SINGAPORE: Asian nations will be hit by big drop in remittances

. SINGAPORE / The Straits Times / Asia / January 31, 2009 By Shefali Rekhi, Assistant Foreign Editor FOR years, foreign currency earned by citizens working in other countries propped up many Asian economies. Such goodwill gifts provided an important source of revenue for families and nations alike. Now, the economic crisis and a halt to construction projects in the Middle East are putting the squeeze on the employment of foreign workers. As a result, the World Bank estimates that foreign currency flows from them to their home countries will plummet this year. This 'will slow significantly from a 6.7 per cent growth in 2008 to -0.9 per cent in 2009', says a World Bank report released in November last year. It is a 'significant drop', said Mr Armin Bauer, senior economist with the Asian Development Bank in Manila. 'There are countries where remittances comprise a major part of their GDP and their budget,' he told The Straits Times. The impact in Asia will be disproportionate, said Mr Manu Bhaskaran, chief executive officer of consulting firm Centennial Asia Advisors. 'The Philippines, India, Pakistan, Bangladesh will be hurt the most.' It has been estimated that the overseas diaspora sends nearly US$30 billion (S$45 billion) to India. The figure for China is about US$27 billion. While these countries earn significant foreign exchange via exports too, remittances keep economies afloat in countries such as the Philippines, where the sums account for a substantial part of its total domestic product. 'Workers are very conscientious about their families' needs,' said Mr John Gee, president of Transient Workers Count Too, a foreign workers advocacy group in Singapore. 'They really do try to send back every dollar they can. So, for example, an Indonesian worker who gets only around S$250 a month may send around $220 back, which is about 90 per cent of his or her earnings.' For economists, remittances are the glitter in foreign exchange reserves, acting to stabilise economies when inflows from foreign investors dip. The slowdown in the United States will hit remittances to the Latin and Caribbean regions and parts of East Asia and the Pacific, says the report, entitled Outlook For Remittance Flows 2008-2010. The crunch in Europe will affect the fortunes of workers from Eastern Europe and Africa, while the cancellation of projects in the Gulf region will hit migrants from South and South-east Asia. According to Mr Bhaskaran, 'if migrant workers return home, unemployment will rise and that could create social stresses'. Is the situation of concern for Asean - many of whose member nations both send and receive migrant workers? 'It is early still,' said Mr Rodolfo Severino, head of the Asean Studies Centre at the Institute of Southeast Asian Studies here. 'We have to assess the impact. It will vary from country to country. We are looking at holding a discussion in June.' Copyright © 2008 Singapore Press Holdings Ltd. Co