Maximizing Remittances for Development in Southeast Asia

Among the key challenges for countries is to enhance formal remittances channels and reduce costs of remittance transfers. © IOM 2008 - MPH0312

The IOM project "Improving Knowledge of Remittance Corridors and Enhancing Development through Inter-Regional Dialogue and Pilot Projects in South-East Asia and Europe (with special focus on the Philippines and Indonesia)" seeks to enhance the link between migration and development within Southeast Asia (SEA) by:

  • improving knowledge of financial corridors – which cover the various flows of remittances that migrants use – in Southeast Asia and between Southeast Asia and Europe;
  • promoting regional dialogue about remittances policies and the link between remittances and development; and
  • supporting innovative pilot projects that promote productive use of remittances both at origin and destination countries of migrants.

Special focus will be given to the Philippines and Indonesia.

Background

Remittances are one of the most visible and tangible contributions of migrants to their home countries. The money sent by migrants to their families pay for food, education and healthcare, easing day-to-day hardship and poverty and contributing to the achievement of the Millennium Development Goals.

International remittances received by developing countries were estimated to be USD 328 billion in 2008, doubling in the last five years.

The Philippines has experienced a consistent growth in remittances, reaching USD 16.3 billion in 2008. Europe is the third largest destination of Filipino workers, with Italy hosting about 128,080 workers as of December 2007.

Despite the sophistication and comprehensiveness of the Philippines' labour migration management model, interventions to promote migrant reintegration and an organized development-oriented inflow of remittances remain a critical gap.

As for Indonesia, it is estimated that some 3 to 5 million Indonesian workers are now employed abroad, with a large proportion of this population going to Malaysia. Historically, the Netherlands is another popular destination country for Indonesians, in which there is now a large Indonesian community present. Official statistics indicate that in 2006, a total of 393,057 persons “with Indonesian background” lived and worked in the Netherlands.

"This project is all about mainstreaming migration and remittances in the development plans and initiatives. A large volume of remittance is channelled to migrant origin countries in Asia, thus more and more countries are finding it important to seize these opportunities."
-- Aiko Kikkawa, Project Manager, IOM Philippines

Most Indonesian migrants abroad send remittances home which are critical to the country's economy. Remittances to Indonesia have grown steadily over the past three decades and constitute one of the largest sources of foreign exchange, alongside export revenues and foreign direct investment. In 2008, it was estimated that total remittances to Indonesia reached USD 6 billion. 

Key challenges for Indonesia include enhancing access to formal remittances channels, increasing transparency of processes involved and reducing costs of remittance transfers.

Key Objectives

The project's objectives are:

  • Enhance national development planning in Indonesia and the Philippines through the generation of new remittance data in important channels within SEA and those linking SEA to Europe which are understudied and/or difficult to measure.
  • Provide a forum for inter-regional dialogue, information exchange and cooperative development planning.
  • Strengthen the capacity of government, civil society, diaspora groups and other main actors in SEA and the EU to engage more effectively in development-enhancing initiatives in SEA.
  • Improve remittance transfer services, promote remittance transfers through formal financial institutions and support initiatives which enhance savings and/or investment in projects which promote development in SEA.

Principal Activities

Research

A comprehensive, survey-based, and policy-relevant research was carried out to look at the following areas:

  • Remittance flows between Indonesia and the Netherlands
  • Remittance flows between the Philippines and Italy
  • Informal remittance flows between Malaysia and the Philippines, as well as Indonesia.

The research established references on remittance policies and practices, migrants' remittance behaviours, savings, consumption and investment patterns, channels, facilities, transfer mechanisms, transfer size, service providers and efficiencies.

Policy Dialogue

Migrants send remittances to their families to pay for food, education and healthcare. © IOM 2009

Two major policy dialogues on remittance and development were held with governments, civil society organizations, diaspora groups, financial institutions and other stakeholders: one for the Philippines–Italy remittance corridor and the other for the Indonesia–Netherlands remittance corridor. 

These dialogues generated recommendations for practical steps to enhance the link between remittances and development.

Pilot Projects

Capacity-building, awareness-raising and direct service interventions which seek to encourage development-oriented use of remittances at the family and community levels are being undertaken in both the remittance-sending and recipient countries.

Beneficiaries

  • Migrants from Southeast Asian countries
  • Remittance recipients in Southeast Asian countries
  • Southeast Asian diaspora groups
  • Migrant NGOs in Italy and the Netherlands
  • Civil society groups in the Philippines and Indonesia
  • Financial institutions in specific European Union countries, the Philippines, and Indonesia
  • Government institutions dealing with migration, remittances and development issues in concerned European Union and Southeast Asian countries

Concrete Benefits

  • Better financial management, improved living conditions, and active participation in community development for migrants and their families.
  • Improved policies and services for migrants from government and financial institutions.
  • More comprehensive migrant assistance and support programmes that address migrants' concerns on remittances in destination countries.
  • Opportunities for diaspora groups to advocate for transnational rights and inclusion in social, political and economic affairs of their home and host communities.
  • Stronger relationships and more effective collaboration among diaspora groups, the government and other partners.
  • Support from civil society groups in the Philippines and Indonesia for national policies that promote migrants' rights and welfare.
  • Increased ability of participating governments, agencies and organizations in using remittances as a tool for national development.
Among the objectives of the project is to improve remittance transfer services, promote transfers through formal financial institutions and support initiatives that enhance savings and/or investments. © IOM 2008
Remittances are one of the most visible and tangible contributions of migrants to their home countries. © IOM 2004 - MCO0039