KUALA LUMPUR — New economic data shows that foreign remittances sent to Asian countries hit US$300 billion for the first time last year, underscoring the ever-rising importance of overseas work for the region’s economies despite world-beating growth rates.
Freshly released World Bank statistics put the total amount of remittances for 2018 to countries in South Asia, Central Asia, Southeast Asia, East Asia and the Pacific at $299.6 billion, a sum that does not include what are believed to be substantial informal flows of money sent home by regional migrants.
Globally and in Asia, remittance figures are growing year by year, despite heady 6-7% gross domestic product (GDP) growth in countries such as the Philippines, a nation which has around 10 million of its citizens working abroad across various vocations.
The 2018 amount of regional remittances was around $25 billion greater than in 2017 and $125 billion more than in 2008. Worldwide, remittance flows now account for more than foreign direct investment to middle and low income countries, excluding China, the World Bank data shows.
The Philippine embassy in Kuala Lumpur, like in all countries with a large population of Filipino expats, usually sees a steady stream of people, plastic folders and binders of paperwork in hand, making their way in and out of the compound throughout the course of the day.
Among those at the embassy on a recent afternoon was M.J. de Guzman, a 36-year-old from the north of the Philippine island of Luzon who has been in Malaysia for two years working as a croupier in a casino.
Now on her second stint as a Malaysia-based Overseas Filipino Worker (OFW), to use the Philippine government’s designation, she thinks there are better job prospects at home nowadays than during her first term working in Malaysia a decade ago.
Nonetheless, she “will extend for one of two years” in Malaysia, where average incomes are three times higher than in the Philippines, which received nearly $34 billion in remittances, equivalent to 10.2% of its GDP, in 2018.
World Bank GDP figures for 2017 show major remittance recipient countries such as Pakistan and the Philippines having GDPs only slightly bigger than the $300 billion regional remittance total, which was substantially larger than the combined GDPs of Vietnam and Myanmar, a country with an estimated 5 million of its citizens working abroad.
While the biggest remittance amounts worldwide were those sent back to China and India, $67 and $78 billion, those numbers amounted to 0.5% and 2.9% respectively of the two Asian giants economic output.
As well as being a remittance destination, China is also a big source, the world’s 7th highest in 2018 with an estimated $16 billion sent out from the world’s second biggest economy. Smaller remittance totals to countries such as Nepal, Bangladesh, Pakistan and the Philippines represented much bigger shares of those countries’ economies.
The new statistics highlight the dependence of tens of millions of people on money sent from abroad by loved ones working in wealthier neighbors such as Singapore, Malaysia and Hong Kong — or further afield in migrant worker magnets such as the United Arab Emirates, Saudi Arabia, as well as in Europe and North America.
2018 remittances made up an estimated 5.4% of Bangladesh’s GDP, 6.6% of Vietnam’s and 6.8% of Pakistan’s. For other countries in the region, remittances make up more than a quarter of the economy: 28% in Nepal, and over 30% for Kyrgyzstan, Tajikistan and Tonga.
And while remittances are set to keep growing as regional economies expand, the money flows are vulnerable to wider fluctuations in the global economy, seen in the plummeting of remittances to Asia in the wake of the global financial crisis to $106 billion in 2009 from $175 billion the year before.
Seemingly peripheral factors can also affect remittance flows. While the impact of oil price fluctuations on inflation and trade balances is well-known, remittances might not be the first thing that springs to mind when it comes to assessing potential economic knock-on effects.
But according to the World Bank, remittances to South Asia increased by an estimated 12.3% in 2018, a surge that the Bank said was “driven by stronger economic conditions in high-income economies (particularly the US) and strong oil prices that had a positive impact on remittance outflows from some GCC countries.”
Remittance numbers will remain high as migrant numbers, now estimated at over 200 million people worldwide, continue to grow. While countries such as Malaysia and Thailand launch intermittent crackdowns on informal migrants from neighbors such as Bangladesh, Cambodia, Myanmar, and Nepal, other countries are allowing in greater numbers of migrants.
Historically averse to immigration, Japan recently named nine countries — Cambodia, China, Indonesia, Mongolia, Myanmar, the Philippines, Thailand, and Vietnam — as beneficiaries of a new scheme to allow 345,000 foreign workers to take up jobs in sectors facing labor shortages in a country that is on the demographic cusp of severe population decline.
Malaysia hosts an estimated five million immigrant workers, many of them without official status. But despite on-off crackdowns and deportations, Malaysia has signed agreements with sending countries such as Nepal, making employers liable for costs such as airfares and visas for workers hired from abroad.
But there are hurdles to sustaining smooth remittance flows. The average worldwide charge for remitting money is 7%, costs that are generally higher for Asia and South Asia in particular.
While the spread of internet-based or mobile phone technology could, in theory, make transferring money less costly, legal hurdles remain for so-called FinTech to be used as a means of moving funds electronically across borders.
According to a summary of a February conference on remittances staged by the International Fund For Agricultural Development, “FinTech industries struggle in still harsh regulatory environments: licensing is often difficult or time-consuming, and regulators are wary of new products. Protections can be overly burdensome, with many markets disallowing international remittances altogether.”
Further down the line, the increasing uptake of automation in sectors such as manufacturing — jobs that migrants often fill — could undermine job prospects and in turn disrupt remittance flows from workers at risk of unemployment. But automation could also be a migration push factor as labor force disruption puts more people out of work.
Asian countries are as vulnerable to automation as anywhere else, be they sources of or destinations for migrant workers.
A 2016 report by the International Labour Organization estimated that over 50% of all jobs in Cambodia, Indonesia, the Philippines, Thailand and Vietnam could be “at high risk of displacement due to technology over the next decade or two.”Show