WASHINGTON, D.C.—Amid the slowing remittances from migrant workers, countries in South and East Asia are coping better than their counterparts in Latin America, World Bank officials said Monday.

In an international conference on Diaspora for Development held at the World Bank headquarters here, Dilip Rath of the bank's migration and remittances team said in his speech that Asian countries, like the Philippines, have their workers spread-out more evenly worldwide. On the other hand, Mexico and other Latin American countries are more dependent on the US economy.

In 2008, Philippines was the fourth biggest remitting country ($18 billion). It was next to India ($52 billion ), China ($40.6 billion), and Mexico ($26 billion). About 4,000 Filipinos leave for jobs abroad daily for about 200 countries.

Lagged Response

Remittaces to the Latin American region have been declining since the last quarter of 2008. Like Mexico, most Latin American and Caribbean countries are dependent on the US job market. With the slowdown in the US construction sector, countries such as Jamaica have experienced monthly declines as sharp as 17% compared to the same period the previous year.

Ratha explained that the 4% contraction in remittances received by Mexico and the a further drop of 11% year-on-year for the first half of 2009 could be explained by the close connections between the US and Mexican economies. The link between the two countries is considered as one of the biggest migration corridors in the world.

In contrast, remittances to South and East Asia are still inching up. The pace of growth, however, has slowed down. World Bank cited Pakistan, Bangladesh, the Philippines and Nepal as some of those that have recently been registering lower growth rates. The Philippines have been posting less than 5% monthly growth rates in the past months, a far cry from the double-digit increases in the previous years. In March, the World Bank projected that remittances to the Philippines will fall 4% this year.

Ratha said these Asian countries have their workers spread-out more evenly in other countries. He cited the deployment of East and South Asian workers to the Middle East, specifically to Dubai, where the construction industry has not slowed down as much as in the US.

Ratha noted the delayed response of remittances to the slowdown in construction sectors. He noted that Latin American countries experienced a lag when the American construction sector slowed down. It took about three months or an entire quarter for the remittance-receiving countries to feel the impact of the slowdown.

He pointed out that South and East Asian countries may experience a similar lagged response as the economies of Middle Eastern countries slow down in the long run.

The Middle East is one of the major destinations of overseas Filipino workers.

Falling

World Bank has forecasted that global remittances will fall by 7.3 to 10.1% in 2009 amid the global economic downturn.

The slowdown in remittance flows became evident in the last quarter of 2008 and has spilled over to the current year, according to Ratha. Middle-income countries have experienced a drop of 2% year-on-year in 2008.

The Bank’s managing director, Ngozi N. Okonjo-Iweala, said the contraction in remittances is an “alarming” development since remittances constitute a very important source of funds for developing countries. Currently at $328 billion, remittances worldwide are 3 times larger than the total amount of official development assistance for 2008.

For example, 46% of Tajikistan’s GDP is made up of remittances.

Okonjo-Iweala noted that the G8 Summit in L’Aquila, Italy made a declaration that it would work to pull down the cost of remitting money to 5% from 10%.

Still flowing

Ratha, who is the lead economist for the Development Prospects Group of the World Bank, said that on a whole the decline in remittances is very small when compared to other inflows, such as private flows, foreign direct investments, and official development assistance. Cross-country investments have declined by 50% in the past months compared to the same period last year).

The World Bank initially estimated that the remittances would hit a high of $305 billion for 2008. Actual recorded remittances hit $328 billion.

The larger part of the decline that was registered during the last quarter of 2008 coincided with the weakening of the US job markets.

Fluctuations in currency exchange rates made it possible for South and East Asia to experience growth in remittances in 2008 despite the crisis, the Bank said.

Depreciating currencies made properties in the receiving countries more marketable to those working abroad. The “sale effect” resulted to the diversion of a chunk of remittances from consumption to investment-related spending. (Newsbreak)