Lessons from the APEC Remittances Initiative
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Transcript of Lessons from the APEC Remittances Initiative
Lessons from the APEC Remittances Initiative
Lessons from the APEC Remittances Initiative
Finance Forum, September 21, 2004
Raul Hernandez-Coss (FSEFI)
The APEC Remittance InitiativeTo encourage flows of remittances through formal channels
Best Practices to enhance the development impact of remittances
Shaping the Remittances Market by
Shifting to Formal Systems
Shaping the Remittances Market by
Shifting to Formal Systems
USA – MexicoRemittance
Corridor
USA – MexicoRemittance
Corridor
Canada – Viet Nam Remittance
Corridor
Canada – Viet Nam Remittance
Corridor
2004 2005SeptemberJulyJune NovemberApril
WB Financial Sector Remittances Program
Hawala 2 Conference
Publication
Second APEC Symposium
Additional Research
APEC ARS Initiative / APEC Remittances Initiative Follow Up
APEC ARS Draft
Report
2003
a) need for conducting bilateral analysis, for both the sender and the recipient remittance countries,
b) different degrees of development on the remittance corridors
c) presence of informal mechanisms that are linked to illicit activities
d) the need for a balance between regulations and responding to senders incentives
Lessons from the Case Studies
9,814
2,067
-
2,000
4,000
6,000
8,000
10,000
12,000Jo
rdan
El S
alva
dor
Turk
ey
Dom
inic
an R
epub
lic
Viet
nam
Serb
ia a
nd M
onte
negr
o
Col
ombi
a
Bang
lade
sh
Mor
occo
Egyp
t, Ar
ab R
ep.
Portu
gal
Paki
stan
Spai
n
Indi
a
Mex
ico
Top 15 Remittance Receiving Countries in 2002 (millions/ USD)
2,631
6,573
9,814
2,067
1,7541,7571,200
5,910
13,396
8,895
-
4,000
8,000
12,000
16,000
1999 2000 2001 2002 2003
Vietnam Mexico
1999–2003 (millions/USD)
Workers’ Remittance to Mexico and Vietnam
85%
45%
68%
135%135%
159%
148%
40%
34%
124%
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
1999 2000 2001 2002 2003
Vietnam Mexico
1999–2003 (percent)
Remittances as a Share of FDI
Operational Stages
First Mile
Increased accessibility to formal channels Financial awareness among migrants Market information Bilateral initiatives Harmonization of regulations
Regulated and supervised financial institutions appear to play a relatively limited role Viet Kieu and sending habits from Canada The role of ethnicity The need for licensing/registration
Intermediary
Greater competition Technology Innovative services and products The decline of IFT services The tendency to oligopoly
Widespread use of IFT systems Development of the Vietnamese market The technological imperative Potential impediments for RFIs.
Last Mile
More distribution channels Links between sender and recipient communities Gradual approach of regulators The banking approach to recipients Negative effects of remittances Creating rural distribution networks
Flow distribution and geography in Vietnam Anonymity as a Last Mile incentive Data and recording issues Lack of distribution channels Government policy and remittances.
Key Features for the Corridors
Impact of factors and incentives
IFT systems are faster and cheaper than formal systems.
Nascent Market
Nascent Market
Mature MarketMature Market
Cost and speed are critical, but once competitive prices and efficient channels are in place, competitors should explore other factors
Formal systems rely on expensive mechanisms not necessarily designed to facilitate remittance transactions.
•Use of Money Orders sent by mail.•Cash couriers•20 days
Sergio
Nascent
ChannelsOliverio
Mature
• Use of a Bank• 2 seconds
• He uses Money Orders delivered by courier service
Perceived Incentives in the Remittance Process
APEC Framework Perceived Incentives
First Mile
Last Mile First Mile Last Mile
Anonymity/Secrecy Δ Δ
Cultural Familiarity Δ Δ Personal Incentives
Personal Contacts Δ Δ Δ Δ
Dispute Resolution
Accessibility Δ Δ Δ
Class Discrimination
Customer Service Incentives
Versatility/Resilience
Speed Δ Δ Cost Δ Δ Secondary Benefits Δ
Economic Incentives
Legal/Regulatory Environment Δ Δ Δ Δ
Information to the Market
Nascent Market
Nascent Market
Mature MarketMature Market
Authorities and investors should initiate research on the characteristics and potential of the remittance corridor
Authorities should institute mechanisms and standards for systematic information gathering that are detailed and organized
Businesses are looking at remittances flows as an opportunity to create land and home investment opportunities for the remitter
Mono-product platforms, such as those implemented by MTOs, are very limited for products and service innovations.
Multi-product platformMono-product platform
Regulations should be a tool
Nascent Market
Nascent Market
Mature MarketMature Market
Regulations should be applied transparently and consistently to result in a level playing field for market competitors.
Standards should be consistent.