UNCTAD Deputy Secretary-General Petko Draganov has told the fifty-sixth executive session of the Trade and Development Board that remittances to the least developed countries (LDCs) have continued to increase, even during the global financial crisis, and that these flows of money are critical and relatively stable sources of income for LDCs.
Mr. Draganov described these largely private transfers of money, which amounted to some $27 billion in 2011, and the LDC diaspora of some 27.5 million people around the world, as "key resources for development".
The Least Developed Countries Report 2012, subtitled Harnessing Remittances and Diaspora Knowledge to Build Productive Capacities, was released on 26 November.
The Director of UNCTAD's Division for Africa, Least Developed Countries and Special Programmes, Mr. Taffere Tesfachew, then reviewed the findings and recommendations of the Report in detail. Mr. Tesfachew said that despite the vast sums transferred home to LDCs by emigrants working abroad, "not many LDCs have clear national policies or strategies regarding remittances or their diaspora." He recommended that this should be changed, as LDC nationals working overseas and the money that they sent home to their families had "direct implications for two of the major constraints facing the LDCs, namely shortages of capital, and of skill and know-how."
"It is imperative that LDCs explore and widen further the range of options for resource mobilization available to them," he continued, noting that LDCs had much economic ground to make up, and that global economic growth was stagnating and showing signs of being weak for some time to come.
"The remittances sent to LDCs, which are inherently private flows of money, are spent first and foremost on consumption - on the basic needs of families," he said. "That can spur local economic development, but capturing such vast sums for investment and durable economic progress requires winning the trust of the senders and recipients of remittances."
Mr. Tesfachew said that banking systems needed to be further developed and made more widely available to LDC populations. In addition, the costs of transferring money home needed to be reduced. Currently, transfer costs to LDCs were averaging 12 per cent of the total amount sent, about a third higher than the cost of transfers to other developing countries. The high rates meant that many transfers did not occur officially but through informal networks, limiting the benefit that the vast sums involved could have for investment and other sources of LDC economic growth.
"Improving banking services and increasing competition among transfer services could help to bring those rates down," he said. "For example, for the whole of sub-Saharan Africa, 65 per cent of all remittance payout locations are controlled by two money transfer offices."
Likewise, said Mr. Tesfachew, it was important for LDC governments to develop trust among the vast overseas diaspora to enhance the contributions that these often highly educated workers could make to their home economies in the form of knowledge and business know-how. Among other things, home countries needed full information on the skills and knowledge accumulated in the diaspora, and needed to encourage the diaspora to organize into knowledge networks.
"Home countries should actively support these networks," he continued, "because the experience of countries in Asia has shown that strong connections with the diaspora allow better integration into global production networks… There are many examples to show that knowledge and know-how accumulated by the diaspora have helped domestic firms in home countries to acquire new capabilities and technologies, and to improve their capacities for learning to learn."