Leveraging Remittances for Development in Abu Dhabi Dialogue Countries
Labor mobility and remittance flows play a crucial role in the economic development of Abu Dhabi Dialogue countries. This brief explores the impact of remittances, leveraging diaspora finances, and major migration corridors between origin and destination countries.
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Leveraging Remittances for Leveraging Remittances for Development in the Abu Development in the Abu Dhabi Dialogue Countries Dhabi Dialogue Countries Leveraging Diaspora Finances for Private Capital Mobilization Migration and Development Brief 39 December 2023 Dilip Ratha Abu Dhabi Dialogue 7th Ministerial Meeting Dubai February 10, 2024
Key messages 1. Labor mobility and remittance flows are a lifeline to the 17 countries of the Abu Dhabi Dialogue (ADD).* Share of foreign workers in population is among the highest in the world. Inward emittances to 10 ADD origin countries exceeded $264 billion in 2023. 2. Developmental impacts of remittances can be augmented by reducing remittance costs, worker- paid recruitment costs, remittance-linked financial products 3. Diaspora finances can be leveraged for private capital mobilization and strengthening a country s debt position: a) vis diaspora bonds, b) nonresident deposits, c) future-flow securitization, d) improving sovereign rating *17 ADD countries: 10 Labor sending countries: Afghanistan, Bangladesh, India, Indonesia, Nepal, Pakistan, the Philippines, Sri Lanka, Thailand, and Vietnam 7 labor receiving countries: Bahrain, Kuwait, Malaysia, Oman, Qatar, Saudi Arabia, and UAE
Majority of foreign workers to 7 destinations come from 10 origin countries of the Abu Dhabi Dialogue Share in total number of foreign workers % 88 90 82 78 76 80 74 72 68 70 60 50 40 30 20 10 0 Oman Qatar Malaysia United Arab Emirates Bahrain Kuwait Saudi Arabia Source: World Bank-KNOMAD, Saudi Arabia s General Authority for Statistics Note: 10 origin countries include Afghanistan, Bangladesh, India, Indonesia, Nepal, Pakistan, the Philippines, Sri Lanka, Thailand, and Vietnam
Top migration corridors between 7 destinations and 10 origin countries in 2021 Stock of migrants in 2021, thousands 3,471 2,502 1,709 1,484 1,376 1,278 1,242 1,152 1,095 996 Source: World Bank-KNOMAD Note: 10 origin countries include Afghanistan, Bangladesh, India, Indonesia, Nepal, Pakistan, the Philippines, Sri Lanka, Thailand, and Vietnam; 7 destination countries include Bahrain, Kuwait, Malaysia, Oman, Qatar, Saudi Arabia, and the United Arab Emirates
Remittance flows to low- and middle-income countries excluding China are larger than the sum of FDI and ODA. 700 ($ billion) 642 Remittances 600 Foreign Direct Investment (FDI) 500 400 380 300 223 200 100 Official Development Assistance (ODA) 0 Source: World Bank-KNOMAD Migration and Development Brief 39
Remittances to 10 origin countries of the Abu Dhabi Dialogue (% of GDP, 2023e) ($ billion, 2023e) 26.6 125 9.2 40 7.7 7.3 5.2 26 23 3.4 3.22.0 1.90.8 14 11 11 10 5 0.3 Source: World Bank-KNOMAD staff estimates, IMF s WEO and BOP statistics Note: GDP = gross domestic product; e = estimate; 10 origin countries include Afghanistan, Bangladesh, India, Indonesia, Nepal, Pakistan, the Philippines, Sri Lanka, Thailand, and Vietnam
Majority of remittances to Bangladesh, Indonesia, and Pakistan comes from 7 ADD labor-receiving countries Share of remittances from 7 destination countries to total received by the country (%), 2019-23 avg 70 61 60 58 60 50 40 30 20 10 0 Bangladesh Indonesia Pakistan Source: World Bank-KNOMAD, Saudi Arabia s General Authority for Statistics Note: 7 destination countries include Bahrain, Kuwait, Malaysia, Oman, Qatar, Saudi Arabia, and the United Arab Emirates
Remittance flows to 10 labor-sending countries of the Abu Dhabi Dialogue are larger than the sum of FDI and ODA 280 263.5 ($ billion) Remittances 240 200 160 Foreign Direct Investment (FDI) 120 89 80 Official Development Assistance 40 20.1 0 Source: World Bank-KNOMAD staff estimates, IMF s WEO and BOP statistics Note: 10 origin countries include Afghanistan, Bangladesh, India, Indonesia, Nepal, Pakistan, the Philippines, Sri Lanka, Thailand, and Vietnam
Outward flows from ADD countries stagnated since 2014 280 ($ billion) 263.5 Inward remittances to 10 recipient countries 240 200 160 120 90.2 80 Outward flows from 7 source countries 40 0 Source: World Bank-KNOMAD staff estimates, IMF s WEO and BOP statistics Note: 10 origin countries include Afghanistan, Bangladesh, India, Indonesia, Nepal, Pakistan, the Philippines, Sri Lanka, Thailand, and Vietnam
In Saudi Arabia, number of foreign workers have been increasing since 2021Q4 Number of registered foreign workers in Saudi Arabia (millions) 8.5 8.0 7.5 7.0 6.5 6.0 5.5 5.0 Source: World Bank-KNOMAD, Saudi Arabia s General Authority for Statistics
Key messages 1. Labor mobility and remittance flows are a lifeline to the 17 countries of the Abu Dhabi Dialogue (ADD).* Share of foreign workers in population is among the highest in the world. Inward emittances to 10 ADD origin countries exceeded $264 billion in 2023. 2. Developmental impacts of remittances can be augmented by reducing remittance costs, worker- paid recruitment costs, remittance-linked financial products 3. Diaspora finances can be leveraged for private capital mobilization and strengthening a country s debt position: a) vis diaspora bonds, b) nonresident deposits, c) future-flow securitization, d) improving sovereign rating
Fees for sending money to 10 origin countries remain exorbitant, especially to Bangladesh (Costs to send $200 in 2023Q3, percent) High-Cost Corridors 11.7 12 Low-Cost Corridors 10.0 9.7 9.6 8.4 9 6 2.1 3 2.0 2.0 1.7 1.4 3% SDG target 0 Source: Remittance Prices Worldwide database and KNOMAD/World Bank staff Note: 10 origin countries include Afghanistan, Bangladesh, India, Indonesia, Nepal, Pakistan, the Philippines, Sri Lanka, Thailand, and Vietnam
Developmental impacts of remittances can be increased by reducing worker-paid recruitment costs
A summary of the Global Remittances Agenda Size, corridors, channels Counter-cyclicality Effects on poverty, education, health, investment Policy (costs, competition, exchange controls) Monitoring, analysis, projection Mobile money, cryptocurrency (Payment platforms/instruments) eKYC, De-risking, anti-money laundering (AML/CFT) Clearing/settlement, capital adequacy, disclosure, cross-border arbitration Retail payment system Deposit and saving products Mortgage, consumer loans, microfinance Credit history for MFI clients Insurance products Philanthropy Financial access for households, SMEs Capital market access for countries, companies Diaspora bonds Bonds backed by future remittances as collateral Sovereign credit rating
Key messages 1. Labor mobility and remittance flows are a lifeline to the 17 countries of the Abu Dhabi Dialogue (ADD).* Share of foreign workers in population is among the highest in the world. Inward emittances to 10 ADD origin countries exceeded $264 billion in 2023. 2. Developmental impacts of remittances can be augmented by reducing remittance costs, worker- paid recruitment costs, remittance-linked financial products 3. Diaspora finances can be leveraged for private capital mobilization and strengthening a country s debt position: a) vis diaspora bonds, b) nonresident deposits, c) future-flow securitization, d) improving sovereign rating
Reliance on remittances tends to be higher in sub-investment grade countries 5.0 (% of GDP, 2022) 4.1 4.0 3.6 3.1 3.1 3.0 2.0 1.7 1.7 1.4 1.2 1.1 1.0 0.0 BBB- and above BB B CCC and below Unrated -1.0 -0.9 -2.0 Remittance FDI Source: Staff estimates based on World Development Indicators and S&P. There were 12 countries in BBB- and above, 17 countries in BB, 27 in B, 13 in CCC and below, and 40 unrated countries.
A Surge in Nonresident Deposits in India India s NRI deposits (US$ billion) 160 143 140 120 100 80 60 40 20 0 2005 2015 1997 1998 1999 2000 2001 2002 2003 2004 2006 2007 2008 2009 2010 2011 2012 2013 2014 2016 2017 2018 2019 2020 2021 2022 2023
Diasporas can be leveraged for raising financing for development, especially via diaspora bonds Cheaper, longer-term, predictable funding for investment projects Diaspora members more loyal than foreign investors Patriotic discount 15 Interest rate, % 1998-2000: India raised over $9 billion via diaspora bonds Israel bond UST 10-yr 10 2017: Nigeria raised $300 million via diaspora bonds 5 0
$100 billion financing potential by leveraging diaspora resources? Mobilize diaspora saving through diaspora bonds ($50 bn) Reduce remittance costs ($20 bn) Reduce recruitment costs ($20 bn) Mobilize diaspora philanthropy ($10 bn) Remittances and diaspora investments enhance sovereign credit ratings and reduce borrowing costs
