Diaspora & Economy: Effects of the Economic Slowdown on Remittances

Muhammad SohaibBBRM-10

Sustainable Development Policy Institute

1

Outline

• Introduction• Global Economic Slowdown• Patterns and Trends in Migration• Contributions of Diaspora• Remittances Flow to Developing Countries• Remittances to Pakistan• Some Case Studies• GoP Initiatives• Future Outlook• Overseas Pakistanis: Manifestos of Political Parties 2013

Introduction

• Diaspora• Pakistani Diaspora• Types of DiasporaLabor DiasporaBrain DrainImmigrants• Destinations of Migrants

Global Economic Slowdown• Global Financial Crisis 2007• Global Economy Contracted in 2008-2009• Downturn directly hit the advanced economies• In 2009 GDP per capita turned down in 60 out of 107

developing economies (UN 2010)

Source: UN Global Economic Outlook 2012

Patterns and Trends in Migration

There are few jumps and down falls, but there is a big climb started in 2005Data Source: BEOE

19721974

19761978

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

20120

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

Total Migrants

Type Wise Migrants2000 - 2012

Decline in unskilled migrantsData Source: BEOE

20002001

20022003

20042005

20062007

20082009

20102011

20120

50000

100000

150000

200000

250000

Highly Qualified Highly Skilled Skilled Semi Skilled Un-Skilled

Pakistani Workers Registered for Overseas Employment 2002-2012

Migrant flow to: UAE drops in 2008, Saudi Arabia 2009 and diminishes in Oman in 2009Data Source: BEOE

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

50000

100000

150000

200000

250000

300000

Saudi Arabia

UAE

Oman

Pakistani Workers Registered for Overseas Employment 2002-2012

Decline observed in the case of Khyber Pakhtunkhwa and Punjab

20002001

20022003

20042005

20062007

20082009

20102011

20120

50000

100000

150000

200000

250000

300000

PunjabSindhK.PakhtunkhwaBalochistanAzad KashmirN.AreaTribal Area

Contributions of Diasporas

Diasporas contributed in three facets• Remittances• Brain Drain (Brain Drain is a talent mobility; which can bring benefits to both host and home countries) - South Asian Brain Dain - Silicon valley of India (Bangalore)

• Role as Intermediaries -Diasporas can connect home countries to foreign investors - Cultural interpreters

Remittances to Developing Countries

Remittances have shown resilience than FDI since the global financial crisisDeveloping countries received $ 401 billion remittances in 2012(World Bank)In history it can be observe that remittance remained stable (Mexican financial crisis 1995, Asian Market Crisis 1997)

Remittances to Developing Countries

The remittance flows to developing countries in 2006 were 235 $billion and it increased in 2007 with a growth rate of 22.9 percent to 289 $billion, and increased to 338 $billion in 2008 with a

growth rate of 16.9 percent

Top 10 Recipients of Remittances in 2012

India China Philipines Mexico Nigeria Egypt Banladesh Pakistan Vietnam Lebnan0

10

20

30

40

50

60

70

80

69

60

24 2321 21

14 14

107

$ US

Bill

ion

Three South Asian countries are in top 10 recipientsSource: World Bank, Migration and Remittance Brief 20

Workers’ Remittances to Pakistan2002-2011

Was there no impact of Global Financial Crisis on Remittances?Data Source: State Bank of Pakistan

2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

2,000

4,000

6,000

8,000

10,000

12,000

US

$ M

illio

n

Some Case Studies

Barajas et al (2010) investigated the effect of economic slow down on worker’s remittances of Africa(Many countries were forecast to lose 0.1 to 0.2 percent GDP growth due to fall in remittances in 2009)

Ratha. D and Mahapatra. S argued that the global financial crisis has caused decline in remittance flows to low income economiesBalan et al (2011) evaluated the remittances and migration flows during the financial crisis in the European Countries

Some Case Studies

Raihan .S (2010) examined the impact of global financial crisis on remittances, exports and poverty in Bangladesh.(He analyzed the negative shock in remittance will result decline in real GDP by 0.1 percent)

Raihan. S (2010) explored the impact of global financial crisis on migration and remittances in Bangladesh. (The macro statistics showed positive growth in remittances during the crisis but there were large number of household who faced fall in remittance inflows by migrants)

Some Case Studies

Ahmed et al. (2010) examined the impact of remittances on economy and household welfare (If remittances inflows reduced to 50 percent, the GDP growth declined to 0.7% as a result and investment and imports also decreased to 7.7 percent and 6.4 percent respectively)

Ahmed and Sugiyarto (2012) find that improvement of household consumption and investment are positively and consumer prices are negatively associated with remittances

GoP Initiatives

• BOEO is working under the emigration ordinance of 1979

• Overseas Employment Corporation (OEC) • Overseas Pakistanis Foundation (OPF) • Foreign Remittance Card Scheme• Pakistan Remittance Initiative

Workers’ Remittances from Abroad2002-2011

• Remittances not affected during and after the crisis– Traditional migrant economies in Middle East remained

insulated (except UAE)– Indian Diaspora in Middle East was a lesser competition

given the appreciation of Indian currency– The weakening of Pakistani currency implied that

Diaspora’s consumer surplus increased when purchase was made locally

Future Outlook

• Demand Side Factors The flow of remittances will continue to increase in the

foreseeable future Pakistani migrants have embarked upon non-traditional

workplace destinations as well East is a good Option The banking sector in Pakistan is now viewing the remittances

as a major source of business

Future Outlook

• Supply Side Factors EU will remain in recession North America will continue to Maintain its strict visa policies China and East Asia will be future engines for Economic

Growth Middle East will continue to diversify away from South Asian

Migrants

Recommendations

• Diaspora may be engaged beyond their monetary contributions : in terms of knowledge and technology

• Migration Policy needs to be aligned with the Development Policy

• Banking Sector can play a vital role• Role of Overseas Pakistanis Division needs to be revisited

Overseas Pakistanis: Political Parties Manifestos 2013

• Pakistan Muslim League – N• Pakistan Tehreek-i-Insaf• Pakistan Peoples Party• Pakistan Muslim League - Q• Muttahida Qauami Movement

sohaib@sdpi.org 23

Thank You