Nepali Doctor in the Maldives.. Photo: IOM/Natalie Oren

REMITTANCES AND BEYOND: COVID-19 IMPACTS ALL FORMS OF MIGRANT CONTRIBUTIONS TO DEVELOPMENT

The International Day of Family Remittances (IDFR) has traditionally focused on raising awareness around migrants and remittances. Beyond remittances, however, migrants and diaspora contribute to countries of origin and destination economically in many more ways - through labour force participation, entrepreneurship and self-employment, small scale investments including real estate/portfolio markets, nostalgia/ cross border trade, and the transfer of social and technological capital. On this 16th of June, when all eyes are on the World Bank’s predicted 20 % drop in migrant remittances this year, it is important to recognize the key factors behind this drop and to draw the attention to how broader economic contributions of migrants and diaspora are affected and could be safeguarded in the future.

 

DROP OF REMITTANCES CAUSED BY LOSS OF INCOME

 

Remittances are the most visible form of migrants’ economic contributions to their home countries. At an economy-wide level, remittances form a substantial part of several countries’ GDP and help shore up foreign reserves.  However, being private money 75 per cent of which are used to cover essentials the anticipated drop in remittances will be particularly felt by migrants and their families who may no longer be able to afford covering school fees, medical expenses, housing, or even food. COVID19 lockdowns brought significant limitations to the business of money transfer operators (MTOs) which migrants rely on, highlighting the importance of digitalization in service provision.  At the same time, an even more important factor disrupting remittances flows remains the disproportionate loss of income by migrants stranded in countries of destination or who managed to return, faced with little prospect of economic activity in their communities of origin, similarly affected by economic stalemates. Similar to the 2008 global financial crisis, when the increase in unemployment of foreignborn workers in the EU28 countries was significantly higher than that of nativeborn workers, during the COVID19 crisis too, migrant workers are more exposed to the loss of employment and risks of being stranded in situations of vulnerability. With a considerable number of migrant workers being employed in low-skilled professions with high level of informality, they are particularly vulnerable owing to limited savings and access to social security.

 

 

LOCKDOWN AND MOBILITY RESTRICTIONS EXPOSE SECTORS AND BUSINESSES TRADITIONALLY RELIANT ON MIGRANTS AS THEIR WORKFORCE

 

A large proportion of the estimated 164 million migrant workers are impacted by COVID-19 related restrictions, both in term of immediate loss of jobs but also their capacity to engage in economic activity abroad even once these restrictions start loosening up. Strict lockdown measures have disproportionally impacted sectors with high reliance on migrant labour. In the transport sector, more than 52 thousand restrictions to mobility were put in place worldwide. In the tourism sector, the United Nations World Tourism Organization predicts a 60 – 80 per cent decline in international tourism. In the agriculture sector, due to movement restrictions, producers experience severe labour shortages, which resulted in disruptions to harvesting, processing and distribution, and impacting agri-food systems more broadly. The construction sector, which employs migrant manual workers, especially in the Middle East, has been similarly negatively impacted. Finally, the healthcare sector itself, experiencing an unprecedented increase in demand for its services, employs has a large migrant component with nearly 20% of healthcare workers in OECD countries having a migrant background.

 

IMPACT ON MIGRANT ENTREPRENEURSHIP AND TRADE

 

Migrant and diaspora entrepreneurship is primarily concentrated in small and medium-sized Enterprises (SMEs) and micro-businesses. COVID-19 has particularly impacted micro-businesses and SMEs. ILO estimates that around 81 per cent of employers and 66 per cent of own-account workers are in countries with recommended or required workplace closures with severe impacts on current operations and solvency. Migrants and diaspora trade and operate as cross-border traders. Trade in goods and services in the era of the COVID-19 pandemic is seeing a slowdown owing to disruption of value chains, border restrictions, and trade policy shocks, such as commodity prices. COVID-19 has exposed vulnerabilities of the global and regional supply chains. During the pandemic there were severe disturbances in about a quarter of intermediate inputs coming from China used in high-tech exports in the US, Japan, Korea, and Mexico. Migrant businesses, even small-scale suppliers of goods and services or nostalgia goods, can be linked directly or indirectly to supply chains. Further, informal cross-border trade in goods and services between neighboring countries and at border markets which is conducted by small, unregistered traders suffered due to lockdown and travel restrictions.

 

WHAT CAN WE DO TO SAFEGUARD MIGRANTS CONTRIBUTIONS? A FEW SUGGESTIONS

 

Monitor the situation and evolve appropriate responses: As industries and sectors respond and restructure to the COVID 19 pandemic, labour mobility is likely to evolve, with some jobs being created while others becoming obsolete either by design, or default. Effective responses at each distinct phase of the COVID-19 crisis will depend on good data collection and analysis relating to migrant movement and concerns, the financial sector, economy wide developments and national policy measures.

 

Access to social security and fiscal stimulus packages: As of now, 190 countries introduced some kind of a social protection programme in response to COVID-19. Most countries also implemented some form of financial stimulus. These mechanisms can be an important safety net for migrant employees, self-employed individuals, entrepreneurs, and traders. Ensuring awareness of and access to financial stimulus packages and other employment measures is important for both diaspora and stakeholders in the migration continuum, such as remittance services providers.

 

Remittances specific: During the past few months, the international community worked intensively to evaluate remittance developments and formulate responses for governments, the private sector and diaspora associations. Two notable initiatives in this regard are the Swiss and UK government-led Call to Action on “Remittance in Crisis: How to Keep Them Flowing” and the International Fund for Agricultural Development (IFAD) coordinated Remittance Task Force. Migrant and Diaspora areas for consideration include:

 

Digital Remittance Transfers: A technology-centric framework can bring remittance costs down, largely due to the lower physical infrastructure requirements, as was the case for mobile money transfers in Sub-Saharan Africa.

 

Informal Remittances: It is estimated that informal remittances amount to 35-75 per cent of official remittances to developing countries with significant regional variations, exact figures are however difficult to obtain. Digitization and falling commission charges may reduce reliance on informal channels. Enabling behavioral change from informal towards formal remittances including through financial and digital literacy is therefore important.

 

Inter-relationship between debt and remittances: Some of IOM’s initial work on debt, migration and remittances for South and South-East Asia indicates that debt can be both a driver and an outcome of migration. Migrant households incur loans to cover education, healthcare, farm support and business establishments. Migrants also take out debt to cover migration-related costs, e.g. recruitment, transportation, documentation and medical checks. Remittances are used to service such debts as, for instance, in rural households in South-East Asia which reported debt repayments as the primary use of remittances as well as in Bangladesh and some parts of South America. In the COVID- 19 context, migrants debt sustainability becomes important as remittances and income levels shrink.

 

Financial inclusion:  In 2017, only 63 per cent of adults in developing economies had an account at a financial institution, well below the 93 per cent in developed economies. The COVID-19 pandemic provides an opportunity through greater digitization and expanding the migrant and diaspora financial ecosystem to enable greater financial inclusion. Financial/ digital literacy enables informed choices by migrants on the cheapest and most secure means of sending money home, as well as saving possibilities. Enhancing the financial ecosystem, in terms of creating or re-adapting financial products to migrant- specific needs including savings accounts, insurance products, mortgages, investment products, portfolio investment and real estate purchases can further boost financial inclusion.

 

Diaspora contributions: A key and often forgotten factor is the need for active inclusion of diaspora and migrants who are willing contributors in times of crisis. In the context of the COVID 19 pandemic, governments can deepen relations with diaspora communities and strengthen virtual collaborations with skilled diaspora, such as health care professionals via telemedicine.

 

Migrant enterprises and trade opportunities: migrant enterprises lack access to finance and are least likely to benefit from COVID-19 linked fiscal stimulus measures. Migrant entrepreneurship and trade can consider the applicability of financial stimulus packages and other schemes to access credit, loan guarantees, microfinance. In the case of returning migrants, access to such schemes would enable longer-term livelihood plans. In addition in the context of internal migration, the creation of employment opportunities in the rural context is both an opportunity and a necessity.

 

Looking to the future of work:  Finally, the world of work even prior to the COVID pandemic was already changing due to technology and globalization. COVID19 may result in newer ways of working, i.e. digital versus physical, changes in business models, e.g. 3D printing versus manufacturing, changing workers preference, i.e. remote versus on site working and potentially both job destruction and job creation. Developments in the future of work arena can act as both a driver of migration - if there is massive unemployment - as well as reducing migration pressure, if creative solutions can be found. These developments are likely to influence migration flows resulting in what some economists refer to as a “period of unpredictable and fast-changing migration flows.” A key challenge will therefore lie in managing these transitions.

 


[1] Senior Economic Development Specialist, International Organization for Migration. The author is grateful to Marina Manke, Head Labour and Human Development Division, IOM and Sarah Lima, Intern, IOM for the substantive comments provided in the preparation of this piece. While this piece is focused on the economic contributions made by migrants and diaspora, it is important to recognize that these economic contributions are better enabled if migrant’s social protection and rights are safeguarded. For the purposes of this piece the term migrant refers to regular migrants and is deemed to include diaspora.