The Least Developed Countries Report 2012

Harnessing Remittances and Diaspora Knowledge to Build Productive Capacities

The least developed countries (LDCs) are a group of countries classified by the United Nations as least developed in terms of their low gross domestic product per capita, weak human assets and high degree of economic vulnerability.

The Least Developed Countries Report 2012 addresses the issues of remittance flows to LDCs and the potential role of diasporas in LDCs’ development. It argues that with the right policies and international support, LDCs could enhance the benefits from remittances and the knowledge and know-how accumulated in their diasporas. Using evidence and policy lessons from other countries, the report shows how LDCs could better harness remittances and diaspora knowledge to build their productive capacities.

Regarding LDCs’ recent economic performance, the Report argues that the uncertain global economic recovery continues to undermine the factors that enabled them to attain higher growth rates between 2002 and 2008. After a slight improvement in 2010, the group performed less favourably in 2011, signalling major challenges ahead. Moreover, if another global downturn dampens growth prospects for the developing economies, LDCs, as major commodity exporters, will be hard hit.

The Report then examines the impact on LDCs of past and current migration patterns that have created diasporas in different parts of the world, and the potential for utilizing the knowledge and experience gained by diasporas for the development of the home countries. Given the increasing magnitude of remittances in LDCs in recent years, the Report explores both their beneficial as well as possible adverse impacts. The evidence suggests that remittances contribute to poverty reduction and improved health care and education, and constitute a significant source of external financing whose availability, if managed through appropriate policies, could prove particularly valuable for capital-scarce LDCs. However, this Report cautions that remittances may increase dependence on external sources of financing, thereby further increasing LDCs’ vulnerability to external shocks and further reducing their policy space. If remittances are to be harnessed for increasing productive capacities, they must be viewed pragmatically, with the recognition that ultimately these are private sector resources, and due consideration must be given to each country’s specificities.

Other forms of diaspora engagement with home countries such as diaspora knowledge networks can potentially facilitate technological catching-up in LDCs and thus enhance development of productive capacities. While concerns about the adverse impact of brain drain remain valid, the focus of the recent debate has shifted to how to engage with diasporas and maximize their contribution to development. In this respect, the emphasis has been placed on their latent role as “knowledge brokers” who could facilitate the emergence of new trade patterns, technology transfer, skills and knowledge exchange. Through innovative forms of network-based industrial policy, LDCs could offset some of the adverse impacts of brain drain on their economies. The Report proposes novel ways to mobilize the diaspora networks that would boost the development prospects of LDC economies.

Active engagement with diasporas is a recent phenomenon in the LDCs. This Report argues that more systematic policy action is needed in order to enhance the contributions of diasporas to development. This requires mobilization and coordination of the efforts and resources of different stakeholders, especially home country institutions and firms, host country governments, diaspora organizations, international organizations and bilateral donors. The Report concludes by identifying policies, including lessons from the experiences of other countries, which LDCs may wish to consider in designing policy frameworks for harnessing remittances and diaspora knowledge to build productive capacities.

The Least Developed Countries Report 2012 [English] - Harnessing Remittances and Diaspora Knowledge to Build Productive Capacities  (UNCTAD/LDC/2012)
26 Nov 2012
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Least Developed Countries Report 2012 (Overview) [English] - Harnessing Remittances and Diaspora Knowledge to Build Productive Capacities  (UNCTAD/LDC/2012 (Overview))
26 Nov 2012