same time,there are large variations in remittances per foreignworker across countries (see figure 1). High remit-tances from Belgium/Luxembourg and Switzerlandare a puzzle and could simply reflect the fact that allthree are banking centres and remittance outflowsmay simply be masking money laundering. Alterna-tively, they could be the result of tax arbitrage, with

multinational companies setting up offices in thesefinancial centres attracted by low tax rates. Data frommultilateral institutions also differ. Thus the Inter-American Development Bank�s Multilateral Invest-ment Fund, shows remittances to Latin American tobe $32 billion in 2002 and total remittances to de-veloping countries at $103 billion, which is substan-tially greater than those reported by the World Bank($25 billion and $80 billion respectively).

The poor quality of remittance data is in starkcontrast to data on international financial flows moregenerally, where there has been a tremendous im-provement in the quality of data over recent decades.Concepts have been systematically refined, data istimely, coverage of countries and issues has bothbroadened and deepened. The World Bank�s GlobalDevelopment Finance (formerly World Debt Tables),the IMF�s International Financial Statistics, and theBIS and the OECD are the standard sources of dataon international financial flows. The reasons are nottoo difficult to understand. The institutional chan-nels through which financial capital flows fromNorth to South have a strong interest in maintaininggood data. Creditors are (relatively) fewer in number,and have both greater capabilities as well as greaterpower to ensure that data mandates are adhered to.Moreover, poor data on international financial flowshas been implicated in numerous financial crises,be it the Latin American debt crisis or the variousfinancial crises of the 1990s. Since these crises haverepercussions for global financial stability, mainlythe industrialized countries, each systemic crisis hasresulted in an improvement in data quality. In con-trast the individual sources of remittances are toonumerous and the recipient countries � LDCs � lackthe capabilities and perhaps even the incentives to

Table 1

REMITTANCE FLOWS: PERCENTAGE OFCELLS FOR WHICH NO DATA IS AVAILABLE

1970� 1980� 1990� 2000�1979 1989 1999 2001

Inflows 77 53 39 34Outflows 77 52 43 45

Note: A cell is a country-year data point.

3Remittances: The New Development Mantra?

ensure better data. The data used in the rest of thepaper should be interpreted keeping in mind severelimitations with regard to its quality.

III. Financial remittances: size, sourcesand destinations

Why is there currently so much excitement re-garding remittances? There are five features thatmerit attention.

First, remittances are an increasingly signifi-cant source of external financing for developingcountries.3 Over the past decade they have emergedas the second largest source of net financial flows todeveloping countries (figures 2a and 2b). Theirgrowth is in contrast to net official flows (aid plusdebt), which have stagnated if not declined. The to-tal volume of remittances to developing countries in

2001 was $72.3 billion, nearly one and half timesnet ODA in that year ($52 billion) and almost halfnet private flows (FDI plus debt flows) of nearly$153 billion (table 2a). But if instead one examinesthe figures for net transfers � which is the bottomline after deducting all payments including profit re-patriation, interest payments and remittance outflows(since most developing countries have some outflowsas well) � then the significance of remittances fordeveloping countries is much more apparent. Re-mittance flows were ten times net transfers from pri-vate sources and double that from official sources in2001 (table 2b). While this reflects in part the largestock resulting from flows of private and official fi-nance in previous years, it is precisely the �unre-quited� nature of remittances that makes this bigdifference � all other sources have a correspondingclaim on the receiving country, which can be sub-stantial reflecting the stock of FDI and debt. Thewelfare and growth effects from these differentsources are in all likelihood quite different. How-

Figure 1

VARIATION IN REMITTANCE PER FOREIGN WORKER

Source: Remittance data: World Bank, Global Development Finance, 2003, Analysis and Statistical Appendix: 160, fig.7.5;OECD, Trends in International Migration, SOPEMI 2002: 297, Stocks of foreign and foreign-born labour force, tableA.2.3, all figures are of 2000 except for Spain and Belgium (1999) and Netherlands (1998).

0.0

2.5

5.0

7.5

10.0

12.5

15.0

Czech

Rep

ublic

Denmark

France

German

yIta

lyJa

pan

Belgium

/Luxe

mbourg

Netherl

ands

Norway

Spain

Switzerl

and

United

Kingdo

m

United

States

Rem

ittan

ce p

er fo

reig

n w

orke

r (10

00s

of $

)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Rem

ittan

ce ($

billi

ons)

Remittance per foreign worker (1000s of $) Remittance ($ billions)


ever, if one is interested in the financial bottom line,remittances were clearly the most important sourceof net foreign exchange flows to developing coun-tries in that year. For reasons discussed in the nextsection, the growing importance of remittances rela-tive to other sources of external finance is likely tocontinue. Aid levels have been declining in the 1990sand a more than modest upturn is unlikely. And pri-vate capital flows are unlikely to reach the euphoricpre-Asian crisis levels any time soon.

Which countries contribute most to remittanceoutflows and which are the principal recipients? Theten largest sources and recipients in the last decadeinclude both developed and developing countries(table 3). The United States, unsurprisingly, is thelargest source and four Middle-East countries (SaudiArabia, Israel, Kuwait and Oman) are among the tenlargest. Three G-7 members � Japan, the UnitedKingdom and Canada � do not make this list, thelatter two being especially surprising even whileseveral small countries, Belgium/Luxembourg andSwitzerland, do.4

The general impression is that remittances area phenomenon affecting poor countries. That is onlypartly true. Of the ten largest recipients of remit-tances in the last decade (1992�2001), seven wereOECD countries and two of the top five recipientswere G-5 countries (France and Germany). Of the$111 billion in total remittances in 2002, about three-fourths (or $80 billion) accrued to developingcountries. The share of developing countries hasranged from under half in the late 1980s to aboutthree-fourths in recent years. The largest ten recipi-ents have been quite stable over the decade (exceptthat Morocco has replaced Greece in recent years).While private in nature, remittance flows are lessconcentrated than private flows. Thus while the topten recipients of FDI had a share of 70 per cent ofFDI flows to LDCs in 2001, the share of the top tenrecipients of remittances was 59 per cent.

Second, the bulk of international remittancesdo not accrue to the poorest countries. Nearly halfof all remittances received by developing countriesflow to lower middle-income countries while theother half flows about equally to upper-middleincome and low income countries (figure 3). Remit-tances are benefiting some regions more than others,in particular Latin America (especially the Andeancountries, Central Asia and Mexico), South Asia, theMiddle East and Maghreb and some countries in East

Figure 2a

FINANCIAL FLOWS TO DEVELOPINGCOUNTRIES: NET FLOWS, 1990�2001

(Billions of dollars)

Figure 2b

FINANCIAL FLOWS OF DEVELOPINGCOUNTRIES: NET TRANSFER, 1990�2001


0

50

100

150

200

250

300

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

$ bi

llions

Private net resource flows

Gross remittance

Official net resource flows

-20

0

20

40

60

80

100

120

140

160

180

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

$ bi

llions

Net remittanceOfficial net transfers

Private net transfers


Asia (especially Philippines and Indonesia). The factthat sub-Saharan Africa receives the least amount ofreported remittances and (unlike trends in other re-gions) has shown virtually no growth in remittancesin the last five years, is a sobering indication thatthis source of finance is unlikely to be contributesignificantly in ameliorating the external financingproblems of the region.

The limited remittance inflows to Africa, re-confirms that geography does matter. There are largemigrations from African countries, but the civil strifein that region sends migrants across borders to otherimpoverished African countries rather than to richcountries. Geographical contiguousness to rich coun-tries is clearly important, especially for illegal mi-gration. This privileges Mexico and Central America

Table 2a

DEVELOPING COUNTRIES: NET FLOWS OF EXTERNAL FINANCE, 2001


Remittances/Total net flows

Region Private Official Remittances net flows (per cent)

East Asia 36.4 5.7 10.4 52.5 20East Europe and Central Asia 30.9 10.2 8.9 50.0 18Latin America 62.8 23.4 22.6 108.8 21Middle East and North Africa 8.3 2.0 13.1 23.4 56South Asia 2.9 6.0 14.9 23.8 63Sub-Saharan Africa 11.6 10.2 2.4 24.2 10

Source: World Bank, Global Development Finance, 2003.Note: Official flow includes lending from multilateral banks, IMF and bilateral loans and grants. Private flows includes equity

(FDI and portfolio flows), and both long- and short-term debt flows.

Table 2b

DEVELOPING COUNTRIES: NET TRANSFERS OF EXTERNAL FINANCE, 2001


Total WR/net flowsRegion Private Official Remittances net flows (per cent)

East Asia -9.1 -2.7 10.3 -1.5 695East Europe and Central Asia 10.9 3.0 6.7 20.6 33Latin America 5.8 14.6 20.9 41.3 51Middle East and North Africa -5.4 -1.6 -3.6 -10.6 34South Asia -0.5 3.6 14.8 17.9 83Sub-Saharan Africa 3.5 8.6 1.3 13.4 9

Source: World Bank, Global Development Finance, 2003.Note: Official transfers includes lending from multilateral banks, IMF and bilateral loans and grants. Private transfers includes

equity (FDI and portfolio flows), and both long- and short-term debt flows.


and the Maghreb. The lack of geographical proxim-ity is less of a hindrance to nationals of Latin Ameri-can countries who have access to EU labour marketsbecause of the prior history of migration from thelatter to the former. With the Middle East likely towitness increasing curbs on net migration, SouthAsia, which receives a large volume of remittancesfrom that region, will witness a decline unless com-pensated by migration to other regions.

The two countries with largest global migra-tions, China and India, report substantial differencesin remittances. Surprisingly, China receives com-paratively little remittances � about one billiondollars annually in the last decade (1992�2001),about one-eighth of India�s receipts ($7.7 billionannually over the same period). These large differ-ences are probably less the result of fundamentaldifferences in the characteristics, size or vintage ofoversize migrants from the two countries, and morethe result of differences in incentives (especially taxpolicies) and economic opportunities in the twocountries. In contrast to the remittances figures, thefigures for diaspora FDI in the two countries are thereverse, with overseas Chinese investing betweenten and twenty times more than overseas Indians(the figures vary considerably depending on the sta-tus of investments from Hong Kong (China) andassumptions regarding the magnitude of round trip-ping). However, a large fraction of FDI in China �about a quarter � is invested in real estate (Tsengand Zebregs, 2002). Since this type of investment iscommon to the deployment of remittances as well,it reinforces the suspicion that there is a not incon-siderable statistical overlap between remittances andFDI. If the two (i.e. remittances and diaspora FDI)are combined, financial inflows from emigrants fromthe two countries are more comparable � with in-flows into China being between 2�4 times that intoIndia.

Third, remittances have emerged as the leastunstable source of financial flows for countries af-flicted by �shocks� and constitute the single mostimportant source of insurance for many poor coun-tries. Remittance flows are much more stable thanprivate capital flows, which exhibit strong herd likebehaviour, amplifying the boom-bust cycles in manyemerging markets (figures 2a and 2b). Consequently,remittances can be viewed as a self-insurance mecha-nism for developing countries whereby a country�soverseas migrants help in diversifying its sources ofexternal finance. This role is strengthened by the low

Table 3

LARGEST SOURCES AND RECIPIENTSOF REMITTANCES

(Annual average, 1992�2001)

Source Recipientcountry $ billion country $ billion

United States 20.7 India 7.7Saudi Arabia 15.4 France 6.9Germany 8.8 Mexico 5.7Switzerland 8.1 Philippines 5.0France 4.9 Germany 4.1Italy 2.2 Portugal 3.8Israel 2.1 Egypt 3.8Belgium/Luxembourg 1.8 Turkey 3.7Kuwait 1.4 Spain 3.0Oman 1.4 Greece 2.7

Source: IMF, BOP statistics.

Figure 3

REMITTANCE INFLOWS, 1990�2001


Source: World Bank, Global Development Finance, various years.

0

5

10

15

20

25

30

35

40

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

$ bi

llions Low-income countries

Lower middle-income countries

Upper middle-income countries


risk correlation between the country of residence andthe country of origin and is especially important forpoor countries since (much like poor people) theyfind it difficult to get insurance. It is therefore notsurprising that remittances have emerged as a criti-cal insurance mechanism for residents of countriesafflicted by economic and political crisis (Lebanonduring its civil war, Haiti), those hit by natural dis-asters (such as Central America in the aftermath ofHurricane Mitch), or pressured by international sanc-tions (such as Cuba), or where state authority hascrumbled (so called �failed� states such as Somalia).

For example, in the late 1990s Ecuador experi-ence its worst economic crisis in the century. Theresulting political chaos and social upheaval andeconomic collapse led to the largest out migrationin the country�s history (particularly to Spain). Injust two years, more than quarter million Ecuado-rian left the country. Remittances jumped from$643 million in 1997 to more than $1.4 billion in2001 (10 per cent of GDP), emerging as the secondlargest source of foreign exchange after petroleumexports (Jokisch and Pribilsky, 2002). Cuba�s atti-tude towards remittances changed at the onset ofCuba�s economic growth and collapse occurred inthe aftermath of the collapse of the Soviet Union inthe early 1990s leaving the country without any geo-political benefactor to prop up its economy. Not onlydid overseas assistance dry up, but also the outputand prices of its principal export (sugar) collapsedin global markets even as the United States tried totighten its embargo of the island. Until then the coun-try had curbed overseas remittances from its richdiaspora, which was (in large part) deeply hostile tothe regime. For the first time the Cuban Govern-ment took steps to attract remittances offering a slewof incentives to residents receiving dollars. By 1995remittances were approximately $530 million (fromjust $50 million in 1990). At a time when foreignaid and FDI combined were only about $100 mil-lion and exports just $1.1 billion (Eckstein, 2003)and an acute foreign exchange crisis threatened totake the country down the route of the DemocraticPeople�s Republic of Korea, remittances provided acrucial lifeline.

Fourth, for the many small countries � espe-cially island economies, be it in the Caribbean orthe Pacific � remittances, along with foreign aid andtourism, have become the only viable sources of in-come. For a small island economy like Cape Verde,around two-thirds of families receive money from

abroad. For many families, remittances offer the onlysource of income, not surprising for a country wherein 2000 only 435,000 people lived on the island andtwice as many abroad (IMF and IDA, 2002). Suchhigh levels of migration and remittances might wellindicate that these countries are simply unviable eco-nomic entities, but given political realities they willcontinue to exist � surviving to a considerable ex-tent on the labours of their overseas population.

Fifth, as with the euphoria with private capitalflows in the mid-1990s, the attractiveness of remit-tances is in part a reaction to previous faileddevelopment mantras. Development thinking hasbeen as prone to fads and fashions as private capitalflows are alleged to be. Remittances strike the rightcognitive chords. They fit in with a communitarian,�third way� approach and exemplify the principleof self-help. People from poor countries can justmigrate and send back money that not only helpstheir families, but their countries as well. Immigrants,rather than governments, then become the biggestprovider of �foreign aid�. The general feeling ap-pears to be that this �private� foreign aid is muchmore likely to go to people who really need it. Onthe sending side it does not require a costly govern-ment bureaucracy, and on the receiving side far lessof it is likely to be siphoned off into the pockets ofcorrupt government officials. It appears to be goodfor equity and for poverty and yet imposes few budg-etary costs. What could be better? Are these hopesvalid?

IV. Why have remittances grown?

What explains the growth of remittances in re-cent years? The most obvious factor is the steadygrowth of its underlying cause, namely migration,especially to rich countries. Even though legal an-nual flows of migrants have grown in fits and starts,illegal migration and the stock of emigrants has cer-tainly grown. The United Nations estimates thatroughly 175 million people were living outside theircountry of birth or citizenship in 2000, up from120 million in 1990 (United Nations PopulationDivision, 2002; Martin and Widgren, 2002). Ananalysis of the 2000 United States census revealsthat of the foreign population in the United States inthat year, nearly half (47 per cent) entered the coun-try in just the previous decade. Elsewhere, the foreignpopulation in 17 European economies tracked by


the OECD rose from 15.8 million to 21.7 million in1998 � an increase of 37.2 per cent (OECD, 2001).In the oil-exporting Gulf States, foreign workerscontinue to represent more than 50 per cent of thelabour force in all countries, and 70 per cent of thelabour force of 10 million in Saudi Arabia (Martinand Widgren, 2002).

The frequency and intensity of economic andfinancial crisis in many developing countries overthe past two decades has increased the need forsocial safety nets, amplifying the demand for remit-tances. Some of the reported increase in remittancesis in all likelihood a statistical artifact. For one, dataquality has improved (as evidenced by the decliningnumber of zeroes in table 1). Furthermore, changesin economic policies of many developing countries,especially with regard to foreign exchange controls,have sharply reduced the black market premium forforeign exchange. As a result, part of the increase inofficially recorded remittances reflects a shift in re-

mittances from informal to formal channels. Whereremittances continue to go through informal chan-nels, either because of foreign exchange controls incountries such as Myanmar and Zimbabwe, or be-cause of an absence of state machinery (as inAfghanistan), this problem persists.

There is, however, another less obvious factordriving the growth in remittances � a burgeoninginfrastructure that has helped ease the movement ofmoney across borders. For long the remittance busi-ness was dominated by money-transfer companieslike Western Union. In 2002 alone the company con-ducted almost $700 billion in transfers and paymentsworldwide through 68 million customer-to-customertransactions (and another 173 million customer-to-business transactions). In 1994 it had 24,000 agentsworldwide, but two-thirds were in North America.By mid-2003 this figures had increased nearly sevenfold (to 165,000), of which 70 per cent were outsidethe United States.

Box

INFORMAL VALUE TRANSFER SYSTEMS (IVTS)

Despite the growth of formal transfer mechanisms, substantial amounts of remittances continueto flow through informal (and sometimes underground) channels, outside the purview ofgovernment supervision and regulation. These transfer mechanisms go back centuries, particularlyin Asia. Examples include hawala and hundi (South Asia), fei ch�ien (China), Phoe kuan(Thailand), Hui (Viet Nam), casa de cambio (South America). IVTS systems flourish in countrieswith economic controls, political instability, and low levels of financial development. Usingrudimentary low cost technologies they rely more on trust than violence, riding on the socialcapital of ethnic groups. These systems transfer �at a minimum, tens of billions of dollars�globally, offering speed, easy access, low costs and anonymity.1 Basically the sender gives moneyto an IVTS agent (usually in an ethnic neighborhood) who calls or faxes instructions to hiscounterpart in the region where the money is to be sent. The counterpart makes the paymentwithin a few hours. Settlements are made either with a transfer in the opposite direction and/orperiodic wire transfers or through over(under) invoicing of cross-border trade.

These services transfer funds derived from both legitimate and illegitimate activities, rangingfrom corruption to tax evasion, drugs to terrorism, and funds deployed by intelligence agencies.However, there is more hype than evidence on the scale of the latter (Passas, 1999). Attempts byWestern governments to regulate IVTS activities have arisen in the context of anti- money-laundering measures and most recently terrorist financing.

1 Testimony of David Aufhauser, General Counsel, Department of the United States Treasury, before theSenate Judiciary Committee, 26 June 2003.


The exorbitant costs of remittances (about10�12 per cent of the estimated $25 billion trans-ferred from the United States) and the implied largeprofits, have led to new entrants. The most signifi-cant change has been in the strategies of majorcommercial banks, which had been slow to recog-nize that the remittance business was a potentialsource of significant new opportunities. Portuguesebanks had realized this in the early 1980s. They es-tablished branches in areas with concentrations ofemigrants (like France) and offered free transfer serv-ices along with arrangements with local agents todeliver at home. By the late 1990s deposits fromemigrants represented about 20 per cent of the totaldeposits in Portugal. In the Americas, the collapseof the Mexican banking system in the aftermath ofthe �Tequila� crisis in the mid-1990s, opened up theMexican banking sector to foreign direct investment.As major Spanish and United States banks beganbuying Mexican banks, remittances gradually movedto the center of their strategies. They began to buycomplementary United States assets as well as alli-ances with other banks to leverage the remittancebusiness.5 It soon became evident that users of re-mittance service could be drawn into become fullbanking customers � spearheading a large expan-sion of retail banking to two severely underservedgroups on both sides of the border. The banks havealso been surprised by the relative wealth of Mexi-can customers. The transfer business is alreadypaying dividends. Bank of America has found that33 per cent of its United States-Mexican remittancecustomers have opened a current account. Citigroupis using its transfer business to attract customers forother products � and one way to do is by loweringfees on transfers between Citigroup accounts in theUnited States and Mexico, and luring new custom-ers. Banks are now extending the products andtechnologies developed in the Mexico-United Statesremittance business to other Hispanic remittancemarkets both in the United States and in Spain aswell as the Spanish North Africa remittance market.

V. Effects of financial remittances

The effects of remittances are complex and area function of the characteristics of migrants and thehouseholds they leave behind, their motivations, andthe overall economic environment. Remittances area form of household transfers and its motivationsinclude altruism, as an implicit intra-family contrac-

tual arrangement or as an implicit family loan. Therelative importance of motives appears to vary withthe institutional setting (Foster and Rosenzweig, 2001).

Remittances finance consumption, land andhousing purchases and philanthropy; they are animportant source of social insurance in lower incomecountries; and they provide liquidity for small en-terprises (in the absence of well functioning creditmarkets) as well as capital investments � in equip-ment, land, wells and irrigation works and education� with longer-term implications for economic de-velopment.

However, at this point it is important to dispelone myth surrounding remittances � that remittancescompensate for the brain drain. It is often arguedthat while poor countries might loose the scare fac-tor that is critical for development (human capital),they gain another scarce factor, namely financialresources in the form of remittances. The two arenot substitutes. Although, as we shall note later,emigrants are positively selected, remittances are nota quid pro quo for the brain drain for several rea-sons. The real detrimental effects of the brain drainfor developing countries arise from the migration ofthe upper end of human capital distribution, com-prising of engineers, scientists, physicians, professorsetc. This scarce human capital is usually drawn fromthe upper decile of the income distribution ratherthan the middle. Although there are exceptions(e.g. temporary skilled migrants like the H1-B ITworkers in the United States), for the most part thesehouseholds are in less need of remittances, unlessthe country of origin undergoes a major crisis. In-deed if the brain drain is a response to politicalrepression or economic and political instability,rather than simply better economic opportunitiesabroad, human capital flight and financial capitalflight complement each other. Instead of one formof capital outflow being �compensated� by anothertype of capital inflow, the migration simply pre-cipitates the outflow of financial capital as well.Countries such as Afghanistan, Columbia, Ghana,Haiti, or Venezuela, as well as Cuba in the late 1950sand early 1960s, which have witnessed violent re-gime changes and civil wars are examples of thisphenomenon. This is not to say that the brain drainof professionals might not have other benefits forthe country of origin, such as business and commer-cial networks or investment flows and diasporaphilanthropy, but those affects are distinct from fi-nancial remittances.


0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

t-3 t-2 t-1 t t+1 t+2 t+3

Time from shock

Figure 4b

UNWEIGHTED AVERAGE OF REMITTANCESAS SHARE OF PRIVATE CONSUMPTION,

BALANCED (n=14)

Note: Includes Barbados 1988�94, Colombia 1981�97,Comoros 1985�91, Ghana 1983�89, Guinea-Bissau1988�94, India 1980�86, Jamaica 1992�98, Mauritania1989�95, Mexico 1991�97, Morocco 1989�95,Panama 1984�90, Trinidad and Tobago 1989�95,Tunisia 1989�95, and Turkey 1990�96.

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

n=10t-5

n=21t-4

n=30t-3

n=40t-2

n=57t-1

n=57t

n=57t+1

n=36t+2

n=25t+3

n=17t+4

n=11t+5

Time from shock

A. Remittances as social insurance

As pointed out earlier, remittances play a criti-cal insurance role � and this has significant impacton both poverty and equity. For people in �failedstates� remittances are critical for personal consump-tion. In Haiti, remittances were about 17 per cent ofGDP. In Somalia following the collapse of a formalgovernment in the early 1990s, remittances from theSomali diaspora based in the Gulf States, severalEuropean countries, the United States and Canada,became a critical survival resource for many Somalifamilies. In particular, remittances helped many ur-ban families cope during the harsh years of the 1990s.By the end of the decade with remittances between25 and 40 per cent of GDP (all figures are very ap-proximate), in some pockets, such as southernSomalia, these resources began to be invested inconstruction and commerce.6

A country that suffers a macroeconomic shockgenerally receives greater remittances. The manyrecent economic and financial crises have resultedin two simultaneous shocks that affect remittances:a positive income shock to the remitter because ofdevaluation and negative income shock to the remiteebecause of the economic downturn. Both predict anincrease in remittances (in domestic currency terms).We looked at countries that suffered an economicshock (defined as a decline in GDP by 2 per cent inyear �t�) and examined remittances relative to pri-vate consumption in the years preceding andfollowing the crisis. If the insurance hypothesis holdstrue we would expect the share of remittances inprivate consumption to increase. Due to the unavail-ability of consistent annual data on remittances forthe countries suffering a shock, we examined thisissue in both an unbalanced panel (figure 4a) and ina balanced panel (figure 4b). In the latter we haveanalysed data for a set of countries for which annualdata is available for three years preceding and fol-lowing a shock. In both cases there is a sharp increasein the ratio: remittances increase if a country suffersa macroeconomic shock.

Why does this matter? Its importance lies inthe emerging consensus that with globalization, fac-tor markets are of crucial importance for povertyalleviation. Households tend to be much more spe-cialized in income (or factor earnings such as land,labour or capital) than they are in consumption.Hence it is the source of income rather than the pat-tern of expenditure that affects the poor relative to

Figure 4a

UNWEIGHTED AVERAGE OF REMITTANCESAS SHARE OF PRIVATE CONSUMPTION,

UNBALANCED


the average household (Winters, 2000; Reimer,2002). Remittances provide social protection to poorhouseholds, which reduces vulnerability to shocks.Although the immediate impact of remittances is ontransient poverty, its long-term effects should not beunderestimated. For instance it is now recognizedthat transient poverty is a serious obstacle to humancapital investment. The impact on school attendanceof an income shock is consistently larger for daugh-ters than sons (Sawada, 2003). Thus even if remit-tances impact only on transient poverty, its effectson human capital investment, especially girls, couldbe quite substantial. But of course for these benefi-cial effects to occur the remittances should accrueto poor households in the first place, which in turndepends if the international migrants from that coun-try are drawn from such households in the first place.

The particular characteristics of who migrates� so called selection effects � are equally importantfor equity. While in both cases the eventual effectsare strongly mediated by labour market effects ofmigration, the distributional consequences are morecomplex given the uneven access to such flowsacross households, ethnic groups, communities andregions. Households that receive remittances rapidlyattain standards of living greater than those who donot have family members working abroad. House-holds with more diversified portfolios � both infinancial assets and human capital assets � will gainrelative to those with domestic portfolios in the eventof a domestic economic shock that results in a de-valuation and economic downturn. The incomestream from this overseas portfolio increases in do-mestic currency terms after a devaluation, therebyincreasing their income relative to lower incomegroups. If remittances flow to poorer householdsconcentrated in a particular region, it might reduceinequality within the region even while it widens itamong different regions.

Research in the Philippines shows that house-holds with overseas migrants have done substantiallybetter, following the Asian crisis, than those that hadno members abroad. This is to be expected sincemigration is a form of coinsurance and results infamilies having diversified portfolios. Indeed, evenwhere households have members who are migrantsabroad, those families above a certain income thresh-old are found to use remittances for investment (inthe Philippines case in human capital that wouldmake it easier to migrate abroad), while thosebelow this threshold use it to meet subsistence

consumption (Yang, 2003). This is particularly trueduring a crisis when households face substantialfinancial and economic stress and resultant pressureon consumption.

Migrants are rarely drawn randomly from thepopulation pool. Instead they are drawn selectivelyfrom specific communities � be it regional, ethnicor religious � as well as educational and incomelevels. These selection effects mediate betweenmigration, remittances and outcomes in the countryof origin, be it on poverty or equity. The averagelevel of education of immigrants is substantiallygreater than the average level in the country of ori-gin � often substantially so (figure 5). In the LatinAmerican case it has been shown that while onlyabout one-fifth of Latin Americans have completedhigh school or college, a little over half of the Latinoimmigrants in the United States have a secondaryeducation or better. Well-educated Latin Americansare at least two and a half times more likely to in theUnited States than home country population. In theiranalysis of Mexican migration to the United States,Chiquiar and Hanson (2002) find that Mexican im-migrants, while much less educated than UnitedStates natives, are on average more educated thanresidents of Mexico. If Mexican immigrants in theUnited States were paid as per prevailing wages forthose skills in Mexico, they would tend to occupythe middle and upper portions of Mexico�s wagedistribution. In contrast to earlier work that posits anegative-selection hypothesis (Borjas, 1987), thesefindings suggest that in terms of observable skillsthere is intermediate or positive selection of immi-grants from Mexico. The results also suggest thatmigration abroad may raise wage inequality inMexico.

The fact that migrants are not being drawn fromthe poorest households in their country of originmeans that while remittances are poor-friendly, theirdirect effects on the poorest groups may be limited.Instead the effects on structural poverty are likely tooccur through substantial indirect effects: the demandfor labour-intensive services (such as constructionworkers when remittances are used for home build-ing), and perhaps even redirecting government socialexpenditures from areas benefiting from remittancesto those that are not. Of course these results are likelyto be less representative of the many illegal immi-grants, who are much more likely to come frompoorer households. Large-scale illegal immigrationoccurs largely where there is geographical proxim-


ity � for example, from Mexico and Central Americato the United States, intra-Asian migration (e.g.Myanmar to Thailand or Nepal to India) and fromthe Maghreb countries to Europe. In the case of manypoor people who do make it across borders, there isstrong anecdotal evidence that they incur substan-tial debt from the upfront cost of making the oftenillegal journey across borders. In such cases theybecome indentured labourers who then have to workto pay off the loan (often to criminal syndicates),reducing their volume of remittances. On balance,however, if migrants are low skill or unskilled work-ers, the beneficial impact on poverty and inequalityis maximized for the sending country. It is not justthat the ensuing remittances are directed at poorerhouseholds, but that the supply of unskilled labourin the source country is reduced, thereby increasingunskilled wages of those left behind.

The evidence regarding the direct impact ofremittances on economic development and growthis limited. It is common to hear officials in remit-tance receiving countries lament that the bulk ofremittances are spent on consumption. In the case

of poor families, it is hardly surprising that remit-tances are used to augment subsistence consumption,and therefore little is saved and very little investedin projects that could stimulate economic growth.Nonetheless in so far as remittances finance the con-sumption of domestically produced goods andservices such as housing, there are wider multipliereffects. Moreover additional consumption also in-creases indirect tax receipts (Desai et al., 2003).There is some suggestion that the propensity to saveis higher among remittance-receiving householdsthan in others (Orozco, 2003a, b). If true, it suggeststhat remittances could be leveraged for broader eco-nomic development by helping augment nationalsavings.

To take another example, it has long been rec-ognized that capital and liquidity constraints arecritical for small enterprise development, especiallyin poorer communities with imperfect capital mar-kets. For instance, an analysis of capital constraintson investment levels of microenterprises in Mexico,found that remittances from migration by the owneror family members working in the United States were

Figure 5

25+ POPULATION WITH TERTIARY EDUCATION

(Percentage)

Source: CPS, OECD, UNESCO.

62.3

54.6 53.9

79.874.6

14.0

71.6

63.7

1.3

10.4

2.0 2.5 2.3

9.2

1.1 2.8

0

10

20

30

40

50

60

70

80

90

Bangladesh Brazil China India Indonesia Mexico Sri Lanka Tunisia

Perc

enta

ge

Overseas in OECD countries In source country


responsible for almost 20 per cent of the capital in-vested in microenterprises throughout urban Mexico� an additional cumulative investment capital ofnearly $2 billion. Within the ten states with the high-est rate of migration from Mexico to the UnitedStates, almost a third of the capital invested in mi-cro-enterprises was associated with remittances(Woodruff and Zenteno, 2001). In so far as remit-tances are driving retail banking strategies of foreigninvestment in Mexican banks, an inadvertent butpotentially far reaching effect of remittances onMexico could be the transformation of its bankingsystem. Fewer than one in five Mexicans has a bankaccount and many rural areas of central Mexico,which send the most migrant labourers to the UnitedStates, lack any bank branch. Weak formal creditmarkets have been particularly inimical to Mexico�ssmall and medium enterprises. If the remittancedriven post-merger banking strategy in Mexico leadsto the transformation of retail banking in Mexico,the potential long-term economic benefits of remit-tances to the country might be greatest here.

More recently immigrant communities havesought to pool remittances and channel them forpublic purposes. For instance, in the last decade,Hispanic immigrants across the United States haveorganized themselves into hometown associations(HTAs) that finance public works projects and smallbusinesses in the towns from which they have mi-grated. The Mexican Government has taken theinitiative to leverage these remittances by creating a�three-for-program� whereby all HTA remittancesused to improve infrastructure or establish businessesare matched dollar for dollar by the Mexican fed-eral, state, and local authorities (Alarcon, 2001). Thisthree fold leveraging has had some notable successesat the local level, but the cumulative impact remainslimited.

Often communities do not have the resourcesto maintain what has been built through these con-tributions. Hype notwithstanding, HTAs have not sofar been used significantly to fund direct incomegeneration projects. In particular it is unclear if theseinitiatives are creating jobs so that Mexicans do nothave to emigrate, or instead simply subsidizing fu-ture migration through improved training. Perhapsthe biggest benefit is that the HTAs become a gluefor local collective action in both the sending andthe receiving country. For migrants, these associa-tions help maintain ties to their home town, whichin turn may help sustain private remittances.

B. What is the problem?

It is interesting that when examining the im-pact of remittances, micro-level studies (principallyby anthropologists), are less sanguine about its ef-fects than more macro-level studies (usually byeconomists). A common theme in the former is theduality of greater wealth but fewer economic op-portunities for those left behind � a Pyrric victory asit were. So-called �migra-villages� in Latin Americahave in many cases been physically transformed. Butoften the new handsome houses are empty becausetheir owners live in the United States. Likewise, re-mittances have helped build better schools, butenrollment has been declining. In these regions ifinitially remittances were simply a consequence ofmigration, over time they have emerged as its prin-cipal driver. The very money that has increased thematerial wealth of these villages appears to be gradu-ally undermining their long-term future. What isgood for individual migrants and households maynot be as beneficial for the communities. Whethereconomic development is more about the former orthe latter, is something that can be reasonably debated.

Even at the household level remittances canhave ambiguous effects. Consider the case of home-care workers, for instance, Jamaican nannies in NewYork or Philippine nannies in Hong Kong (China).In many cases these are mothers who have left theirown children behind to take care of children in richerhouseholds. The household in the country has ahigher consumption due to remittances, but the chil-dren of these homecare workers grow up withoutthe presence of their mother. We could take the mi-gration decision of the mother as a �revealedpreference� of an improvement in household wel-fare. Why would she leave otherwise? However, wedo not have an independent analysis that this is in-deed the case.

In communities heavily dependent on remit-tances, a culture of dependency often sets in. In avariety of contexts it has been observed that house-hold members simply stop working and wait frommonth to month for the overseas remittance. Suchnegative incentive effects � a form of moral hazard� also results in an increase in the reservation wage.Young men prefer to remain unemployed and waitfor the possibility that they themselves will migrate,rather than take up jobs at the local market-clearingwage. That remittances increase consumption muchfaster than production, raises issues of long-term


sustainability, given an inevitable decline as migrantssettle in new communities and links with their homecommunities gradually erode. Of course this is mootif most people leave the community in any case.

Similar negative incentive effects can also actat the national level. If remittances are relativelylarge, and a large share is spent on non-tradeables �housing and land are particularly favoured � thecountry is likely to suffer Dutch disease effects. Ef-fectively this results in an appreciation of the realexchange rate, rendering exports less competitive.The country�s principal export could become thecheap factor � labour � rather than labour intensiveproducts. At an aggregate level remittances consti-tute a form of rents. Exporting products requirespainstaking effort to build the institutions and infra-structure that helps develop the necessary productivecapacity. Exporting people, on the other hand, oc-curs in most cases by default rather than by design.Nonetheless if the latter also results in large foreignexchange receipts, the pressure to undertake reformsneeded for export-led growth are considerably at-tenuated. For instance, countries can maintain largerfiscal deficits in the context of international migra-tion and remittances. In the absence of remittances,high fiscal deficits would imply higher current accountimbalances and hence greater reliance on foreignsavings (assuming the deficit is not monetized �which is less likely given that central banks are rela-tively more independent today) resulting in highercapital account inflows.7 However if remittances arehigh, current account deficits would be lower,thereby reducing the likelihood that high fiscal defi-cits will precipitate a balance-of-payments crisis �the most common trigger for economic reforms inLDCs. Thus countries with high levels of remittancescan sustain higher fiscal deficits � while at the sametime keeping international financial institutions likethe IMF and the World Bank at bay.8 Increasingpoliticization of these institutions has meant poten-tial borrowers have transitioned from co-insurancethrough these institutions, to self-insurance in theform of higher foreign exchange reserves and inter-national migration and remittances.

C. Political effects

Money buys influence. It should not thereforebe surprising that in countries where remittances areimportant, the political effects are not inconsequen-

tial. In countries such as the Dominican Republic(where remittances are 10 per cent of GDP), presi-dential candidates campaign in the United States.From Mexico to India, the lucre of remittances hasled politicians to switch positions vis-à-vis theirdiaspora from benign neglect to active courtship.Regimes in socialist economies like Cuba and theDemocratic People�s Republic of Korea, have usedremittances to augment scarce hard currency re-sources to strengthen themselves in the short term.Cuba draws remittances from its United States baseddiaspora while the Democratic People�s Republic ofKorea earns remittances mostly from pachinko par-lours run by Koreans living in Japan. But in so faras these remittances sow the seeds of economic trans-formation, they can begin to quietly erode thepolitical system. In Cuba access to remittances hasincreased inequality in a political system that drawsits legitimacy from its commitment to equity. Re-mittances have a strong racial bias since the diasporais predominantly white while the island is majorityblack. The latter gained under Castro and were there-fore less likely to emigrate, but as a result they haveless access to the emerging cross-border informaldollarized economy. Furthermore, access to remit-tances is also heavily urban and regional; Havana,with 20 per cent of the island�s population, receivesapproximately 60 per cent of remittances. Thereforerural-urban inequality is also likely to widen.

Secondly, remittances can be viewed as a po-litical weapon of the weak. Rather than simply reactto state policies, international migration and remit-tances has forced states to accommodate new realties.In lieu of political voice, migration becomes an exitstrategy and remittances either fuel further exit orempower political voice by making available re-sources to new groups. In several Latin Americancountries even as economists debated the relativemerits of dollarization, the influx of �migradollars�were in several cases rendering the debate moot.

Nor is the political impact confined to justsource countries. In receiving countries, remittanceshave been quietly reshaping immigration policies.Recently the Mexican Government negotiated withbanks and wire transfer agencies in the United Statesto make it easier and cheaper for immigrants to sendmoney home. The Mexican Government began todistribute �matricula� consular identification cardsand persuaded United States banks to accept themas identification cards for the purpose of openingbank accounts, irrespective of the legality of their


immigration status.9 Major United States banks at-tracted by the high fees and volumes, began to acceptthese cards. The remittance market was also a goodcomplement to United States banks� strategy of ex-panding operations in Latin America by buying localbanks in the region. After all, if a bank could get acustomer to step inside and make a deposit (in theUnited States) or a withdrawal (in say, Mexico), itmight interest him in other financial products. In turn,by simply offering to do business with any illegalforeign resident who got a consular identificationcard, United States banks have quietly reshaped theircountry�s migration policy towards illegal immi-grants from Latin America or Mexico. As Mexicanconsulates began to be flooded with applications forID cards, local governments and law enforcementagencies in the United States began accepting theseID cards to get other forms of identification such asdriver�s licenses, making the lives of illegal migrantsless onerous.

Since international remittances are a form ofcross-border financial flows, it should not be sur-prising that they also have international politicaleffects. In many countries the importance and con-centration of remittances impact bilateral relation-ships and foreign policy. While at the local levelremittances impact politics, at the macro level cau-sality runs the other way � it is politics that impactsremittances. To the extent that sources of remittancesfor some receiving countries are heavily concentratedin regions and countries that suffer from politicalinstability, they are especially vulnerable. The emer-gence of �remittances communities� creates source-destination dyads (table 4), which increases covariantshocks and can become a coercive instrument on thepart of migrant destination country. Thus remittancesfrom migrants in Côte d�Ivoire accounted for a quar-ter of the GDP of Burkina Faso and a civil war inthe former rapidly reverberated to the latter.

The oil shocks and the gulf crisis in the MiddleEast have not only affected oil producing countriesbut have had a regional contagion effect through theirdemand for labour. A similar phenomenon was ob-served in South East Asia during the Asian crisiswhen the expulsion of Indonesian labour from Ma-laysia and Thailand exacerbated the crisis in theformer, increased tensions between the countries andweakened ASEAN. Following the 1991 Gulf War,the Gulf countries punished workers from Jordan andYemen and especially Palestinians for supportingSaddam Hussein and expelled them from their coun-

tries. In all these cases remittances from family mem-bers earning money in the Gulf states were crucial.The heavy price paid then and the continued depend-ence on remittances from the Gulf, was one factorwhy some countries were opposed to renewed con-flict in Iraq, fearing its disruptive economic effects.

Control of remittances as a form of economicwarfare has been most evident in the Israel-Palestinian conflict. In September 2000, Israel be-gan revoking the work permits of Palestinians be-cause of security concerns. At that time, some100,000 Palestinian workers from the West Bankand Gaza Strip crossed into Israel every day. ByJanuary 2002, only 25,000 Palestinian workers and8,000 merchants had permits to enter, a number thathas continued to drop. In their place, Israel began to

Table 4

SOME PROMINENTSOURCE-DESTINATION DYADS

Source country Destination country

Afghanistan PakistanAlgeria FranceArgentina ItalyArmenia Russian FederationBangladesh Saudi ArabiaBrazil JapanBurkina Faso Côte d�IvoireChina Republic of KoreaColombia VenezuelaDominican Republic United StatesEcuador SpainGhana Nigeria (1970s), United KingdomGuatemala MexicoHaiti Dominican RepublicIndia Gulf countries, United StatesIndonesia MalaysiaMexico United StatesMozambique South AfricaMyanmar ThailandNepal IndiaPakistan Saudi ArabiaPeru ChilePhilippines Hong Kong (China)Suriname NetherlandsTurkey Germany


import foreign workers (an estimated 230,000),largely from China, Thailand, Africa and the Phil-ippines to work in agriculture and construction. Asa result remittance outflows from Israel tripled fromless than one billion dollars in the early 1990s tonearly three billion in 2001. The economic effectson the West Bank and Gaza have been devastating.GNI per capita fell by 11.7 per cent in 2001 and afurther 18.7 per cent in 2002 while poverty levelsjumped from 21 per cent in 1999 to 46 per cent in2002. The drop in remittances had larger indirecteffects as well since the loss of income resulted indepressed demand for Palestinian goods and a sharpdecline in imports from Israel � in turn adverselyaffecting Israel�s economy as well.10

As with much else in the contemporary world,remittances changed in the aftermath of Septem-ber 11. For Pakistan, a �front line� state caught inthis vortex, where remittances were around $1 bil-lion in 2000 (about a third of their peak in 1982�1983),this proved a blessing. Many Pakistanis with sav-ings in offshore accounts repatriated their funds,fearful of being caught in United States-led investi-gations into terrorist financing. Under pressure fromthe United States, the Pakistani central bank tight-ened controls on the web of money changers (locallyknow as hundi operators), and introduced a law re-storing immunity against disclosure of the sourcesof income for foreign currency account holders. Asa result the difference between the official and mar-ket rates narrowed (to less than one per cent), andremittances in Pakistan exceeded three billion dol-lars in 2002.

In contrast, the effects were disastrous for So-malia a country with no recognized government andwithout a functioning state apparatus. After the in-ternational community largely washed its hands offthe country following the disastrous peacekeepingforay in 1994, remittances became the inhabitants�lifeline. With no recognized private banking systemthe remittance trade was dominated by a single firm(Al Barakaat).11 In 2001 the United States shut downthe Al Barakat bank�s overseas money remittancechannel labelling it �the quartermasters of terror�.With remittances representing between a quarter and40 per cent of total GNP, closure of the channel wasdevastating. The humanitarian impact of moneyfrozen in transit was considerable. Remittances pro-vided many times what the aid agencies wereproviding to rebuild the deeply impoverished coun-try. Although evidence of Al Barakaat�s backing for

terrorism was weak,12 the effects of the ban on thecountry�s well-being were significant.

VI. Policy options

The Somali case emphasizes two issues. One,there is little doubt that remittances are an impor-tant mechanism to fund terrorism, civil wars, andliberation struggles, the nomenclature depending onthe beholder. From the support for the revolutionarycouncil of the Free Aceh Movement (or Gam) inSweden to the LTTE in Canada, to support for theKashmiri cause in the United Kingdom, there is noshortage of examples. In Somalia itself a large por-tion of the remittances went to supply arms to therural guerrillas who toppled the government in Janu-ary 1991. For the peoples of collapsed states (or socalled �failed� states) in Congo, Somalia and Af-ghanistan as well as for nationalities without states(Palestinians, Kurds, and pre-independence Eritreaand East Timor), overseas remittances are the oxy-gen essential not just for family survival andhousehold consumption � but also to finance themilitant causes and support leaderships that may usethe struggle in turn to maintain their own hold. Inother cases such as Armenia and Croatia, remittancesunderwrote long-distance nationalism, boostinghard-line regimes and complicating efforts to resolveregional conflicts.

Second, it illustrates the need for greater inter-national efforts to create an acceptable internationalmoney transfer system in the growing number ofcountries where the state has collapsed, there is acutepaucity of international aid, and its nationals are try-ing to do more for themselves. There is no biggerchallenge facing the international community thanthe challenge of addressing the well being of peopleliving in such states. Currently, the internationalcommunity is relying principally on a �big stick�approach � proscriptions and sanctions against coun-tries and financial intermediaries. For instance, theUnited States recently considered sanctions to cutoff remittances to the Democratic People�s Repub-lic of Korea. The United States and the Paris-basedFinancial Action Task Force (FATF) are pressuringcountries to start monitoring �door-to-door� remit-tances, fearing that this unregulated flow of moneycould be used for terrorist activities. New legisla-tion is forcing money transmitters to install expen-sive new compliance technologies. It is certainly the


case, as the United Nations Development Programme(UNDP) found in Somalia, that current money trans-fer systems in that country do not meet acceptableinternational standards, and lack the systems to iden-tify suspicious transactions and money launderingschemes. But international efforts will be more mean-ingful if they are directed to build a financial archi-tecture rather than just to deploy the blunt instrumentof sanctions. The UNDP�s initiative to work withforeign governments and Somalia�s remaining moneytransfer and remittance companies, to comply withstandard financial rules and regulations and helpfirms institute standard book keeping, auditing andreporting, is an example of such an alternative policyoption.

The international community can best addressthe channels through which remittances are trans-mitted, by helping construct a financial architecturethat reduces the transaction costs of intermediationand increases its transparency. Recently the WorldCouncil of Credit Unions launched the InternationalRemittance Network (IRNet) to facilitate remittancetransfers from the United States. It does not chargerecipients any fee and offers better exchange rates �but as of yet its services are confined to its mem-bers. The Inter-American Development Bank (IDB)is helping create a common electronic platform inthe region between sending and receiving countriesand within receiving countries (Buencamino andGorbunov, 2002). But there is considerably greaterscope in this regard. In particular the internationalcommunity should fund a much more substantialeffort to underwrite the development and mainte-nance of a common electronic platform (includingclearing house and payment systems) that wouldfacilitate remittance transfers. If the facility wasmaintained under the aegis of a multilateral organi-zation (the UNDP for instance), it could ensure bothgreater transparency as well as lower transactionalcosts. Indeed by allowing registered IVTS opera-tors as well as INTERPOL access to such a platformat low costs, it would couple many of the advan-tages of informal banking with the transparency ofsuch a facility. It should be remembered that publicsubsidies for such an endeavour would in all likeli-hood be much less than the higher costs of policingand monitoring, as well as the greater transactionalcosts, than are being currently incurred.

Another step to help lubricate international re-mittance transfers would be to work on transformingthe role of post offices, the single biggest global dis-

tributional channel. The United States post-officebegan a programme called �Dinero Seguro� (safemoney) for sending remittances but with charges atnearly ten per cent of the face amount, it has hadlittle success. Postal �giro� payment systems arewidely used in Europe and Japan. Linking the postalgiro systems worldwide, would facilitate interna-tional postal transfers, parallelling the agreement forthe exchange of mail among member countries ofthe Universal Postal Union (UPU).

What can receiving country governments do toenhance the development impact of remittances? Forone, they should try and get a better handle on themagnitudes and sources of these flows. In contrastto the massive effort devoted to monitoring andmanaging foreign aid flows, governments for themost part have paid little attention to these flows.Remittance data should become part of the IMF�sSpecial Data Dissemination Standards (SDDS) toboth address the severe problems of consistency andtimeliness of remittance data. Moreover, this wouldalso ensure that there was better data on remittanceoutflows, thus allowing for some cross checks, simi-lar to what is currently done in trade flows. Remit-tance receiving countries need to create a spatialmapping of their overseas communities, not just bycountry but specific geographical location. Thiswould allow financial intermediaries to better targetthese communities.

Second, increasing the long-term productiveimpact of remittances requires promoting greatercompetition and using a carrot and stick approachto increase the penetration of formal financial inter-mediaries, especially banks, in areas with higherlevels of emigration. While it is true that havala-like informal transfer systems are extremely efficient,in that they provide much needed low transactionand financial cost services, the net amount of capi-tal they bring in is virtually zero. The reason is thathavala can only function if inflows are equal to out-flows, which means that the transactions are balancedthrough capital flight. Thus while remittance receiv-ing households benefit from the operation of havalalike informal systems, the net financial and foreignexchange gains to the country are significantly lessthan if the flows came through formal channels.Moreover, if the propensity to save is higher amongremittance-receiving households than in others, for-mal systems are likely to raise national savings rates.This would suggest that the presence of an exten-sive network of financial intermediaries in these


areas could help leverage remittances for broadereconomic development. Countries with large remit-tance flows through informal channels, couldconsider subsidizing the intermediation costs throughformal channels as well as offer other incentives e.g.lower cost financial products like life insurance oraccess to mortgages.13 Remittances could also beused to securitize future receivables to augment for-eign credit ratings (Ketkar and Rath, 2001).

Third, governments also need to more activelymonitor and regulate labour market intermediaries,who often fleece potential migrants. Intermediarieslubricate flows � but can also divert a substantialstream of income to themselves. Finally, they shouldbe aware that active government attempts to encour-age or require remittances to be invested, are unlikelyto have significant economic benefits. The best wayfor recipient country governments to ensure that agreater proportion of remittances are utilized forproductive investments (rather than simply consump-tion) is to have a supportive economic environmentfor investment per se. Countries such as India andTurkey have tried to increase remittances by offer-ing various preferential schemes under the capitalaccount. Such preferential treatment, such as tax-free status, inevitably leads to round tripping. Insteadgovernments should direct their efforts to the finan-cial sector.

VII.Conclusion: are remittances a newdevelopment paradigm or anotherdestabilizing force of globalization?

Remittances are one of the most visible � andbeneficial � aspects of how international migrationis reshaping the countries of origin. In a variety ofsettings they are quietly transforming societies andregions and are the most manifest example of self-help undertaken by poor households in the globalarena. Their role is particularly important in aug-menting private consumption and alleviating tran-sient poverty in receiving countries. However, theireffects on structural poverty and long-term economicdevelopment, are less well understood. Given theirimportance, rigorous data and research on the ef-fects of remittances is surprisingly limited, in starkcontrast to the substantial body of literature on theother principal sources of development finance �foreign aid, flows from the Bretton Woods institu-

tions, and foreign direct investment and private debtflows.

Unlike foreign aid, remittance flows do not putany burden on taxpayers in rich countries. Nonethe-less, they occur only to the extent that emigrants frompoor countries can work in richer countries. It is clearthat countries that are de facto much more open toimmigration are also the principal sources of remit-tances and in so far as these constitute substantialsources of external finance to poorer countries,should they not be viewed as a country�s contribu-tion to poor countries?14 From this point of view theUnited States contribution substantially increases(and in proportionate terms that of Saudi Arabia evenmore), while that of more immigrant resistant coun-tries like Japan falls. The critical difference betweenforeign aid and remittances is that the former con-sists of transfers from public entities in the donorcountry to public agencies in receiving countries andeven when it is directed to civil society actors suchas NGOs, it goes to organized entities. Remittancesof course, simply go directly to households and inthat sense their immediate poverty alleviation im-pact � through increased consumption � can begreater than traditional foreign aid, depending on theincome characteristics of the receiving household.The transaction costs are lower and there is less leak-age to rent seeking bureaucracies and consultants.However, its long-term impact may be more ques-tionable, especially if few productive assets are beingcreated. Thus, it would appear that remittances are abetter instrument to address transient poverty, whicharises due to shocks whether at households or na-tional level, rather than structural poverty. Toalleviate structural poverty, broad economic trans-formation may still require external financialresources in the form of budgetary support to gov-ernments in many poor countries.

If remittances are to become the principalmechanism to transfer resources to poor countries,it would require more liberal, open-door immigra-tion policies in industrialized countries. Perhaps inthe new round of global bargaining LDCs mightcomplement the slogan �trade not aid� with �migra-tion not aid�. In the ongoing trade negotiations underthe Doha round, LDCs would do well to press forgreater levels of temporary migration, and less onforeign aid. That might be better for all sides but itis unclear if either rich or poor country governmentshave the incentive to do so. Rich country govern-ments loose potential leverage on LDC governments


while the many poor country governments loose asource of rents. Indeed, it is likely that foreign aidand bilateral trade agreements will be increasinglyused to persuade developing countries governmentsto check migrant outflows.

Finally it is worth reflecting whether it is theless visible, non-quantifiable and intangible remit-tances � namely social remittances or the flow ofideas � have a more critical impact than their pecu-niary counterpart? The overseas experience has un-doubtedly some cognitive effects on migrants. At thesame time, the communications revolution has ledto an exponential growth of transnational phone callsand emails and a sharp increase in internationaltravel. As a result not just elites but social groups atthe lower end of the social spectrum are exposed tothe flow of new ideas. The cumulative effect of mil-lions of conversations � akin to filling a pond one-drop at a time � is interesting to speculate on. Onthe one hand this results in information flows � �deepknowledge� � that is frequently tacit, about what andhow to do things. On the other hand it changes ex-pectations and preferences of what is acceptable, beit standards of service or the role of the state, as wellas what is not, such as the behaviour of politicians.Perhaps, it is here that the real effects of remittanceswill be felt. But that is another story.

Notes

1 The World Bank has recently adopted this practice aswell. See Global Development Finance, 2003, statisti-cal appendix to chapter 7.

2 In the BOP such transactions show up as contra entries �a reduction in the capital account and an increase in thecurrent account. For instance remittances to India in-crease by more than $2 billion if this is taken into ac-count. This is also a feature of the so-called Dresdnerscheme in Turkey.

3 I am grateful to Dilip Rath of the World Bank for thedata used in this section and discussions related to thesame. Also see Rath (2003).

4 Belgium�s data is not reported separately but is usuallycombined with Luxembourg�s.

5 Thus Spain�s Banco Bilbao Vizcaya Argentaria boughtBancomer and then emerged as a dominant player in theelectronic transfer business. Its volume grew from657,000 transactions in 1999 to 12.65m last year thankslargely to the alliance it started in 2000 with anotherUnited States bank (Wells Fargo), links with a numberof money transfer services in the New York area, andwith the United States Postal Service. FollowingCitbank�s purchase of Banamex in 2001, it introduced asingle account that can be operated on either side of the

border, using branches of either Citibank or Banamex.In 2002, Bank of America, the biggest United States re-tail bank, took a stake in Santander Serfin, the third-larg-est Mexican bank, which was controlled by Spain�sSantander Central Hispano (SCH). The remittance busi-ness also drove HSBC�s decision to buy Grupo FinancieroBital, a large Mexican retail bank along with HouseholdInternational, a consumer credit lender with branchesacross the United States, as a base for the remittancebusiness.

6 Idil Salah, Som-Can Institute for Research and Devel-opment; Bernard Taylor, Partnership Africa Canada,http://www.web.net/pac/pacnet-l/msg00008.html; Soma-lia: Peace and Development, (ymd): 990912.

7 Moreover, the general trend of greater trade opennessand increasing domestic liberalization means that excessdemand has much less effect on inflation.

8 For instance, India, has maintained exceedingly high fis-cal deficits (about 10 per cent of GDP) even as inflationis modest (about 5 per cent). In part this is because itscurrent account � buoyed by remittances exceedingtwelve billion dollars (2.5 per cent of GDP) � is posi-tive. For a more elaborate discussion see, Kapur andPatel, 2003.

9 The cards are digitally coded and check an applicant�sinformation against computerized census and voter rollsin Mexico. The accounts will allow immigrants to sendATM cards to relatives back home, so rather than spend-ing $25 to send $200 at a typical money transfer coun-ter, immigrants can give their families access to funds inthe United States for about $3 per transaction.

10 http://lnweb18.worldbank.org/mna/mena.nsf/Attach-ments/Ecomomic+and+Social+Impact.

11 Al Barakat operated in 40 countries, was the country�slargest private sector employer, and handled about$140 million a year from the diaspora and in additionoffered phone and internet services.

12 By early 2003 only four criminal prosecutions had beenfiled, and none involved charges of aiding terrorists.

13 This is being attempted in Mexico with the assistance ofFannie Mae and JP Morgan.

14 A new research initiative currently underway by theCenter for Global Development and Foreign Policymagazine, on the impact of an array of rich country poli-cies on poor countries, does take this into account.

References

Alarcon R (2001). The Development of Home Town Associa-tions in the United States and the Use of Social Remit-tances in Mexico. Mimeo.

Borjas G (1987). Self Selection and the Earnings of Immigrants.American Economic Review 77 (4): 531�553.

Buencamino L and Gorbunov S (2002). Informal Money Trans-fer Systems: Opportunities and Challenges for Devel-opment Finance. United Nations, DESA Discussion Pa-per no. 26, ST/ESA/2002/DP/26.

Chiquiar D and Hanson GH (2002). International Migration,Self-Selection, and the Distribution of Wages: Evidencefrom Mexico and the United States. NBER Working Pa-per No. 9242, September.


Desai M, Kapur D and John McHale (2003). The Fiscal Impactof High Skilled Emigration: Flows of Indians to the U.S.WCFIA Working Paper No. 03-01, Harvard University.

Eckstein S (2003). Diasporas and Dollars: Transnational Tiesand the Transformation of Cuba. Rosemarie RogersWorking Paper #16, MIT.

Foster A and Rosenzweig M (2001). Imperfect Commitment,Altruism and Family: Evidence from transfer behaviorin Low Income Rural Areas. Review of Economics andStatistics, August.

IMF and IDA (2002). PRSP, Cape Verde, March.Jokisch B and Pribilsky J (2002). The Panic to Leave: Eco-

nomic Crisis and the �New Emigration� from Ecuador.International Migration, 40 (4).

Kapur D and Patel U (2003). Large Foreign Currency Reserves:Insurance for Domestic Weakness and External Uncer-tainties? Economic and Political Weekly, XXXVIII (11),15 March.

Ketkar S and Ratha D (2001). Development Financing Duringa Crisis: Securitization of Future Receivables. WorldBank, Policy Research Working Paper 2582.

Martin P and Widgren J (2002). International Migration: Fac-ing the Challenge. Population Bulletin, 57(1), Popula-tion Reference Bureau.

OECD (2001). Trends in International Migration. OECD, Paris.Orozco M (2003a). The Impact of Migration in the Caribbean

and Central American Region. Canadian Foundation forthe Americas, FPP-03-03.

Orozco M (2003b). Worker Remittances in an InternationalScope. Inter-American Dialogue, March.

Passas N (1999). Informal Value Transfer Systems and Crimi-nal Organizations; a study into so-called undergroundbanking networks. Report prepared for Netherlands Min-istry of Justice.

Rath D (2003). Workers Remittances: An Important and Sta-ble Source of External Development Finance. In: WorldBank, Global Development Finance, 2003, chapter 7.

Reimer JJ (2002). Estimating the Poverty Impacts of TradeLiberalization. GTAP Working Paper No. 20, Center forGlobal Trade Analysis, Department of Agricultural Eco-nomics, Purdue University.

Sawada Y (2003). Income Risks, Gender, and Human CapitalInvestment in a Developing Country. CIRJE F-Series /CIRJE, Faculty of Economics, University of Tokyo. http://d.repec.org/n?u=RePEc: tky:fseres:2003cf198&r=dev.

Tseng W and Zebreges H (2002). Foreign Direct Investment inChina: Some Lessons for other countries. IMF PolicyDiscussion Paper, PDP/02/03.

United Nations Population Division (2002). International Mi-gration 2002, United Nations.

Winters LA (2000). Trade, Trade Policy and Poverty: what arethe links. CEPR Research Paper 2382.

Woodruff C and Zenteno R (2001). Remittances and Micro-enterprises in Mexico. Unpublished paper, University ofCalifornia, San Diego.

Yang D (2003). Remittances and Human Capital Investment:Child Schooling and Child Labor in the Origin House-holds of Overseas Filipino Workers. http://www.people.fas.harvard.edu/~dyang/papers/yang_remittances.pdf.


G-24 Discussion Paper Series*

Research papers for the Intergovernmental Group of Twenty-Four on International Monetary Affairs

No. 28 April 2004 Sanjaya LALL Reinventing industrial strategy: The Role of Govern-ment Policy in Building Industrial Competitiveness

No. 27 March 2004 Gerald EPSTEIN, Capital Management Techniques in DevelopingIlene GRABEL Countries: An Assessment of Experiences from theand JOMO, K.S. 1990s and Lessons for the Future

No. 26 March 2004 Claudio M. LOSER External Debt Sustainability: Guidelines for Low- andMiddle-income Countries

No. 25 January 2004 Irfan ul HAQUE Commodities under Neoliberalism: The Case of Cocoa

No. 24 December 2003 Aziz Ali MOHAMMED Burden Sharing at the IMF

No. 23 November 2003 Mari PANGESTU The Indonesian Bank Crisis and Restructuring: Lessonsand Implications for other Developing Countries

No. 22 August 2003 Ariel BUIRA An Analysis of IMF Conditionality

No. 21 April 2003 Jim LEVINSOHN The World Bank�s Poverty Reduction Strategy PaperApproach: Good Marketing or Good Policy?

No. 20 February 2003 Devesh KAPUR Do As I Say Not As I Do: A Critique of G-7 Proposalson Reforming the Multilateral Development Banks

No. 19 December 2002 Ravi KANBUR International Financial Institutions and InternationalPublic Goods: Operational Implications for the WorldBank

No. 18 September 2002 Ajit SINGH Competition and Competition Policy in EmergingMarkets: International and Developmental Dimen-sions

No. 17 April 2002 F. LÓPEZ-DE-SILANES The Politics of Legal Reform

No. 16 January 2002 Gerardo ESQUIVEL and The Impact of G-3 Exchange Rate Volatility on Felipe LARRAÍN B. Developing Countries

No. 15 December 2001 Peter EVANS and Organizational Reform and the Expansion of the South�sMartha FINNEMORE Voice at the Fund

No. 14 September 2001 Charles WYPLOSZ How Risky is Financial Liberalization in theDeveloping Countries?

No. 13 July 2001 José Antonio OCAMPO Recasting the International Financial Agenda

No. 12 July 2001 Yung Chul PARK and Reform of the International Financial System andYunjong WANG Institutions in Light of the Asian Financial Crisis

No. 11 April 2001 Aziz Ali MOHAMMED The Future Role of the International Monetary Fund

/...


No. 10 March 2001 JOMO K.S. Growth After the Asian Crisis: What Remains of theEast Asian Model?

No. 9 February 2001 Gordon H. HANSON Should Countries Promote Foreign Direct Investment?

No. 8 January 2001 Ilan GOLDFAJN and Can Flexible Exchange Rates Still �Work� in FinanciallyGino OLIVARES Open Economies?

No. 7 December 2000 Andrew CORNFORD Commentary on the Financial Stability Forum�s Reportof the Working Group on Capital Flows

No. 6 August 2000 Devesh KAPUR and Governance-related Conditionalities of the InternationalRichard WEBB Financial Institutions

No. 5 June 2000 Andrés VELASCO Exchange-rate Policies for Developing Countries: WhatHave We Learned? What Do We Still Not Know?

No. 4 June 2000 Katharina PISTOR The Standardization of Law and Its Effect on Develop-ing Economies

No. 3 May 2000 Andrew CORNFORD The Basle Committee�s Proposals for Revised CapitalStandards: Rationale, Design and Possible Incidence

No. 2 May 2000 T. Ademola OYEJIDE Interests and Options of Developing and Least-developedCountries in a New Round of Multilateral Trade Nego-tiations

No. 1 March 2000 Arvind PANAGARIYA The Millennium Round and Developing Countries:Negotiating Strategies and Areas of Benefits

G-24 Discussion Paper Series*

Research papers for the Intergovernmental Group of Twenty-Four on International Monetary Affairs

* G-24 Discussion Paper Series are available on the website at: www.unctad.org. Copies of G-24 Discussion Paper Series maybe obtained from the Publications Assistant, Macroeconomic and Development Policies Branch, Division on Globalization andDevelopment Strategies, United Nations Conference on Trade and Development (UNCTAD), Palais des Nations, CH-1211 Geneva 10,Switzerland; e-mail: [email protected].

Documents

Devesh Kapur - UNCTAD