The World Bank (WB) will release this month its general principles for international remittance systems as it and the International Monetary Fund (IMF) attempt to capture migrant workers’ money flowing through informal channels.
In her presentation at a meeting in Bangkok, Thailand last May, WB official Marilou Uy cited that a WB unit is crafting the general principles governing countries’ policies on remittances.
The presentation of Uy, WB director for financial sector operations and policy, was titled “The Role of Public Policy and Remittances”. It was presented to more than a hundred financial executives in Bangkok during the second Asia Pacific Economic Cooperation (APEC) policy dialogue held May 26-27. The dialogue on the role of the private sector in shifting from informal to formal remittance systems comes after the WB released a report, Global Development Finance 2003, saying remittances have become an important and stable source of financial inflows to developing countries.
Uy’s paper defined remittances as the sum of workers’ remittances, compensation of employees, and migrant transfers. Citing the World Bank’s Global Development Finance 2005 report, Uy’s presented that inflows to developing countries reached beyond $120 billion end-2004 from less than $40 billion in 1990.
In his presentation, Bangko Sentral ng Pilipinas Deputy Governor Nestor A. Espenilla Jr., one of three speakers from the Philippines in the conference, presented that from $6 billion in the year 2000, OFW remittances hit $8.54 billion in 2004, which is 52.65 percent of the country’s gross international reserves and roughly 14 percent of the Philippines’s gross domestic product.
Espenilla’s presentation also cited five key regulatory challenges in OFW remittance flows which are: 1. money laundering channels, 2. low transaction cost, convenience and access, 3. consumer protection, 4. operational risk management, and 5. proper recording and monitoring.
Uy’s presentation emphasized the international lender’s seriousness in tackling the issue of remittances, so much so that the WB’s Global Economic Prospects 2006 for release this year would center on international remittances and migration.
Key Issues
A KEY issue the WB considers in its policy recommendation is reducing remittance costs through improved financial systems and infrastructure.
“Reducing remittance fees is likely to increase annual remittance flows to developing countries”. “To date, remittance costs remain regressive and high on average,” Uy pointed out.
On the average, sending money to the Philippines and Mexico through Moneygram and Western Union is higher compared to sending it through other remittance firms. According to Uy, sending $100 through Moneygram and Western Union to the Philippines from the US exacts above 14 percent in fees compared to other remittance firms that charge below that range. However, the two firms are charging less for every $1,000 remittances sent to Mexico from the US compared to other remittance companies.
Another key issue for public policy on remittances is the regulatory regime for anti-money laundering and financing terrorism. This was emphasized by IMF’s Chee Sung Lee, that remittance flows are an important source of external funds for many countries, “such flows may go through informal systems.”
“Informal remittance providers may pose a particular risk of misuse for ML and the financing of terrorism (FT),” Chee added.
“The regulatory regime needs to introduce ways of ensuring financial integrity without unnecessarily reducing access to remittance services,” Uy said.
Basically, Uy said, “policymakers should understand and enhance the development impact of remittance.”
This key issue comes from the WB’s belief that remittances directly reduce the severity of poverty, smooth consumption, and affect household investments in education, health, land and housing.
Her data cited that with remittances in the denominator, the Philippines’ debt as percent of exports would only hit below $151 billion, the amount of debt as percent of exports the Philippines would have without remittances in the calculation.
The fourth key issue for public policy focuses on improving data on remittances and migration as “reliable data on remittances are keys to our understanding of their development impact.” /MP http://madyaas_pen@yahoo.com
In her presentation at a meeting in Bangkok, Thailand last May, WB official Marilou Uy cited that a WB unit is crafting the general principles governing countries’ policies on remittances.
The presentation of Uy, WB director for financial sector operations and policy, was titled “The Role of Public Policy and Remittances”. It was presented to more than a hundred financial executives in Bangkok during the second Asia Pacific Economic Cooperation (APEC) policy dialogue held May 26-27. The dialogue on the role of the private sector in shifting from informal to formal remittance systems comes after the WB released a report, Global Development Finance 2003, saying remittances have become an important and stable source of financial inflows to developing countries.
Uy’s paper defined remittances as the sum of workers’ remittances, compensation of employees, and migrant transfers. Citing the World Bank’s Global Development Finance 2005 report, Uy’s presented that inflows to developing countries reached beyond $120 billion end-2004 from less than $40 billion in 1990.
In his presentation, Bangko Sentral ng Pilipinas Deputy Governor Nestor A. Espenilla Jr., one of three speakers from the Philippines in the conference, presented that from $6 billion in the year 2000, OFW remittances hit $8.54 billion in 2004, which is 52.65 percent of the country’s gross international reserves and roughly 14 percent of the Philippines’s gross domestic product.
Espenilla’s presentation also cited five key regulatory challenges in OFW remittance flows which are: 1. money laundering channels, 2. low transaction cost, convenience and access, 3. consumer protection, 4. operational risk management, and 5. proper recording and monitoring.
Uy’s presentation emphasized the international lender’s seriousness in tackling the issue of remittances, so much so that the WB’s Global Economic Prospects 2006 for release this year would center on international remittances and migration.
Key Issues
A KEY issue the WB considers in its policy recommendation is reducing remittance costs through improved financial systems and infrastructure.
“Reducing remittance fees is likely to increase annual remittance flows to developing countries”. “To date, remittance costs remain regressive and high on average,” Uy pointed out.
On the average, sending money to the Philippines and Mexico through Moneygram and Western Union is higher compared to sending it through other remittance firms. According to Uy, sending $100 through Moneygram and Western Union to the Philippines from the US exacts above 14 percent in fees compared to other remittance firms that charge below that range. However, the two firms are charging less for every $1,000 remittances sent to Mexico from the US compared to other remittance companies.
Another key issue for public policy on remittances is the regulatory regime for anti-money laundering and financing terrorism. This was emphasized by IMF’s Chee Sung Lee, that remittance flows are an important source of external funds for many countries, “such flows may go through informal systems.”
“Informal remittance providers may pose a particular risk of misuse for ML and the financing of terrorism (FT),” Chee added.
“The regulatory regime needs to introduce ways of ensuring financial integrity without unnecessarily reducing access to remittance services,” Uy said.
Basically, Uy said, “policymakers should understand and enhance the development impact of remittance.”
This key issue comes from the WB’s belief that remittances directly reduce the severity of poverty, smooth consumption, and affect household investments in education, health, land and housing.
Her data cited that with remittances in the denominator, the Philippines’ debt as percent of exports would only hit below $151 billion, the amount of debt as percent of exports the Philippines would have without remittances in the calculation.
The fourth key issue for public policy focuses on improving data on remittances and migration as “reliable data on remittances are keys to our understanding of their development impact.” /MP http://madyaas_pen@yahoo.com
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