Workers Remittances well above FDI, Aid and Donations

Worldwide, the picture of financial flows to lower-income countries (not including exports).

Remittances	$354 billion
Foreign Direct Investment	$290 billion
Aid:	$161 billion
Private charities & NGOs	$32 billion?*

* OECD estimate of aid provided “by NGOs.”

Official aid and charitable donations aim to improve governance, provide emergency help after disasters, and support public services like schools and vaccination systems. FDI is a private-sector flow designed for profit, employment, and growth; remittances are direct financial support to families and neighbors. The world’s ordinary working people do at least as much as the wealthy, the famous, and the powerful to ease poverty, add equity to growth, and change things a bit for the better.

The World Bank’s most recent estimate (in October 2013) estimated a global $550 billion remittance total.

This includes $140 billion sent home to wealthy countries (e.g. from American petroleum engineers working in the Gulf states, securities traders in London, etc.) and $60 billion sent to China. Subtracting these, we get the $354 billion for lower-income countries.

India was the top recipient at $71 billion, followed by the Philippines at $26 billion, Mexico at $23 billion, and then Nigeria, Egypt, Pakistan, Bangladesh, and Ukraine.

Relative to national economies, smaller countries rely most on remittances, with land-locked countries and small island states, with Central Asia, Nepal, Lesotho, Swaziland, and other low-income landlocked countries joining island states like Haiti and Samoa at the top.

Remittances cost some money, and typically fees for small wires sent by low-income workers remain noticeably higher than money-management fees levied on wealthy financial-services clients. The most efficient remittance services for workers are in Singapore: by the World Bank’s estimate, a Thai worker in Singapore helping family pay for the Phi Mai (New Year’s) party next week will lose only $2.75 of her $200 wire to fees. The most expensive are intra-African wires - a Malawi miner sending $200 home will lose $47 to banking and wire fees.) The U.S., source of $125 billion in remittances or a quarter of the global total, is toward the efficient end of the scale, with an average cost of 6.4 percent.

Comparisons

Aid - Tallying worldwide development-aid programs, the OECD finds its 31 members offering $126 billion in development, economic, and other aid programs in 2012. Slightly more than half came from European countries, led by the UK’s $13.7 billion, Germany’s $13.1 billion, and France’s $12.1 billion. The U.S. remained the largest single donor country at $27 billion, and Japan at $10.5 billion. Adding multilateral agencies, and a few other countries (Saudi Arabia, Russia, Kuwait, the United Arab Emirates, and Thailand, but not China, Taiwan, or India) OECD statisticians get a full figure of $161 billion in aid flows as of 2011:

Investment - Figures on foreign direct investment in lower-income countries come from the UN Conference on Trade and Development’s World Investment Report 2013. Removing the Gulf monarchies, Russia, China, Hong Kong, Taiwan, Korea, and Singapore, FDI in developing countries at $290 billion for 2012, with the largest recipients Brazil at $65 billion, Chile at $30 billion, and Indonesia at $20 billion. By way of comparison, the U.S. was at $167 billion, China $121 billion, and the UK $62 billion.