Foreign aid experts dissociate remittances from ODA

Remittance growth no reason to discontinue dev’t assistance

MANILA — OFFICIAL development assistance (ODA) and migrant workers’ remittances are not an either-or situation, delegates to a United Nations Development Programme workshop on managing ODA recently said.

According to a World Bank report, ODA worldwide has been overrun by the pace of remittances from overseas workers. The WB-Global Development Finance Report (WB-GDF), which was released April 6 and which can be downloaded from the bank’s website, estimated that remittances to developing countries from overseas resident and nonresident workers in 2004 were in the neighborhood of $126 billion. Since 2001, the report added, remittances to developing countries have increased by $41 billion, or almost 50 percent.

UNDP’s Manila workshop, entitled “Making Aid Work–The Challenges for Aid Coordination and Management” held April 18-20, worked on the so-called Paris Declaration on Aid Effectiveness approved in March by ministers of developed and developing countries. The workshop had development practitioners and ODA experts identifying mechanisms to standardize ODA management tools and mechanisms, as called for in the Paris Declaration.

In particular, the ministers and heads of institutions providing aid –like the development banks– resolved in Paris “to take far-reaching and ‘monitorable’ actions to reform the ways we deliver and manage aid”. The ministers and foreign aid top managers assumed that there would be further increases in aid to developing countries.

Three of 21 delegates representing a dozen ODA-giving and -receiving countries said the total $126-billion in remittances from 175 million migrant workers worldwide shouldn’t result in donor countries cutting back development assistance to developing countries.

“(Growth in) Remittances must not be cited as a situation to hold back on aid by donor countries,” Artemy Izmestiev of the United Nations Development Program (UNDP) said, in reaction to the major finding of the World Bank report.

$125B in ODA by 2015 = $126B in 2004 remittances
THE UNDP expects developed countries to give a total of $125 billion in ODA by 2015, the target year for eradicating world poverty that countries committed to work for during the 2000 UN Millennium Summit. This means that what would take another decade for some 22 donor countries to allot for the world’s poor was already remitted by migrant workers back to their home countries last year.

At that summit, donor countries pledged to allocate 0.7 percent of their gross domestic product to meet eight Millennium Development Goals (MDGs). These goals are: eradicate extreme poverty and hunger; achieve universal access to primary education; promote gender equality and empower women; reduce child mortality; improve maternal health; combat HIV/AIDS, malaria, and other diseases; ensure environment sustainability; and, develop a global partnership for development.

In his paper titled “The Millennium Project: A Plan for Meeting the MDGs,” Millennium Project head and economist Jeffrey Sachs has emphasized the effectiveness of ODA in meeting these goals. Sachs papers, and other documents on the project, are nestled in the project website

Vini Mahajan of India’s Ministry of Finance who participated in the UNDP workshop said that “comparison between aid and remittances are mainly to show that if aid continues at the current level, it’s going to become irrelevant over time.”

“It’s so small, and getting smaller, that it doesn’t have relevance [anymore],” said Mahajan, the director of the economic affairs department of India’s finance ministry. “It shows that aid is just one part of global solutions to global inequity. At current levels of aid, it is not even the dominant solution.”

Dasa Silovic, Izmestiev’s colleague in the UNDP’s Bureau of Development Policy’s Poverty Reduction, said remittances are just part of what “we can tap into that make development move: from [removing] trade barriers to releasing countries from their debts to releasing debt resources towards development.”

“It’s not an either-or situation,” Silovic said. “The amount of remittances should not be used to increase or decrease aid.”

Mahajan agrees, but adding that remittances should not even be part of the equation of development issues because these are legitimate compensation for labor.

“They [migrant workers] are paid for what they contributed to the developed countries’ economy,” Mahajan said.

Whether it is ODA or remittances, the ultimate issue for Silovic is how these resources are used for development.

Management of resources still the issue
“WE go back ultimately to management of these resources to the best interest of the people,” she said. “I think the whole issue of remittances is still an area not given full attention, not only in terms of the relation of aid and remittances but in terms of where these remittances go.”

Izmestiev, who comes from Russia, said most of these remittances only go to consumption and there’s no single, clear program of tapping into these resources other than generating revenues.

Silovic agrees, saying generally, remittances are “individually-sourced”.

“And they have short-lived effects because they are not channeled to broader development [goals or programs],” she added. “This relates to a discourse on a broader relation between remittances and development that the UNDP is also looking on.”

Such discourse is being scrutinized, meanwhile, by multilateral aid-giving institution Asian Development Bank (ADB) that recently announced in a statement a $500,000-research to be completed in August on the effective use of workers’ remittances in Southeast Asia.

“The impact of these remittances will be maximized if fund transfers are made easier and cheaper, and they are used for more productive investments,” an ADB statement quoted Emma Yang, its Senior Financial Management Specialist.

The ADB, one of the Philippines’s major ODA source, said the study to be completed in August this year will cover Indonesia, Malaysia, and the Philippines as recipient countries, and Hong Kong, China; Japan; Malaysia; and Singapore as the source countries of remittances.

An earlier ADB study on remittances shows that competition and technology can help reduce the costs of remitting through formal channels, and that remittances could be securitized for development initiatives such as funding public infrastructure and agricultural facilities, among others. OFW Journalism Consortium, Inc.