Examination of Witnesses (Questions 40
- 52)
TUESDAY 2 DECEMBER 2003
MR MASOOD
AHMED AND
MS SHARON
WHITE
Q40 Mr Davies: You force them to
do that if you only give them the right to come here temporarily
in the first place.
Mr Ahmed: I am talking about the
skilled workers who are here, so in a sense they are in the system
one way or another. What can one do to encourage that? What I
was suggesting there is that if they felt that by leaving at the
end of this period—
Q41 Mr Davies: I see. You are trying
to say that from the point of view of the future, going forward,
we should adopt two policies. We should have a temporary employment
programme for new immigrants and then they will have to go back,
but those who are already here will have the right to remain indefinitely
although they might lose that right if they leave, and those who
have not got a permanent right of residence or nationality we
should give some sort of Green Card to so they can do it and get
back and they have the option of returning.
Mr Ahmed: Yes.
Q42 Mr Davies: I want to pick you
up on a statistic you quoted which sounded as though it was very
significant, which if I recall exactly was that as a general and
approximate rule, where remittances into a country increase by
10%, poverty in that country reduces by 1.5%. Presumably you mean
that the national income increases by 1.5%, is that right? That
seemed to me a strange thing to say because it depends upon the
proportion of remittances to the national income.
Mr Ahmed: Absolutely right. The
precise formulation is where the share of remittances in national
income increases by 10%, so a 10% increase in the share of remittances
in national income is associated with a 1.5% increase in income
poverty, so it is a shared thing.
Q43 Mr Davies: I have a third clarification
point. You mentioned a figure which we heard last week from the
IOM for total remittances in this world being of the order of
$80 billion which, as you say, is about 50% higher than government
aid programmes. What proportion of that $80 billion total for
remittances is derived from the UK, in other words from the remittances
being sent out of the UK to other countries?
Mr Ahmed: I do not have the exact
number for the UK but I am happy to send it to you[7].
Q44 Mr Davies: I cannot imagine you
would produce an aggregation without knowing what the figures
were. We would be grateful to receive that helpful figure. Finally,
if I can come back on the matter of remittances because these
are very startling facts we have heard today and last week. Our
briefing last week was that between 13 and 20% of remittances
are absorbed in remittances costs by the banking system or by
the intermediaries that are handling the remittances and you have
quoted a figure of around 15% today. If you take 15% of the $80
billion a year, you are talking about $12 billion a year being
lost in this fashion, which is twice the total of your aid budget.
In other words, if you did find a solution to this you could go
out of business, giving the UK taxpayer all the UK aid budget
and the recipient countries would be twice as well off. This is
a problem which seems to me to be worth tackling, I put it no
higher than that. It is quite extraordinary that there should
be this degree of loss and equally extraordinary that very little
attention seems to have been focused on it from a policy point
of view. I would like to know whether you are working on this
and whether you have any policy recommendations at the present
time because my colleagues suggested very possible approaches
but you did not seem to be very taken by any of their suggestions.
Have you any of your own?
Mr Ahmed: I have not got the numbers
for remittances from the UK that I can share with you. When you
go by the number of 15% of $80 billion, what we have is evidence
that says that the costs of remittances can be quite high, as
high as 15, in some cases 20%. I do not think there exists, at
least not that I am aware of, an assessment of what is the average
cost that is paid. In other words, not all remittances are transmitted
at 15% or 18% cost. I suspect that the actual figure will be considerably
smaller than $12 billion because some share of the remittances
will actually be going through channels that are more efficient
than the 15% cost.
Q45 Mr Davies: We had a meeting last
week with the IOM, which I think you would consider a reasonably
well-informed organisation in this, although I have not probed
their methodology and perhaps we should, and the written evidence
from Mr McKinley, their Director General in New York, was that
the range was between 13% and 20%. Depending on the weighting,
in other words depending on whether the bulk of that is nearer
13 or 20 then the average must, as a mathematic certainty, be
between about 13 and 20, but it cannot be less than 13. Thirteen
is already a very substantial amount of money. That might be $11
billion a year instead of $12 billion a year. It is a bit of a
rip off for very vulnerable people and it is still twice your
total aid programme.
Mr Ahmed: I am not at all disputing
the argument that the number is very large in terms of the cost
of transmitting those remittances and that is precisely why when
we started the work on migration it became clear relatively quickly
that dealing with the issue of the costs of remittances was going
to be a key part of the policy recommendations that we would make.
As I said earlier, that is why we tried to bring together the
work that has been done with the World Bank and others which has
tried to make the first step in terms of what kinds of things
countries have done to reduce the costs, and one of the things
I have suggested could be done in terms of policy recommendations
now is making it easier for migrants to open bank accounts because
when they have bank accounts they do not have to go through the
more expensive channels.
Mr Davies: The problem with bank accounts
is these people are being ripped off by the banks. It sounds to
me from the evidence today and last week as though most of these
people, who may be unsophisticated people working very hard sometimes
in onerous jobs, they earn their money and they really deserve
it, are then finding they are being ripped off by the banking
system. They would be much better off putting the money in dollar
bills in an envelope and having it physically transmitted to their
families because in most of these developing countries dollars
or euros circulate as alternative currencies anyway. They do not
trade at a discount, they very often trade at a premium to the
local currency and in those circumstances they would have a premium
rather than a loss. The present situation is not very rational,
is it?
Q46 Chairman: I think what Mr Davies
is arguing is maybe somebody needs to do a bit of empirical research
on what happens to remittances and where does the money go and
who is benefiting and how could there be some benefit.
Mr Ahmed: I do not disagree with
your line of thought on this.
Q47 Mr Davies: It is a priority,
is it not?
Mr Ahmed: This is a priority area
where we could do more work on. I do not think there is any dispute
about doing that work and that is one of the areas in which I
see our role being to support more work.
Q48 Mr Davies: Is there any timescale
in which DFID would expect to be able to put something in writing
on this subject?
Mr Ahmed: I cannot give you a
precise timescale now, but with the work we now have underway
my suspicion is that our paper on migration and development in
about 12 months' time will have specific suggestions on how to
address the issue of costs of remittances, that will be an important
part of that. So if you want a timescale, 12 months is the timescale
in which we would be hoping to put together work in that area.
Q49 Hugh Bayley: One of the policy
points I guess we have to get our heads round is whether in general
or in relation to specific groups of migrants the value of migration
and remittance to a developing country is greater or less than
the loss of labour power and skills and there is a trade off there.
When we were being briefed a week ago by the International Organisation
for Migration we were told, in relation to the least developed
countries but it was not defined, remittances account for 2.7%
of the gross national income of those countries receiving the
remittances but the migrants are 1.3% of the population. I do
not know whether you recognise this statistic. If that is broadly
right, it suggests that the value of a remittance per person is
roughly twice the average income in the country concerned. This
is very crude, but if that were the case you might indeed be able
to have a virtual circle, we could employ a South African nurse
who would remit to South Africa more than the cost of training
and employing a South African nurse. Perhaps South Africa is a
poor example, let us say a Malawian nurse. I am not suggesting
for one moment that that is the case, but is that a sensible way
to look at the trade off, because if one is removing from the
developing country more than the value of replacing the economic
contribution of a person then it must be a net drain on the developing
country, but if one is contributing more it would be a net benefit?
Has the Department done any work on that and does it make sense
to pursue that line of inquiry?
Mr Ahmed: I think as you pursued
it you would want to think through the following problem, which
is if it were the case that the income that the person who migrated
would have earned in their own country was a true reflection of
their economic contribution then almost by definition, if they
were remitting at least that amount back to countries at least
as well off, I think the worry that people would have is that
the costs of training up another person to take that position
and the time it would take to train up a person to take that position
is actually not reflected in the current wage that that person
is earning. I think that is why there is a worry that even if
that person remits that amount back you have in a sense taken
away some fixed amount of skills in a particular profession. In
some countries there is some work underway which suggests—and
I am not sure how robust this is—that by raising the wages
that you would get, because there is a possibility that some proportion
of people in their profession could emigrate to higher wages,
you raise the demand for that profession locally and the supply
of people actually increases by more than what you take out of
the system. There is an argument in India that some IT professionals
feel they can actually go abroad and become much better off. As
a result this encourages more people to become IT professionals
than are actually leaving the country, so the net supply of IT
professionals in India increases even though some share is leaving.
Whether that is going to happen in practice in every case or not
is an empirical question, but I think it is worth looking at this
dynamic effect as well. So it may well be that if a certain amount
of nurses in Malawi feel that you can do quite well there is a
chance you could do quite well.
Q50 Hugh Bayley: Perhaps the Philippines
is a better example.
Mr Ahmed: There is anecdotal evidence
that doctors are becoming nurses in some countries because it
is easier to emigrate as a nurse and receive a higher income than
you do as a doctor in the country in which you stay. There are
all these complex dynamics that are playing out underneath, but
I think that is the kind of analysis you need to draw.
Q51 Chairman: Is our understanding
that the Philippines train more nurses than they need because
they know that Filipino nurses go overseas and back to the Philippines
and that is a benefit to the Philippine economy—correct?
Ms White: Yes. They have a strategy
which is based on exporting skilled labour. The worry is whether
Ghana has the capacity to train as many doctors as it both needs
and is able to export, that is the kind of worry you are thinking
of.
Q52 Chairman: I have a mischievous
point I want to put to you. I think DFID recognises diasporas
and your memorandum[8]
talks about "How best to tap into the strengths of diaspora
networks to facilitate transfers of knowledge, ideas and resources
. . .", so I think there is general agreement that particularly
first generation migration people tend to go to diasporas. I think
that would be a fair summary, would it not?
Mr Ahmed: Yes.
Chairman: Therefore
people will tend to migrate towards their diasporas. I do not
expect an answer to this next point. So sticking 750 asylum seekers
in the middle of a field in Oxfordshire means they are all likely
to disappear to their natural diasporas. Thank you very much.
I think the fact that we have spent two hours discussing this
shows that these are areas where there are lots of questions and
where we are yet to get as many answers as we would like, but
thank you very much for sharing with us what DFID is doing. When
you read through the transcript I think you will find there are
areas where you have said you would get back to us. I think we
will be interested to see what more work DFID will be doing in
terms of research and then we can look to the academics and see
what bits they are doing which might complement what you are doing
and build up a total picture. Thank you.
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