Building a foundation for “first movers” Key role for the very few entrepreneurs who created initial entrepreneurial projects (both within established and new firms)
Exposure of Indian talent to US firms. Executives of Indian origin start to outsource through “body shopping” contracts.
Emergence of a software cluster in Bangalore and a critical mass of professional entrepreneurs
Continuation of business linkages and “body shopping” contracts.
Emergence of high value-added outsourcing (R&D and consulting)
Diaspora is engaged in a concerted effort to promote an image of India as an attractive outsourcing location. Diaspora firms provide the specifications for the software to be manufactured and as well as a market for the products.
Emergence of knowledge-process outsourcing
Highly-placed executives of Indian origin pioneer knowledge-intensive outsourcing (R&D and professional services).
Source: Taken from Table 4 in India’s Transformation to Knowledge Based Economy- Evolving Role of the Indian Diaspora. Abhishek Pandey, Alok Aggarwal, Richard Devane and Yevgeny Kuznetsov, July 2004.
Table 5.1: Selected inventory of policy measures to enhance the impact of remittances
Capturing a share of remittances for development purposes
Taxation of emigrants
Duties or levies on remittances transfers
Voluntary check-off for charitable purposes (on transfer forms)
Source: Global Development Finance 2005 BOXES Box 1: Selected Paper on Brain Drain/Brain Gain
Brain Drain/Brain Gain
Grubel and Scott (1966)
Brain Drain (in the short term)
Short-term losses due to the intra-generational and fiscal externalities could be offset in the long run thanks to various effects in the form of remittances, networks or innovations.
Bhagwati and Hamada (1974)
The departure of skilled workers reduces unskilled workers’ expected earnings.
Miyagiwa (1991), Haque and Kim (1995)
Endogenous growth models. A person’s knowledge not only provides a direct benefit in terms of available skills but also has positive effects on the productivity of other. Emigration of those with skills eliminates this indirect benefit to the economy at large.
Skilled labor is an important variable in attracting foreign direct investment. Hence, low labor skills will not promote transfer of technology by multinationals in developing countries.
Mountford (1997), Stark (1998), Vidal (1998), Beine (2001)
Migration prospects could foster human capital formation and growth in sending countries.
Stakr and Helmenstein (1997)
Dos Santos and Postel-Vinay (2003)
Knowledge diffusion brought by returnees contributed to the diffusion of more advanced technology. Potential sources of growth for the home country.
Dos Santos & Postel-Vinay (2004)
A shift in immigration policy, with an increase in the share of temporary visas, may benefit the sending countries of educated migrants. A higher proportion of returnees among emigrants increase the country’s stock of knowledge, a complement of human capital.
Cinar and Docquier (2004)
Feedback effects through remittances.
Dustmann and Kirchkamp (2002), Mesnard and Ravallion (2002)
Creation of business and trade networks.
Lowell and Findlay (2001)
Migration of skilled labor from Eastern Europe during the 1990s slowed economic growth in some countries.
Pang, Lansang and Haines (2002)
Each migrating African professional represents a loss of US$ 184,000 to Africa.
Migration premium in the medical profession in U.K. is between 2 and 4; About 30% of Indian doctors surveyed acknowledge that the prospects of emigration affected the effort put into studies.
Migration premium for India I.T. workers contemplating emigration to the U.S. lies between 3 to 5. (depending on the type of job).
Box 2: Conclusions from the UK remittance survey 2004/2005 Information is lacking. Customers do not feel they have enough information, and do not know where to look for the information they need. They therefore rely on word of mouth. Advertising, staff training, and providing suitable information are extremely important. Information on provider websites should also be improved, as should scope for online remittance services.
Security and trust are the most important factors in choosing a service provider. Banks have an advantage as they are perceived as the most secure and trustworthy of providers.
Speed and cost are traded off against one another. These are the key areas of product attributes for providers to work on.
Remittance senders rely on word of mouth. It is therefore important that banks, building societies and money transfer operators increase awareness of their products and the information they make available.
Good customer service is crucial. Banks in particular need to train their staff to have a greater knowledge of the services they offer, and to take into consideration the needs of customers in areas with a large number of residents from a particular ethnic group or speaking a particular language.
Outlets in the receiving country need to be easily accessible. It may be necessary to seek partnerships with local agents if the network is currently limited. An improved branch presence or partnership networks in receiving countries would make the banks a more viable competitor to the money transfer operators.
Banks are perceived as too expensive and slow for low value transfers. Provision of variable fees depending on the amount to be transferred, as well as speedier fulfillment processes, would make banks a viable and competitive alternative to money transfer operators for urgent, low value transfers.
Country-specific banks are seen as slow and inconvenient. There is a need for an improved service and a fostering of trust in order to gain more custom. There is also scope for using their comparative advantage of cultural understanding to a greater extent. 50% of mystery shoppers had difficulty sending money via these channels, so the quality of their service needs to be scrutinized.
Informal methods are seen as cheap but risky. Formal providers have scope to attract users of informal remittance services if their products are appropriately designed and priced.
Customers are confused about informal providers. Customers suggested that regulators set up a system of authentication for smaller high street providers, so that consumers are able to differentiate between legitimate independent money transfer operators and illegal providers.
Greater information and education is required on ID requirements. If customers know what is required of them – and why – in advance of going to a provider to make a transfer, ID requirements may not be perceived as the onerous burden they currently are.
Banks are not making the most of cross-selling their services. Remittance transactions give banks the opportunity to offer additional services, but no more than 8% are currently doing so.
Customers need to know that the money has been received. An appropriate service improvement would be to offer free confirmation on all transactions. Source: Taken from http://www.sendhomemoney.org
Box 3: The Padrino Program in Mexico- Use of collective remittances Several states in Mexico have initiated many projects with migrant communities. The state of Guanajato was the first one to establish a program “Adopta una Comunidad” to make use of remittances send by migrants in community projects. In 2002, President Fox expanded the program to encompass the 90 Mexican regions. The program changed the name to “El Padrino” (The Godfather). The innovative base of the program is to request investors to become very involved in their communities instead of only writing a check.
In 2002, the program raised $ millions for over 200 projects. The majority of the resources (40 %) were used in employment-generating activities. Other activities included the construction of schools, roads, health centers, potable water facilities and others. Examples of some Padrinos are: the music group Los Tigres del Norte that gave the money for school construction. An LA-based entrepreneur offered marketing skills to a coffee cooperative in Chiapas. The founder of a fast food chain donated just over $ 31,000 to bring electricity to a small rural town in Oaxaca state.
Source: Summarized from Alfredo Corchado and Ricardo Sandoval, “Mexico aims for expatriates” heartstrings and pursestrings”, Dallas Morning News, 20 March 2002
Box 4: Sentiments Toward Immigrants Does immigration policy affect natives’ sentiments of immigrants? Bauer, Lofstrom and Zimmermann (2000) have done some research on whether immigrant sentiments vary across countries with different immigration policies. They test the premise that a policy that attracts relatively skilled workers could imply greater tolerance towards immigrants. They find that countries where natives are needed (e.g., Canada, New Zealand) view immigrants in a favorable way. On the other hand, countries such as Norway and the Netherlands responded that the number of immigrants should be reduced. One explanation is that both of these countries predominantly receive refugee immigrants.
A common concern about immigration is that immigrants take jobs away from natives. “This sentiment appears to be prevalent in the UK, where about half of the native population feels that immigrants take jobs away.” In countries that received immigrants looking for jobs, the fear that immigrants take the jobs away is the main explanation for requests to the government to reduce immigration. In countries that receive asylum seekers and refugees, the population is concerned about crime.
The Britain’s election in May underscored the growing debate over immigration. Britain’s birth rate is at a historic low of 1.64 babies per women. This rate is not enough to replace its current population, The United Kingdom has seen a net influx of more than a million non-British immigrants. There are two views in the country. One argues that Britain needs the immigrants to perform jobs that natives do not want to do. The other view is that immigrants are a burden. They live on welfare benefits.
Source: main information taken from Knight Ridder Newspapers: “Britain’s election underscores growing debate over immigration”. May 04, 2005.
Box 5: Chile and Singapore Free Trade Agreements with the US: Temporary Entry of Professionals
The Chile and Singapore Free Trade Agreements contain provisions allowing the temporary entry of business professionals into the other party, to facilitate trade in services.
Since services account for 65% of the U.S. economy, the international mobility of business professionals- particularly as employees providing services- has become an increasingly important aspect of competitive markets for suppliers. Facilitating the movement of professionals allows trade partners to more efficiently provide each other with services such as architecture, engineering, consulting, and constructions.
The principal negotiating objective regarding trade in services is to reduce or eliminate barriers to international trade in services. Each trade negotiation the United States enters, like Chile and Singapore, is approached individually to determine if the inclusion of a temporary entry chapter will benefit U.S. trade in services and, if so, whether a section on temporary entry of professionals is needed in the agreement.
The agreement with Chile and Singapore establishes the temporary movement of Chilean and Singaporean professionals in the United States through the use of the H-1BA visa.
The number of U.S. professionals allowed entry into Chile and Singapore is not limited under these FTAs, while the number of Chilean professionals in the United States is limited to 1400 and the number of Singaporean professionals to 5400.
Source: Trade Facts, Office of the United States Trade Representative, July 21, 2003.
1 The breakup of the Soviet Union and emergence of 15 new independent countries in 1991 created new populations of “international” migrants without migration having taken place (UNPD, 2004).
2 Undocumented migration in this context means any person entering, residing and working in a country without proper documentation relating to their legal status in that country.
3 The estimates were taken from the Growing Global Migration and Its Implications for the United States, NIE 2001-02D, National Foreign Intelligence Board.
4 OECD (2005) has developed a new data set on immigrants and expatriates that contains detailed information on the foreign born population for almost all member countries of the OECD. For the great majority of the countries involved, data by country of birth are available.
5 Germany, Ireland and the Czech Republic, are in the process of establishing new immigration regimes, with a major focus on economic migration. The European Union is also discussing a Green Paper on an EU Approach to Managing Economic Migration (EU 2005).
6 These data are described in Docquier and Marfouk (2004), which in part relies on official sources (plus extensive estimations), and thus undercounts irregular migrants, who are less likely to report their immigrant status. As most irregular migrants are unskilled, the data probably understate low-skilled migration.
7 Doccquier and Rapoport (2004),
8 The G8 Heads of State Summit at Sea Island in June 2004, for example, has called for “…better coherence and coordination of international organizations working to enhance remittance services and heighten the developmental impact of remittance receipts”.
9 It is interesting, however, that several rich countries, including France, Spain, the United Kingdom, Germany, Belgium, and the United States rank among the top receivers of remittances globally.
10 For example, the reporting threshold (typically per person per day) is $10,000 in the United States, 12,500 euros in West Europe, and 3 million yen in Japan.
11 The Bank of Ghana is one of the few banks that collect statistics in remittances and requires information from registered banks and transfer agencies.
12 The Financial Action Task Force (FATF) prepared recommendations on anti-money laundering (AML) and combating financing of terrorism (CTF) after September 11. The implementation of the recommendations can have an impact on the transfer of remittances via informal channels.
13 Genesis Analytics, (2003).
14 After September 11, one of the largest xawilaad company, Al Barakat, was closed down.
15 Since the predicting model --equation (1) -- includes several variables with negative coefficients, a small number (N= 7) of the predicted values for total remittances (official and unofficial) are negative. These negative values are set to zero.
16 The zero estimate for South Asia is an artifact of the estimating technique. The country observations for which we have data in South Asia form a portion of the “outer bound” regression plane and hence their officially recorded remittances are accepted as total remittances. We know this is not strictly true, but the pattern does conform to the observation that remittances in South Asia increasingly have moved through recorded channels.
19 For a detailed analysis see: “Sending Money Home: Remittance to Latin America and the Caribbean”, May 2004. Inter-American Development Bank. Multilateral Investment Fund.
20 Adams and Page (forthcoming) addresses one of the more vexing problems in the empirical literature on cross country estimates of the migration-poverty relationship, endogeniety of the migration or remittance variable, by instrumental variables techniques.
21 Adams (2005) in a paper for this conference reviews the microeconomic evidence on the remittance-poverty relationship and finds similar results with respect to the incidence, depth and severity of poverty.
22 The largest survey to date of entrepreneurial activities among immigrant communities of different nationality is the Comparative Immigrant Enterprise Project (CIEP) in the United States. This study was undertaken between 1996 and 1998 by UCLA, UC-Davis, Johns Hopkins, Brown, and Princeton Universities.
24 Tebeje, Ainalem. Brain Drain and Capacity Building in Africa” http: http://web.idrc.ca/en/ev-71249-201-1-DO_TOPIC.html
25 Ding-Hua Hu earned his doctorate in engineering at Princeton University and became the first general manager in H&Q Asia Pacific’s Taipei office. H &Q Asia Pacific’s early investments included Acer, UMC, Microtek, and Tai Yan.
26 See http://indiandiaspora.nic.in/contents.htm
27 Introduction to the UK (2005) remittance study summarized in Box 2.
28 On Thursday 31 March the UK Department for International Development (DFID) launched the results of a UK survey into the best ways for people to send money to relatives and friends in developing countries. For more information. Visit www.sendmoneyhome.org
29 For a review of the status of negotiation of the GATS see: A Quick Guide to the GATS and Mode 4, by Julia Nielson and Daria Taglioni, Trade Directorate, OECD.