|Figure 2: Flow of Remittances as a Percentage of GDP (blue) and Flow of Remittances
Received in millions of USD (green)
Source: UNDP 2009.
Even more, Hatzipanayotou posits that the important role Diaspora’s remittances play has been established by many empirical studies. Chandavarkar (1980), argues that some developing countries notably from the Mediterranean region encourage emigration hoping that remittances will raise the welfare of non-migrant residents (Chandavarkar as cited by Hatzipanayotou in Vertovec &Cohen 1999:50). Swamy (1981) concludes that remittances constitute a significant source of foreign exchange earnings in many developing countries and in some cases may exceed foreign exchange earnings from merchandise exports (Swamy as cited by Hatzipanayotou in Vertovec & Cohen 1999:50).
Stark studied the implications of remittances on the income distribution and welfare of source countries and concludes that “the effects on income distribution depend on factors such as the degree to which migration opportunities are diffused accross households, the magnitude of remittances to income from other sources and the distribution of potential remittance-enhancing skills and education (Stark et al. 1986). The essence of the above review is to enable one have an insight into the established empirical evidence on the importance of diaspora remittances. But where do these remittances come from? In the following part, this question shall be answered.
4.1.1 Who remits?
Generally, remittances come from both individuals and groups (Ethnic Associations and National Unions) .The main objective is usually to help bring development to their “homelands” either on individual basis or collectively as homeland associations. Amongst those who remit from the Diaspora, are migrants who are well settled and are active in the labor force of the host country. This group includes those who have acquired the citizenship of the host country as well as residents. Another group that remits is comprised of refugees who usually send back home part of the money they receive from the host country’s government as social support for their welfare. The third group is comprised of students. Although some Africans studying in Europe and North America are fees paying students, they still manage to save some money that is sent home to family and friends for diverse purposes. Finally there are undocumented immigrants who survive in the shadows of the authorities. But yet they too are involved in sending home remittances.
The role of Diaspora associations as a source of remittances is unique. Over the last decade SSA Diasporas have formed many Diaspora organizations serving the interest of its members in both the host countries and homelands. There are about 38 registered African Diaspora Organizations in Europe (AFFORD). They are diverse and range from Pan African, to National students to borough-centered organizations or associations which are committed to activities in countries of destination vis-a-vis countries of origin.
The African Foundation for Development (AFFORD) has identified many Diaspora developmental organizations involved in diverse activities: home town associations, ethnic associations, alumni associations, religious associations, professional associations, development NGOs, investment groups, political groups, national development groups, welfare/refugee groups, supplementary schools, and virtual organizations. These organizations are also engaged in diverse activities which include “community- to- community transfers identity building/ awareness raising, lobbying in current home on issues relating to ancestral home, trade with and investment in ancestral home, transfers of intangible resources, support for development on a more ` professional’ basis, payment of taxes in ancestral home( AFFORD as cited by Uchou 2009:8). Through these organizations and associations, it is possible to see the important role Diasporas play in the development of African countries.
According to Gupta of the IMF, between 2000 and 2005 for instance, remittances to the entire SSA region amounted to about $7 billion (Saajev Gupta et al. 2007). According to data from the Center for Research and Analysis of Migration (CReAM),official flow of remittances to Africa have increased over the last decade , with remittances flow to SSA increasing five –fold from US$4billion in 2002 to$20billion in 2008(Ratha et al.2009 as cited by CReAM).It is argued that although there has been an increase in remittance flow to Africa as shown by the CReAM working paper, the actual flows surpass the official figures because money sent through informal channels is not recorded.
The CReAM working paper also established a pattern of remittances to Africa. They hold that a little less than three-quarters of all remittances to SSA originate from the USA and Western Europe. It also argued that African Diasporas in OECD countries remit more compared to migrants from other developing countries living in OECD countries. Furthermore, it posited that educated migrants remit less than uneducated migrants because they are less prone to return home and are more likely to bring over their whole family ( CReAM). The studies also reveal that immigrants from poorer countries are more likely to remit than emigrants from rich African countries ( CRe AM).
The amount of remittances sent home by Diaspora Africans are amongst others, determined by the state of the global economy. For instance the global financial crisis that dealt a deadly blow to the economies of Europe and America impacted the flow of remittances to Africa. The effects were felt by African families because it reflected in remittances sent home by Diaspora Africans living in the west. A case in point is Ghana where for example, according to Dr.Paul Acquah , Governor of the Ghanaian Central Bank , the first quarter of the 2009 saw a decline in remittances to Ghana of 7.3% to $1.9 billion in relation to the first quarter of 2008. He also declared that 18.2% ($359.37 million) of 2009 remittances to Ghana accrued to individuals (Dr.Paul Acquah 2009).
According to a 2009 report of the Fund for Agricultural Development (IFAD), 30 million Africans in the Diaspora send to and within Africa US $40 billion per year. According to statistics made available by Africa Focus magazine, in 2009, amongst others, Tanzania received US$ 313 million (2.4% GDP); Somalia received US$790 million (per cent age of GDP is unknown); Cameroon received US $ 267 million (1.5% GDP); Ghana received (6.6% GDP) worth US $ 851 (IFAD 2009) . Mercer holds that, at a global scale in 2006 remittances have been more significant than overseas Aid flows and it amounted to US $ 240 billions destined for the global south. Although African countries received only US$ 10.8 billion , it was still a very significant source of finance(Mercer et al.2008:7).
Regarding Ghana, remittances come both from individuals and associations as well. Ghanaian diaspora maintain some particularity especially concerning the frequency of money sent , the rational and beneficiaries. One other significant particularity of Ghanaian diasporas is that they increasingly remit more money, the longer they stay abroad. This trend is similar in the US, UK and Canada. The amount of money sent by Ghanaians varies from one country to the other. Ghanaians in the U.S send an average of US$ 380 and thirteen times a year. Those in Germany send an average of 159Euros (US$ 255) and from the UK 290 Pounds(US$510). When remittances’ sending is compared it is evident that Ghanaians in the UK are the highest remitters.
4.1.2 How is remittance utilized?
Diasporas undertake different kinds of activities in their home countries. They ranges from small and medium scale businesses to large scale ventures, education and training, house- building, support for fundraising, charitable donations, paying taxes at home and transferring technology and knowledge (Newland as cited by Mercer et al.2008).In African countries like Ghana and Ethiopia, Diaspora associations have been involved in heavy projects such as the construction of schools colleges and universities.
Remittances usually come from both individuals and associations for economic and social purposes. Most Africans in the Diaspora send huge sums of remittances to their families and friends back home to support life. According to Gupta of the IMF, most remittances to SSA countries are, “intra family or intra community,” transfers that are used to address the issue of poverty and whatever is left after meeting basic consumption needs could be used for development (Saajev Gupta et al. 2007. Mercer also affirms that most remittances flow to Africa is “private” because it moves between individuals who usually use it for personal consumption and to satisfy their immediate social needs. This implies that in most cases remittances flow to SSA is not being invested in productive sectors and public goods such as schools, hospitals, and water supplies.
On the other hand remittances from Diaspora groups that are interested in specific development projects offer a good means of transferring capital and skills. These associations have a good knowledge of needy communities which might give them an advantage and enable them to bypass “the unwieldy bureaucracies of state and development agencies” (mercer et al. 2008:8). Home associations are seen by many as the best means of provision of public goods at home. Diaspora associations have, for instance, provided schools, hospitals, health facilities, water supplies, mortuaries, community halls, libraries, internet cafes, church buildings, etc(Mercer et al. 2008:18.
As far as Ghanaian Diaspora involvement in development is concerned, the latter also uses the medium of ethnic associations to serve homeland development. The most popular of Ghanaian ethnic associations are the Ghanaian Unions which groups all Ghanaian nationals. Meanwhile, the Asante Associations groups a large proportion of Ghanaian Diaspora from the Ashanti tribe. The Asante are the single largest ethnic group in Ghana mostly from the East of Ghana, but also hail from other parts of Ghana.
Through these associations Ghanaian Diaspora raise funds to different development projects in their homeland such as building of schools, hospitals, sponsoring of agricultural projects etc. In the USA the Asante associations usually “sustain the traditional Asante political system of installing Chiefs, Kings and Queen mothers and function as a cultural and benevolent association” (Akyeampong 2000, as cited by Oucho 2008:10). According to Ayeampong, the Asante associations have sponsored many projects in their homeland. In the UK, Ghanaian ethnic associations actively participate in homeland development through financial and material contributions (Higazi 2005, as cited by Uocho 2008:10). Henry and Mohan posit that bonds, obligations, and reciprocity constitute the ties that hold together Ghanaian Diaspora in the UK (Henry & Mohan (2003), as cited by Oucho 2008:10).
Furthermore, Ghanaian Diaspora are not only organized in ethnic associations but equally in faith based organizations especially in Ghanaian Pentecostal churches. Many of these churches have branches in many countries around the world where huge numbers of Ghanaian immigrants reside such as in the USA, UK, Germany, The Netherlands, Belgium, Italy, Canada (Akyeampong, as cited by Oucho 2008:9). Ghanaian Pentecostal churches are not just good at mobilizing the Diaspora, but equally help new comers to regularize their stay and also participate in executing development projects in homeland. According to Van Dijk, in The Netherlands, Ghanaian Pentecostal churches go as far as assisting illegal Ghanaians secure legal status(Van Dijk in Akyeampong 200 as cited by Oucho 2008:9). The church appropriately substitutes for kinship and family networks (Akyeampong, as cited by Oucho 2009:10).
Ethiopian Diaspora on their part are as well present in virtually all regions of the world, with huge numbers in the USA and UK, and other European countries. Homeland Associations have been established with the main objective being to contribute to the development of their homeland. One such Ethiopian Diaspora association that is very actively involved in homeland development is The Forum International for Ethiopians Living in the Diaspora (FIELD). There are also two other associations that are actively involved in the Ethiopia’s development and they share the acronym AHEAD. One is the Association for Higher Education and Development (AHEAD). It contributes towards the improvement of education in Ethiopia by exploring, soliciting, acquiring, and delivering materials to Ethiopia’s universities and colleges.
The other organization is Action for Health, Education and Development (AHEAD), a UK based charity that initiates, and supports projects aimed at fighting poverty, and inequalities in Health, education, and development in Ethiopia, especially in the Gujii zone of the country. There are other many organizations of Ethiopian Diaspora that are concerned not just with the socio- economic development of the country, but also with other aspects of development that fringe on politics. According to Martha such Diaspora organizations which are into issues related to politics are motivated amongst others by “lust for wealth and power, obsession to rule, opposition to land and ethnic policies, and vengeance as well as envy” (Martha, as cited by Oucho 2009:14).
4.2 Technology transfer.
Another way by which Diaspora contributes to the development of their homeland is by way of technology transfer. But the question is, how do Diaspora contribute to homeland development through technology transfer?
This is done through the setting up of light and heavy industries in homeland, trade as well as provision of services, cooperation in research and education. However, before explaining how diasporas help to transfer technology to their home lands, it is worth while presenting a little background information on the process by which diasporas acquire the technological know how that is later transferred to homeland.
It all begins with the emigration of skilled labor from developing countries. In this time of a globalized world, it has been quite a common practice for developed countries to encourage the migration of skilled labor into their countries. This practice has been controversial especially as most of the source countries of the migrants view this from a negative perspective.
For most of the past two decades, there was a debate in public policy cycles and development thinkers, as to the negative impact of migration in general. It was argued that as individuals possessing high human capital migrated from low income countries to high income countries it led to the rise of a phenomenon known as “reverse technology transfer” or the “brain drain”. With the passage of time, other new issues, ideas and fashions gained importance and the issue of brain drain was edged out. In particular, developing countries were confronted with other development problems in the 1980s that demanded the attention of both policy makers and development thinkers.
Devesh Kapur of Harvard University asserts that by the mid 1990s, even though there were still concerns about human capital flight especially from Africa, Russia, the Caucasus and the Balkans, the expression brain drain became less fashionable. Although it was not replaced, it was none the less challenged by other concepts which presented the positive aspects of migration such as “brain gain”, “brain bank”, and “brain trust”. The afore mentioned concepts implied a reversal of the “reverse technology transfer” (Devesh Kapur 2001:1). In order to understand why there was a shift from talking about “brain drain” to “brain gain”; one must look at the structural shifts taking place in the global economy where international labor mobility has become as important as mobility of capital. If capital was the main mobile factor driving economic development in the last century, then international labor mobility will also play a central role in the next half century. International labor migration will be enhanced by both technological and structural factors in developed as well as developing countries (Devesh Kapur 2001).
It is not only recent that advancement in transport and communication facilities has motivated the large scale migration of skilled labor from less developed countries to OECD countries, but it is equally due to changes in the demography of many OECD countries. Many developed countries now have to deal with the dangers of an aging population. Devesh Kapur argues that the aging population of western countries such as EU, U.S.A, Canada and Japan means in 50 years time there will be a serious demographic shift that will place a huge financial burden on the budget and pension scheme and also create shortages in man power. The implication of this demographic shift is that many industrialized countries see the solution in opening up their borders to immigrants. But this cannot be done in a haphazard manner because they understand the socio-economic and political impact of such likely high inflows of immigrants.
There have been heated debates on immigration policies and many governments are opting for skilled immigrants because the fiscal input of skilled immigrants is more than that of unskilled immigrants. In fact governments of industrialized countries are even competing to attract the best of global highly skilled human capital to their countries. Consequently immigration policies are fast becoming a tool of their industrialization policy (Devesh Kapur 2001:269).The US , Canada and Australia are leading countries in as far as using immigration policies to attract highly skilled labor from all over the globe. The success of the US information technology (IT) sector is said to be driven by talented brains from around the world.
Although there is an increasing trend for some analysts to talk more about “brain gain” instead of “brain drain”, it should be noted that the departure of huge numbers of human capital is a double edge sward especially for the poor countries of Africa.
Having explained how demographic changes in some developed countries is attracting skilled labor from developing countries and that is initially seen as brain drain, it is important at this juncture see how these migrants in the long –run assist in the transfer of technology to their home lands. As earlier mentioned above, this is done through trade, investment and the provision of services.
As far as trade is concerned some analysts argue that one major obstacle that developing countries have to grapple with is the problem of reputation and credibility, especially in high tech sector where knowledge and quality are primordial. Kapur asserts that “Diasporic networks act as reputational intermediaries and as credibility enhancing mechanisms that are particularly important in economic sectors where knowledge, especially ex ante knowledge of quality is tacit”. In other words, where a country’s Diaspora has excelled in a particular sector, it completely changes the way the world views that country and the way it deals with it as far that particular sector is concerned. For instance India now enjoys the spillover effects of the success of its Diaspora in the Silicon Valley.
The success of India’s Diaspora in the IT sector has completely changed the way the world views Indian IT companies. Kapur asserts that “ it has created a “brand- name” wherein “Indian” soft ware programmer sends an ex ante signal of quality just as a “made in Japan” sends an ex ante signal of quality in consumer electronics”. India’s IT professionals are solicited not just in the USA but also in the some EU countries where previously there were few Indian immigrants such as Germany, Finland, Japan and South Korea (Kapur 2001:273-274).
The point we are trying to make here is that once a country’s Diaspora has established itself in a particular sector with strong reputation and credibility, it becomes easier for home based entrepreneurs involved in that sector to strike important deals in the global market.
The success of the Diaspora enables it to play a mentoring role and also serve as a role model. This goes a long way to instill confidence in both domestic entrepreneurs and overseas investors in the potentials of the source country. For instance Companies like Yahoo, Hewlett Packard and General Electric have established Retail and Distribution centers in India based on the on credibility and trust establish by large numbers of Indians working in their US operations.
Besides trade and service provision, transfer of technology also occur through investments. Diasporas help to channel investments to their home lands individually, but most importantly through their networks. A vivid example of Diaspora networks being used in investments is the Chinese Diaspora networks (the “bamboo network”) in channeling into china particularly in the south eastern provinces of Guangdong and Fujian (Weidenbaum and Hughes, 1996 as cited by D.Kapur 2001 :274). Chinese business persons in the mainland as well as those in Hong Kong, Taiwan, Macao, ASEAN countries and Indochina have established good networks for their businesses and today constitute one the world’s economically powerful blocks (Ibid)
According to the World Bank report on Global economic prospects, developing countries embrace new technologies twice as fast as developed countries in the 1990s, with much of this thanks to foreign investment and overseas Diaspora. Developing countries embraced new technologies at twice the rate of developed countries during the 1990s, with much of the acceleration due to foreign investment and overseas Diaspora. The report affirms that recent progress is as a result of: “globalization, which has exposed developing countries to foreign technology through imports, foreign direct investment which is often accompanied by knowledge of important technologies and foreign markets; and highly skilled international diasporas, which expose developing countries to technology through trade and return of former [emigrants]” (World Bank Report “Global Economic Prospects as cited by CORDIS News 2008-OI-22).
Although emigration from developing countries leads to loss of skills, such mobility, nonetheless, lead to technology transfer in both directions. Migrants are likely to use contacts back home and pass on technology to them. “Technology appears to diffuse efficiently through culturally and nationally linked groups, and shared ethnicity appears to counteract the kind of home bias effects that underpin the geographic network or the cluster effect that give high density R&D [Research and development] zones an innovation advantage” (Agrawal,Kapur,and Mchale 2004 as cited by the World Bank Report 2008).
In Ethiopia, the Diaspora have been active in investment especially in the Oromia region where 50% of investments are from Diaspora in North America. Between 1992 and mid 2009 the Ethiopian investment Authority issued 1,805 investment licenses to Diaspora Ethiopians most of whom reside in North America. Although most of these licenses where for small business, a few were none the less issued for large business concerns like MIDROC group, which happens to be the largest private sector in Ethiopia with large capital flows into many sectors. Investments in the different sectors in the region of Oromia are: Agriculture 14%, Real Estate 26%, and Manufacturing 21% (World Bank.).
With regards to Ghanaian Diaspora, transfer of technology has been one area where the Diaspora has been doing a lot to serve the development of their home land. Amongst the huge number of Ghanaians Diaspora, there are many highly educated individuals in all fields of life who are settled abroad with no plans to return home. However with recent improvements in both the economy and politics, an increasing number of Ghanaian intellectuals and professionals are opting for jobs in their homeland.