Edward Seaga, Contributor
JAMAICA ENJOYS one of the highest rates of remittance of money from overseas Jamaicans compared to other countries. In fact, remittances now top the list of foreign exchange inflows into Jamaica, exceeding tourism and bauxite/alumina. Indeed, after deducting outflows from all export earners, where applicable, retention from net remittances considerably exceeds all other foreign exchange inflows. Every dollar goes directly to the pocket or bank account of the recipients.
A comparison of how major export earning categories perform is very revealing. After outflows are deducted in each category to pay for imported requirements, the result shows a much different picture of the extent to which each contributes to the economy. Compare the net retention of the major foreign exchange earners in 2002:
Category US$ Million
Remittances 1204
Bauxite/Alumina 770
| Tourism | | 389 |
| Sugar | | 60.2 |
| Rum | | 34.5 |
Remittances actually equal all other categories of foreign exchange inflows in terms of net retention in the economy.
The performance is even more startling. According to the World Bank Time for Action Report 2005, remittances are more than 100 per cent greater than foreign direct investment when each is measured as a percentage of GDP. What these figures are saying, is that remittances are now the mainstay of the external economy both in terms of contribution to the balance of payments and in providing disposable income for household expenditure. Some one million Jamaicans, it is estimated, benefit from these funds remitted to families and friends, or for private payments to Jamaican suppliers, or real estate investments.
STEADY INCREASE
A profile of the remittance inflows over the last 25 years shows that while there has been a steady increase over the years, a surge in receipts began in 1992 and has continued since then.
A report submitted by the Bank of Jamaica to the XXIX Annual Conference of Monetary Studies in Barbados, in 1997, argues that in Jamaica, "with contradictory policies, there may be a greater dependence of Jamaicans on relatives abroad to supplement the dwindling incomes". Conversely, "if macroeconomic policies are conducive to growth and expansion in the Jamaican economy, then with less unemployment, Jamaicans are expected to be less dependent on migrants for support".
The surge of migrant remittances since 1992 coincides with commencement of the stagnation in economic performance which has continued for more than a dozen years. In contrast, while the economy was stagnating, the poverty rate showed dramatic improvements beginning at the same time. This is expected since increased remittances would be a main contributor to poverty alleviation.
The correct social perspective of remittances must give due credit to Jamaican migrant families for standing behind their families in times of need when a stagnated economy fails to function. This should not detract from the efforts of the government's anti-poverty programme which would also have some success to its credit from other contributing factors. But real credit for lowering the poverty rate belongs moreso to the families abroad who care for Jamaicans in need at home.
THE ROLE OF MIGRANT FAMILIES
It is time to put the role of migrant families in perspective too. They are often discredited as lacking in attention and parental support for their children. While there are many who can be so condemned, the exceptional support given by Jamaican migrants to families at home includes children who are left behind in order to allow parents to find better means of support abroad.
Remittance flows peak in August and September, the two months involved in the re-opening of school. Another peak occurs in November and December, Christmas time, which is also involved primarily with children.
Jamaicans abroad also remit money for real estate purchases at home, whether as returning migrants or to make better provision for families left behind and for themselves when they visit or return. The Bank of Jamaica estimates that 15 per cent of remittances are pensions for returning residents who are returning at a rate of more than 2,000 per annum. These returning residents make real estate purchases which have become the principal area of expenditure of remittances. Migrant support from abroad serves not only the social purpose of dealing with the welfare needs of families and education of children, but economically, it spurs investment in housing and construction, generating employment and economic growth.
Given the broad-based, substantial contribution of remittances, the question arises as to what policy initiatives are in place to promote further growth.
According to the World Bank, 80 per cent of Jamaica's graduates of tertiary institutions are abroad. This figure is far higher than the corresponding data for other countries.
A brain drain is the natural consequence of this outflow of higher-level talent, assuming that there are local job openings. There is good reason to believe that, for the most part, there is little shortfall of higher level skills in Jamaica. Migration of tertiary level skills ought not to affect the requirement for skilled personnel and would be a significant source of remittances given the higher level of salaries earned. But this assumption needs empirical research. Meanwhile, government should not hesitate to promote and assist tertiary-level education to take advantage of jobs available overseas.
STRONGER TIES WITH
THE JAMAICAN DIASPORA
Other initiatives are possible and the appointment by Government of Vice Chancellor Emeritus the Hon. Rex Nettleford to head a unit to promote stronger ties with the Jamaican diaspora is a good move. Likewise, the organisation established by Jamaicans overseas to promote relations with Government is a step in the right direction. But I cannot help but believe that there is lots more that can be done over and above promoting goodwill. So little is known about the motivational forces which drive remittances that a specific in-depth study should be done to deepen the knowledge base on determinants of remittance flows.
After all, we know practically all that there is to be known about the other two major foreign exchange earners: bauxite/alumina and tourism. Why not remittances too?
Edward Seaga is a former Prime Minister. He is now a Distinguished Fellow at the University of the West Indies. Email: odf@uwimona.edu.jm.
