Will the RA government succeed in transforming private remittances into investments?

Experts say that private remittances make 6-12% of Armenian GDP.

Only 3% of the world’s population (or about 200 million people) live in a country different from their country of birth. Although this is the highest rate in the past 40 years, this rate hasn’t changed much in the last decade. Migration is a phenomenon that reflects economic, social and demographic imbalances across countries and requires a multi-disciplinary approach to understand and manage. But the fact remains that there is really still only small fraction of the world population who reside outside their country of birth.

PanARMENIAN.Net - While most of the international migrants, 37%, move from low- and middle-income countries to richer Northern countries, another 24% of all international migrants are between Southern countries compared to 16% between Northern countries. The South-North migration captures the media attention but possibly an even larger fraction of migration occurs between developing countries themselves, or the South-South migration.

Some of the largest movements of labor in the world occurs every year within countries. A glimpse of these internal migration patterns can be seen by the growth of concentration of economic activity within countries and the constantly changing spatial distribution of the population. The most important example of all is China, where policies to restrict the flow of internal migration have been unable to stem the movement of people, and have created a class of second-rate internal migrants numbering perhaps 250 million.

Officially recorded remittance to developing countries reached $318bln in 2009, down 6% from $336bln in 2008. With improved prospects for the global economy, remittance flows to developing countries are expected to increase by 6.2% in 2010 and 7.1% in 2011.

Remittances have significantly influenced Armenia’s economic growth. According to Vice-Chairman of the Central Bank of Armenia (CBA) Vache Gabrielyan, the decrease in remittances should not lead to sudden macroeconomic stops, while at micro-level it should not cause moral risks related to the unwillingness to enter the market of competitive salary. As Armenia’s market is not sufficiently developed, it is difficult to control remittances, as well as to use them, by creating financial instruments providing with the opportunity to use their potential.

CBA surveys showed that 60% of remittance receiving households are in middle and high income class, and 40% are poor and extreme poor households.

Only 1/3 of Armenians live in the homeland. Experts say that private remittances make 6-12% of Armenian GDP. The Armenian government is currently developing the ideology of All-Armenian World, as Diaspora, which makes outstanding contribution to the development of Armenian economy should not be eyed as an assisting force. It’s potential should be used for investments in large-scale projects. It’s essential to pass from simple remittances to beneficial ones, such as investments in small hydropower plants, shares and IT.

According to Armenian Economy Minister Nerses Yeritsyan, efficient control of migration flows can ensure circulation of human and financial capital to prevent brain drain.

As a result of the global economic slump and reduction of remittances mostly from Russia, Armenia’s GDP decreased by 15%. Nevertheless, Diaspora can contribute to development of Armenian economy and trade, given the recovery observed.

Hripsime Hayrapetyan / PanARMENIAN News
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