The Hindu Business Line : Liberalising migration — Powerful force for poverty reduction

In its annual Global Economic Prospects (GEP) for 2006, the World Bank contends that migration could deliver welfare gains for migrants, and for their origin and host countries. It says developing countries should seek agreements with countries to which their nationals migrate to improve the conditions under which they cross borders, seek and maintain employment and send a part of their earnings home.

THE DOHA round of multilateral trade negotiations, now progressing at snail's pace in arriving at modalities for firming up agreements in agriculture, non-agricultural market access, services and trade facilitation, is being grandly called the "development round". With advanced countries not budging from their position on eliminating costly agricultural export subsidy, , other equally weighty development subjects have been put on hold.

Even as developed countries seek liberalisation of trade in goods and easier market access to vast markets in developing countries, they have been obstinate on issues such as relaxing the visa regime to facilitate greater flow of migrants in fulfilment of work projects abroad.

India has, of late, emerged as an important service exporter — among the top 10 in the world. Quite naturally, it has a substantial stake in the liberalisation of services trade, particularly on cross-border supply of services (Mode 1) and movement of natural persons (Mode 4) under the General Agreement on Trade in Services (GATS).

In India, the software sector accounts for 16 per cent of exports and employs half a million people. Two-thirds of software exports go to the US and a quarter to Europe. Almost half of these exports — valued at more than $3 billion in 2002 — are delivered on site by professional staff. Hence, delivery here depends on market access but barriers include a few immigration-related issues, onerous visa eligibility procedures and opposition to outsourcing at home.

The core interest of most of India's trading partners, as is evident from their periodic demands, is in Mode 3, that is, for binding the present foreign direct investment (FDI) policy or to offer a more liberal policy.

It might be recalled that even the Human Development Report 2005, released by the UN Development Programme (UNDP) in September pointed out that liberalisation of rules on temporary movement of people under the GATS would do a great deal to achieve a more equitable distribution of the benefits from trade. The report aptly urges developed countries to put the liberalisation of service markets in developing countries on the WTO backburner and prioritise, instead, a phased liberalisation of their domestic labour markets!

Joining the chorus in favour of the liberalisation of movement of persons as service-providers is an unlikely ally, the World Bank! In its latest annual Global Economic Prospects (GEP) for 2006, released in Washington on November 16, the Bank contends that migration could deliver welfare gains for migrants and their families, as well as their origin and destination countries, if policies are pursued to better manage the flow of migrants and enable the transfer of remittances.

According to the Bank's Chief Economist and Senior Vice-President for Development Economics, Mr Francois Bourguignon, migrant workers' productivity and earnings are "a powerful force for poverty reduction" with the number of such persons worldwide reaching almost 200 million.

"Remittances, in particular, are an important way out of extreme poverty for a large number of people. The challenge facing policymakers is to fully achieve the potential economic benefits of migration, while managing the associated social and political implications", Mr Bourguignon said.

The Bank presents concrete evidence that an increase in migrants would raise the workforce in high-income countries by three per cent by 2025 and increase global real income by 0.6 per cent or $356 billion. Such an increase in migrant stock would be in line with the migration trend observed during the past three decades, it said.

The report states that the relative gains are much higher for developing-country households than rich-country ones, rivalling potential gains from global reform of merchandise trade, the authors conclude, with $162 billion going to new migrants, $143 billion to people in developing countries, and $51 billion to people living in high-income countries.

It is thus clear that the trade envoys and the Commerce and Industry Ministry should focus more on demanding sops from the developed country services engagers so that Mode 4 service delivery could be enhanced. It is precisely for this reason that the World Bank report argues that the developing countries should seek agreements with countries to which their nationals migrate, to improve the conditions under which they cross borders, seek and maintain employment and send a part of their earnings home.

It might be noted that the latest annual report of the Reserve Bank of India (RBI) contends that the surge in remittances, particularly since the advent of the information technology (IT) revolution in the 1990s, has placed India as the highest remittance receiving country in the world. (Remittances surged from $3,275 million in 1991 to $8,453 million in 1996 and to a whopping $21,579 million in 2003.) Remittances by Indians working abroad cover repatriation of funds for family maintenance and local withdrawals from the non-resident Indian (NRI) deposits.

The GEP report says that the officially recorded remittances worldwide exceeded $232 billion in 2005. Of this, developing countries received $167 billion, more than twice the level of development aid from all sources. Analysis of household surveys shows that remittances have been associated with significant declines in poverty (headcounts) in several low-income countries and they are also associated with increased household investments in education and health, as well as increased entrepreneurship.

The Bank report also highlights the high fees charged by remittance service providers and seeks action to prune these costs to migrants, suggesting that heightened competition in the remittance transfer market would lead to lower fees, thereby increasing the disposable income of poor migrants, as well as incentives to send more money home.

The GEP report is a gentle reminder of effective trade diplomacy so that the trade ministers and envoys of the migrants' countries pitch for reasonable demands to render movement of persons as service-providers abroadhassle-free and rewarding . It is time the trade talks on services liberalisation focused on this facet of development too for the benefit of the stakeholders.

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