Friends abroad

2011-04-05 00:00

EMIGRATION is a fact of life. It's more or less inevitable that a certain enterprising proportion of the population of any given poor country will leave for a rich country in search of opportunity and advancement. Every poor country in every region in the world, from Asia to Africa to Latin America, must deal with the fact that some citizens — usually younger, more educated ones — will leave their home shores and migrate to wealthier places.

Economic migration is a very natural process, one that has been going on ever since humans first formed collectives and started to create wealth. It happens within countries — people leave small, poor, rural towns for the opportunities available in big cities — and it happens between countries.

It's possible to restrict the flow somewhat of migrants through border controls, passports, and other legal means, but as the immigrants who flood across the border from Mexico to the United States every day prove, the quest for a better life is more powerful than even the most sophisticated border posts. What's more, the impetus for economic migration is likely to increase over the next few years as populations in rich countries shrink and demand for skilled immigrants grows. Emigration is here to stay.

Despite its inevitability, emigration gets a bad rap. Poor countries spend a lot of money educating their citizens, and when those citizens leave, the countries in question lose both the money they invested and the future taxes and other economic benefits those educated citizens would have generated. For this and other reasons, poor countries have often sought to minimise emigration.

But emigration is not all bad, as a new study from the World Bank, titled "Leveraging Migration for Africa: Remittances, Skills, and Investments", argues. Instead of trying to fight the inevitable, says the report, African governments should try to exploit the positive benefits that large diasporas can provide.

The first and perhaps most important way that migrants can benefit their countries of origin economically is through remittances, that is, through sending money to the folks back home.

The report said: "Remittance inflows to Africa have quadrupled in the 20 years since 1990, reaching nearly $40 billion (2,6% of GDP) in 2010. They are the continent's largest source of net foreign inflows after foreign direct investment.

"Remittance receipts generate large benefits for emigrants' countries of origin. At the macro level, remittances tend to be more stable than other sources of foreign exchange. Their variation is often countercyclical, helping sustain consumption and investment during downturns, and they improve sovereign creditworthiness by increasing the level and stability of foreign-exchange receipts.

"At the micro level, remittances reduce poverty. They also spur spending on health and education, as a result of both higher household incomes and the devotion of a larger share of remittances than other income sources to these services."

Clearly, remittances are a good thing. They benefit the country overall and the families of migrants. African governments should, therefore, do all that they can to encourage remittance flows, including improving the banking and other systems that enable the money to cross the border. By simplifying cross-border transactions and lowering costs, African governments could potentially increase remittance flows and the benefits that they offer.

Tapping the diaspora for growth is a slightly more subtle point. Economists have often noted that some countries, India and China come to mind, are very good at using their diasporas to improve domestic economic growth. Indian and Chinese migrants in the U.S. and Europe, for example, have often set up manufacturing operations that leverage their connections to their home countries, using low-cost labour in those nations to provide goods and services to consumers in wealthy countries. Such migrants thus form an important link between emerging markets and consumers in rich countries.

Unfortunately, this kind of relationship is less common between African emigrants and their home countries. Obviously there is no simple way to change this, but one important step would be for Africans to start looking at emigrants as a potentially positive source of growth. Formal and informal networking between home-country entrepreneurs and migrants would help, as would improvements in the regulation of foreign capital flows.

Consider the example of South Africa. There is a fairly large group of educated South Africans living in Australia, the United Kingdom and elsewhere, many of whom retain close ties to South Africa. The South African government could profitably explore ways to tap into this network for investment and for ideas and connections on new trade and business opportunities.

Emigration is inevitable, but there is often a kind of resentment among the folks back home against those who move to richer countries in search of opportunity. This is a mistake. Emigrants can be a source of economic advantage for their home countries. All that's needed is a positive attitude and some sensible policies.

— Moneyweb.co.za

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