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Opinions of Saturday, 9 January 2010

Columnist: Tuokuu, Francis Xavier

Remittances From Abroad: A Tool For National Development

Remittances are defined as the monetary transfers that a migrant sends to his or her country of origin or, in other words, financial flows associated with migration. Most remittances are personal cash transfers from a migrant worker or immigrant to a relative in the country of origin. Some scholars and academics go further to add transfers of skills and technology, as well as “social remittances” (Baruah, 2006, in OSCE, IOM, ILO, 2007). Over the years, remittances have contributed to the economies of many countries which have led to rapid development especially in the areas of infrastructure, family wellbeing, among others.

Remittances sent back home by migrants are a powerful financial force in developing countries. It is estimated that after foreign direct investment and trade related earnings, remittances form the largest financial flow to developing countries, often far larger than official development assistance (Castles and Delgado, 2008, page 222). According to the balance of payments data, total transfers to the Ghanaian economy ranged between US$ 400 million in 2002. Of the total transfers, private unrequited transfers, increased from US$201.9 Million in 1990 to almost US$ 680Million in 2002(Manuh, 2005).

In Senegal, remittances grew continuously in five years from 100billion F CFA to 242billon F CFA (Manuh, 2005). The World Bank also reported in its review of 2004 data that, India was the world’s top remittance receiver, followed by China and then Mexico. Philippines ranked 5th and Morocco 10th (World Bank, 2006 a: 90, in Castles and Delgado, 2008 page 274).

Furthermore, data from the Commission of Filipinos overseas has it that, between 1981 and 2003, an average of 55, 000 Filipinos left the country each year as permanent emigrants (Castles and Delgado, 2008, page 185). Remittances go a long way to contribute to poverty reduction. This is because quite a number of people depend on their relatives abroad from their feeding to their housing facilities. Migrant remittances therefore can not be underestimated as they acquire vital imports or pay off external debts (World Bank, 2006 in OSCE, IOM, ILO, 2007).

However, the global economic downturns have negative consequences on remittance flow and this means that development projects in most developing countries will be cut down if not come to an end. Many people in the advanced countries who contribute to remittances have been laid off their jobs. Statistics available indicate that, the unemployment rate in February, 2009 was the highest since 1983, and employers cut 651,000 workers from payrolls. The US has already lost 4.4 million jobs since the recession begun in 2007 (Daily Guide, 12th March, 2009, page 9). Latest figures given by Joy Business Report show that monies sent from Ghanaians abroad to relations home, between January and February, 2009 stands at $250million, a drop from $ 300million registered for the same period last year (The Ghanaian Times, 14th April, 2009, page 27).

The global economic meltdown has taught us great lessons, one of which is, not to over rely on one sector for our development including depending on remittances instead of embarking on diversification though remittances contribute a lot to the GDP of most developing countries. Remittances amount to approximately 8% of Ghana’s GDP (estimated at US$ 6, 160million in 2002, Manuh, 2005, page 139).

The way forward is that African governments should invest in their people since that is the surest way of minimizing if not completely eradicating poverty in Africa. Japan, Singapore, South Korea, Malaysia all did it and it worked. African countries can do same. From South Korea to Singapore, history shows that countries thrive well when they invest in their people and in their infrastructure (Daily Graphic, 13th July, 2009.

In his speech to the parliament of Ghana President Obama said that, “development depends on good governance”. That is the ingredient which has been missing far too many places far too long. That is the potential that can unlock Africa’s potential. And that is a responsibility that can only be met by Africans (Daily Graphic, 13th July, 2009, page 9). Therefore, no matter the amount of remittances received from abroad and the amount of donor support, if we fail to govern well , to account well and lack political will and direction, Africa will continue to be poor till the end of time.

In conclusion, it is important to state that the contributions of remittances to national development especially in developing countries can not be over-emphasized. What is needed is a policy measure to support legal migration and frown on upon illegal migration. The Philippines is one such country that has many lessons to offer when it comes to the issue of migration and its consequences. I must also be quick to add that, remittances have fallen over the past few months as a result of the global economic downturns. As such, development funding should be looked at holistically and not depend on one source or over rely on remittances from abroad.

Francis Xavier Tuokuu

University of Ghana,

P. O. Box LG 59

Legon – Accra.