According to a recent article in the Romanian media, Romania is among the top ten countries in the world to benefit from remittances. The International Agency for Source Country Information (IASCI), an Austrian non-governmental organization, has been conducting a project with the Soros Foundation focusing on the impact of migration on financial investments in Romania – the first study of this kind to be developed in a European Union country. The project, which will be finalized in November, aims to highlight the extent of Romanian migrants’ remittances and their impact on the development of their home country.
IASCI has concluded such studies in Bosnia, Kosovo, and Albania, and is currently also working in Moldova. In Albania, the project was developed in partnership with the Center for Economic and Social Studies (CESS), a local think tank and one of the first CIPE grantees in the country. Ilir Gedeshi, CESS Director, mentioned during his visit at CIPE’s Regional Office in Bucharest in July 2010 that the key value of studying migration is not only to quantify remittances, but to help local governments develop public policies that would convince the emigrants to invest their savings in their countries of origin, or even to lend money to the state (through various financial instruments).
In fact, savings are the main concern of most emigrants, to the point where they only remit a small portion of their earnings. Ilir Gedeshi notes that Albanians save 6.6 euros for each euro they send back home, compared to Kosovars who save up 7.1 euros for each remitted euro. The findings also suggest that, on average, emigrants from the countries in the region that IASCI’s studies previously focused on save about 50% of their earnings, whereas EU families save up only 10% of their income.
As quoted in the article, Nicolaas de Zwager, IASCI Director, expects the results of the current project to place Romania between Bosnia and Albania in terms of savings by Romanian emigrants, estimated at about 30-40 billion euros. Whereas this money is currently going into consumption or personal savings, it could become an engine for economic rebound, provided that the adequate policies are in place.
Governments should try to bring about a change in the financial behavior of emigrants and direct the money they save into the home country’s economy as opposed to consumption. In order to accomplish this, they could create fiscal policies to encourage emigrants to invest and create jobs in their home countries. In that respect, it would be useful to compare not just the trends concerning savings and remittances, but also measures that have been adopted by different countries to stimulate investments by their citizens who work abroad. This would allow the Romanian government to have a clear picture of what has worked for other countries and adapt it to the local context.
Finally, it would also be interesting to see to what extent emigrants would be interested in investing in their home country (for instance, by opening their own businesses, or by investing in the local production) if granted real incentives. It can be expected that some citizens will decide not to invest, regardless of the incentives they could get, whereas others could actually find this the perfect opportunity to invest in or even return to their home country.
Published Date: September 09, 2010