Analysis & Opinions - Business Daily

Putting Remittances to Good Use

| Aug. 30, 2007

It has long been assumed that the emigration of skilled people impoverishes developing countries. The problem, however, may be that their remittances are not used to support economic development.

The World Bank reports that immigrants sent to their countries of origin nearly US$276 billion in 2006, twice the figure for 2000. According to estimates by the Associated Press, if the émigrés were set up as a company, its annual value would rank third on the Fortune 500 list behind Wal-Mart and Exxon Mobil.

Despite such earning power, the emigration of skilled workers is seen as a pervasive problem in the least developed countries (LDCs).

Nearly one million skilled persons from 50 of the poorest countries in the world lived in the developed nations, according to the Least Developed Countries Report 2007, prepared by the UN Conference on Trade and Development.

That is a full 15 per cent of all university educated people from LDCs. But rather than constrict the movement of these skilled workers, these countries would benefit more by devising policies that enable them to tap into global knowledge networks.

One of the main obstacles to tapping into global expert networks is the lack of capacity in developing countries to make effective use of  the available knowledge.  For mutual gain, developing countries need to have a basic level of capacity to use existing technologies.

Such absorptive capacity requires initial investment in human capital, entrepreneurship, institutions and infrastructure, and a long term development vision.  For instance, expatriates from Israel, Taiwan, India and China have significantly contributed to the development of their countries.

Africa could do the same in key sectors such as agriculture, health, energy, construction, and telecoms using emerging technologies. These fields are being radically transformed through advances in informatics, genomics, material sciences and nanotechnology.

Focusing on economic renewal would allow émigrés to use their skills and connections to set up profitable industries in their countries of origin. For decades India bemoaned the migration of its skilled expertise to industrialised countries. Today it is benefiting from their knowledge and connections, largely because it has over the years built a strong intellectual and commercial infrastructure through which émigrés are operating.

One possible starting point for developing countries is to design long-term technology-based economic strategies. Such strategies focus on strengthening universities and research institutes, creating a favourable environment for business incubation and providing easy access to communications facilities.

Not only will such capabilities help the countries take advantage of the available expertise, it will also slow down the migration of skilled.

Remittances have become key sources of foreign revenue for African countries, exceeding the value of exports in countries like Bangladesh, Lesotho, Uganda, Senegal, Cape Verde and Samoa.  

Only a small part of the funds remitted to developing countries is used to build capacity for long-term development. Instead, they are largely used for consumption.

New laws on émigrés will achieve little if Africa fails to build the basic intellectual infrastructure and create a favourable investment environment through which to leverage the knowledge and connections of émigrés.

Prof Juma teaches at Harvard University’s Kennedy School of Government where he directs the Science, Technology, and Globalisation Project .

For more information on this publication: Please contact the Belfer Communications Office
For Academic Citation: Juma, Calestous.“Putting Remittances to Good Use.” Business Daily, August 30, 2007.