Realizing the Development Potential of Diasporas

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Author(s):
UN
23 Oct 2013
Pages:
290
ISBN:
9789210563369 (PDF)
http://dx.doi.org/10.18356/7cdd951b-en

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In this book, international experts including academics, policymakers, private sector practitioners, and representatives of diaspora communities further our understanding of how the growing population of expatriates from the developing world can be effectively leveraged to promote development in their homelands. The contributors cover issues relating to diaspora diversity and its impact on development, the potential of expatriates to further entrepreneurship and business development in their homelands, the effectiveness of remittances in furthering inclusive development, and policies to better engage diasporas as drivers of development. Their analyses are supported by examples and case studies focusing on the experiences of specific diaspora networks, home country institutions promoting diaspora engagement, migrant entrepreneurs, and financial institutions facilitating remittances.
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  • Foreword
    This volume represents the outcome of a successful collaboration between the Financing for Development Office of the United Nations Department of Economic and Social Affairs and the Bureau of Development Policy of the United Nations Development Programme on a very topical issue. In addition, it draws on a range of perspectives from experts and practitioners who belong to other multilateral organizations, as well as academia and the private sector.
  • Acknowledgements
    We would like to thank several people who provided assistance in the preparation of this book. We began this project with endorsement from Oscar de Rojas, former Director of the Financing for Development Office in the United Nations Department of Economic and Social Affairs, and Selim Jahan, Director of Poverty Practice in the United Nations Development Programme. Subsequently, Alexander Trepelkov, who replaced Oscar de Rojas as Director of the Financing for Development Office, supported us at every stage of the publication of this book. To all these people, we would like to convey our sincere appreciation. We also wish to thank Michael Lennard, Tun Htet and Ann de Lima for their valuable assistance in the preparation of this book. The views presented in this book belong to us and the other contributors. In addition, we, the editors, take full responsibility for any errors.
  • Introduction: Opportunities and challenges for mobilizing the potential of developing country diasporas
    Increasing attention is being given in both public and private forums to the issue of how the growing diasporas from the developing world could promote development in their homelands. Indeed, diaspora involvement in development opportunities in the homeland has increased significantly during the past decade. When discussing diaspora contributions to development, most observers tend to refer to the impact of remittances. Yet the influence of diasporas extends well beyond remittances. In particular, diaspora entrepreneurship has witnessed dramatic and exciting developments in recent years, with successful entrepreneurs in the North expanding their business reach to their home developing countries, bringing along with them capital, technology and market knowledge. This has been most visible in certain high-technology sectors and in other areas such as pharmaceuticals.
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  • Expand / Collapse Hide / Show all Abstracts Setting the stage

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    • Understanding the diaspora diversity and its impact on development
      This chapter analyses the contingencies that lead to different development outcomes. Such analyses can inform projections of diaspora development contributions and suggest data needs for better understanding diasporas and development. Diasporas’ contributions to homeland development include economic remittances, homeland economic investment, skills transfer, diaspora philanthropy, and political influence. My focus is on diasporans’ financial and human capital contributions.
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  • Expand / Collapse Hide / Show all Abstracts Diaspora funds and the poor

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    • Remittances, diaspora and inclusive micro-finance: What have we learnt?
      The benefits of migration are mostly through remittances to the country of origin. Poor or uncertain economic prospects in developing countries result in part of the family living and working in an industrialized nation and sending money to support family members who remain in their home country. Remittances characterize the most tangible contribution of migrants to poverty reduction. Migration is not only a South–North phenomenon as commonly believed; South–South migration is just as large. South–South remittance flows make up 30–45 per cent of total remittances received by developing countries (Ratha and Xu 2008).
    • Fostering economic opportunity for transnational families
      The world is being transformed by globalization. Although globalization is not a new phenomenon, a number of political, economic and technological developments have facilitated an increasingly integrated global economy (Gilpin 2000: 7) through unprecedented interaction and growing interdependence between nations, people and cultures. The Economist Intelligence Unit classifies the three main components of globalization as the movements of goods, capital and labour (EIU 2008b). These dimensions are all closely interrelated, but particular attention has been focused on the movement of goods and capital, and fewer comparative studies are available on the movement of people. This global movement of people now affects countries at every level of economic development: “Migrants now depart from and arrive in almost every country in the world, making it increasingly difficult to sustain the distinction that has traditionally been made between countries of origin, transit and destination” (GCIM 2005b: 789). A leading academic in the field of migration, Professor Marcelo Suárez-Orozco, estimates that, every second, 25 people cross a national border, accounting for more than 1 billion international journeys in 2007 alone. The United Nations estimates that 1 out of every 10 people worldwide is either a diaspora member or linked to them as families left behind. These growing global networks, cross-border links and, perhaps most notably, economic factors are predicted to result in even greater numbers of migrants in the future (Martin 2003: 6). However, although the processes of globalization have created wealth and opportunity, broad global issues remain, such as the disparity between the world’s rich and poor. These global challenges and the issues surrounding global migration will require increased cooperation at the local, national and international levels.
    • Citibank’s experience serving the unbanked and under-banked through retail remittance services
      Remittances represent an important link between migrants and their communities at home, by providing beneficiaries in many countries a regular and dependable flow of financial support. Of remittances sent through formal channels, the majority are sent through money transfer operators (MTOs) such as Western Union, MoneyGram or post offices, and a smaller part through banks. Banks have now entered the remittance market, but only about 5 per cent of remittances were sent through this channel in 2004 (GAO 2005), though the percentage may now be higher. However, banks are additional channels for migrants to send and receive remittances and can help promote the development impact of these funds by increasing access to more financial products and financial literacy. Given the growing and significant volume of remittances (despite some decline because of the global economic recession), banks have an opportunity to offer more choices for remittance customers and to gain a larger share of the market, reduce transaction costs and further link diasporas with development.
    • Strengthening national policies for engaging diasporas as a development actor: Lessons from learning-by-doing activities
      This chapter provides an analysis of the relationship between practices in development by diasporas at various contexts. There exist a range of initiatives resulting from diasporas participating in some form of economic activity that results in positive development outcomes. These activities include issues relating to remitting, investing and donating by diasporas or through diasporas. These initiatives do help to establish a policy agenda that can be operationalized by governments and international institutions. The first section provides a matrix of the interplay between diaspora economic activities and dimensions of diaspora development. The second section looks at concrete practices and experiences of diaspora engagement. These experiences are either the result of an organic process of engagement with the home country resulting in some impact on development, or policy-driven initiatives that drive development approaches. The third section presents 10 policy initiatives emerging from lessons learned in the activities identified.
    • Developing capacity: Diasporas as transnational agents of development
      The search for innovative ways of mobilizing financing for development has led development practitioners and officials to take increasing interest in the role of diasporas as transnational agents of development. Specifically, diaspora remittances, direct diaspora investment (DDI – a counterpart to foreign direct investment, or FDI), and diaspora philanthropy all now constitute significant flows with development implications and impacts.
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  • Expand / Collapse Hide / Show all Abstracts Diaspora entrepreneurs and development

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    • Strengthening the business sector in developing countries: The potential of diasporas
      Diaspora entrepreneurship has witnessed dramatic and exciting developments in recent years, with successful entrepreneurs in the North expanding their business reach to their home developing countries, bringing along with them capital, technology and market knowledge. This has been most visible in certain high-technology sectors and in other areas such as pharmaceuticals. The two interrelated mechanisms through which the diasporas are playing a role in strengthening the business sector in developing countries are, firstly, inflows of financial resources (i.e. collective remittances, equity and bond finance) and, secondly, their ability to transfer knowledge, strengthen skills and facilitate trade through their networks and contacts. While illustrating the various success stories in this area, this chapter also emphasizes the diversity among diaspora groups and examines the underlying factors influencing the degree and nature of an expatriate community’s contribution to business development in the homeland.
    • Why is diaspora potential so elusive? Towards a new generation of initiatives to leverage countries’ talent abroad
      “All happy families resemble one another; each unhappy family is unhappy in its own way” – the famous beginning of Leo Tolstoy’s novel Anna Karenina contrasts the diversity and heterogeneity of failures yet highlights basic similarities among human success stories.
    • Venture capital and fixed-income markets in developing economies
      Venture capital and fixed-income markets are two factors that can play a significant role in the economic development of a country. However, it appears that most developing economies are not doing enough to effect meaningful change in either factor. This chapter will present the case why policy-makers should make a long-term commitment to developing vibrant venture capital and fixed-income markets, and will suggest some specific levers they should focus on in making this commitment. Finally, I believe that a country’s diaspora can make a material contribution on both factors, and I will outline some specific ideas on how these contributions can work.
    • A Kenyan diaspora entrepreneur creating social value through tea: A case study
      Entrepreneurship enables economic development because private sector goals are contingent on economic viability. The potential of diaspora entrepreneurs to create economic growth in their home country lies in their ability to identify and develop market opportunities abroad, which in turn facilitate income generation, job creation and skill and knowledge transfer in their home country. For developing countries, the creation of such trade linkages can be instrumental to poverty alleviation.
    • Chile Global: A talent network for innovation
      Migrants have played an important role in the acceleration of technological change, business development and investment in many countries. Emerging in different ways and for diverse reasons, they have constituted diaspora networks in nation-states such as India, Taiwan Province of China, Ireland, Israel and China, among others. Their impact in most cases has resulted in a technological push, which in turn has helped further the development of their countries. At times when their nations were considered vulnerable, some of these highly skilled migrants have turned out to be pioneer investors as well as facilitators of foreign investment attraction. Additionally, they have constituted bridges between resident and home countries for market connections, technological transfer, coaching of local business and internationalization of local firms.
    • Policies to strengthen diaspora investment and entrepreneurship: Cross-national perspectives
      Reciting a quote by the renowned Mauritian poet in an address on Pravasi Bharatiya Divas (Non-Resident Indian Day) in New York City in 2007, Mr Vayalar Ravi, India’s Minister for Overseas Indian Affairs, eloquently described the economic development expectations he holds for diaspora investment and entrepreneurship in his country. But India is not alone in holding high hopes for diaspora involvement in home-country development. In a 2005 survey conducted by the International Organization for Migration (IOM), 92 per cent of countries indicated they possess policies and programmes targeting their diasporas abroad for homecountry development purposes (IOM 2005: 205). The challenge for governments, utilizing the metaphor from the above quotation, is successfully to encourage the diaspora to “touch and turn the stone” by stimulating interest in economic involvement in their country of origin and to help them “turn the stone into gold” by providing diaspora investors and entrepreneurs with the tools necessary to transform their ideas into successful economic initiatives.
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