Sixty-first General Assembly

Second Committee

Panel (AM)

in presentation to second committee, expert panel calls for creative

approaches to tap expertise of emigrants, overseas citizens

Panellists Discuss Investment, Remittances, Collaboration with Governments

As they cultivated stronger business sectors and helped local entrepreneurs, developing countries needed creative approaches capable of tapping into the expertise of former citizens spread around the globe, an ad hoc panel of business experts told the Second Committee (Economic and Financial) today.

In a presentation of the panels’ findings on “Strengthening the business sector and entrepreneurship on developing countries: The potential of disporas”, the experts said that each country’s diaspora was unique and offered developing countries a vehicle to help shape a stronger business sector that would boost their economies.  Collaboration with the private sector and civil society was essential as Governments created unique solutions that recognized the differences among diaspora groups.

The presentation was organized by the Financing for Development Division of the Department of Economic and Social Affairs in collaboration with The Indus Entrepreneurs.  Committee Chairperson Tiina Intelmann ( Estonia) welcomed members to its first special event, which highlighted recommendations that emerged from the expert group’s discussions held yesterday at United Nations Headquarters.

Panellist Rajat Gupta, Senior Partner Worldwide of McKinsey & Company and Secretary-General Kofi Annan’s Special Adviser on United Nations Reform, said he was pleased to see a change in the Organization’s mindset that had led to the acceptance of a private sector role in development.  Not long ago, the private sector would have been “a bad topic in these halls”.  The ad hoc group recognized the uniqueness of each diaspora while acknowledging that each sent investments back home and tried to maximize their rate of return.  The experience of each diaspora could vary according to education and level of skills.  For example, many Indians with backgrounds in engineering, science and technology contributed those skills to industries in the United States, where they lived.

Other diaspora groups comprised people from the lower end of the economic ladder and their potential for contribution was very different, he said.  It was also important to determine whether people left their home countries for economic or political reasons, in which case their contribution might not be as great.  The expert panel had agreed that in order to be useful, government policies must be multidisciplinary and experimental.  Instead of talks that could fizzle out, diaspora groups should take specific steps, which could mean collaborating with home entities like Governments and business leaders so as to interact with those in their new home countries.

Echoing the theme that a “one-size-fits-all” approach did not work, panellist Chukwu-Emeka Chikezie, Executive Director of the African Foundation for Development, emphasized the importance of public policy in making use of remittances, particularly in the important area of job creation.  The African Foundation had partnered with Voluntary Services Overseas, Barclays Bank and Rokel Commercial Bank to enable United Kingdom-based African entrepreneurs to help create jobs and build capacity in Africa.  Eight million jobs would need to be created in the coming years, which could not be accomplished without private- sector involvement.  That required countries to invest in education, strong government and improved ability to implement policies.

Remittances were an important tool in building the kind of environment that said one need not leave the country to be valued, he continued.  Toward that end, there was a need to focus beyond the current generation and consider the language of subsequent generations as equal to that of the migrant.  Dual nationalities, dynamic cultural policies and nurturing ties with embassies were ways to reinforce such thinking.  Ultimately, there was no need to place too much emphasis on what proportion of the remittances went to subsistence and how much into investment.  The focus should be on implementing projects to achieve tangible results.  The diaspora needed “champions” who were aware of the benefits of investing in their former countries and who could engage the domestic private sector through leadership on initiatives that began with feasible projects that could then be scaled up as appropriate.

Molly Pollack, Executive Director of Chile Global, an initiative coordinated by Fundacion Chile, which aimed to build a network of successful Chilean entrepreneurs abroad to help the knowledge-intensive business back home. The network was needed because, although the Chilean economy had grown greatly and was strong from a macroeconomic standpoint, it remained weak in innovation and education.  Without changes, it could not continue to grow.  Chile Global was a group of active business owners and high-level executives abroad who promoted technology transfer and knowledge exchange back home.  Its initial link with Fundacion Chile, a technology transfer institution founded more than 10 years ago, was very important because it provided a link with executives abroad.

The network had 60 members in the United States and was expanding into Europe and Latin America, she said.  One lesson gleaned so far was that the network must generate value for all its stakeholders.  The work must be tangible, quantifiable and pervasive, and must show results in the short run.  Any network must be flexible enough to adapt to its members.  Quality was more important than quantity, which was the reason behind the network’s small membership.  Human relationships were very important to its success.

Lisa Curtis, Private Sector Adviser to the Department for International Development of the United Kingdom said more research was needed on remittance flows and how service providers affected economies.  That knowledge would provide a basis for driving down the cost of sending remittances.  Attention should be paid to financial flows overall, in order to study how remittances affected development, and to new products designed on the basis of research findings.  One such product was a “send money home” web page campaign that the Department had implemented.  The diaspora’s potential investors should be identified, as should the correlation between remittances and investment, since subsistence remittances could be turned towards investment.

She pointed out that the objectives of investors who returned to their home countries, particularly to post-conflict situations, were not just about commercial investment, but also rebuilding the community to make a home for their families.  Consideration should also be given to where a diaspora investor should put resources since there was a great mismatch between the investor’s skills and the needs of the environment.  It should also be kept in mind that barriers to investment could be huge in the early stages.  As the investment climate improved and other investors came in, ventures made in light of market imbalances and little competition could ultimately be shown up as having been made into very weak businesses.

Wanja Michuki, Chief Executive Officer and co-founder of the Highland Tea Company, focused on the development of businesses that used commodities to manufacture low-value products.  Many of the policies of developing countries were directed towards achieving the Millennium Development Goals.  Seventy-five per cent of the target populations of those Goals lived in rural areas.  Most such people relied on agriculture for their livelihoods.  The need was to generate income and increase the productivity of developing countries and add value to their commodities.

Trade assistance programmes offered by developed countries like the United States were important in helping to educate people about exporting, she said.  Those new exporters could then tap into the diaspora community and continue a vital, ongoing business dialogue.  They could help business people at home by building relationships, investigating useful supply-chain infrastructures and identifying new products and market trends.  In working with their diaspora community, developing-country embassies could be focal points to determine where diaspora members were located.  It was all about bridging worlds and creating linkages.  Kenyan tea, Ghanaian chocolate, Tanzanian coffee and Zambian pepper sauces were examples of products that could be made from developing-country commodities and help Governments to attain the Millennium Goals.

Parag Saxema, speaking on behalf of The Indus Entrepreneurs, said the group had been lucky in establishing itself just before the technological revolution.  While much had been said about the fragmentation of the diaspora, every group had members who loved the country they had left in order to take advantage of new opportunities.  Those members should be identified and brought together in an organized fashion to capitalize on two aspects of financial services related to the diaspora and remittances -- the fixed income market and its dependence on securitization on the one hand, and the role of venture capital on the other.

He explained that in a fixed income economy, the cost of capital went down in line with securitization -- a big word for spreading the risk of loans among more investors and diversifying the risk.  Without the fixed income market, the involvement of bigger markets like London or New York was needed.  It must also be kept in mind that venture capital was not a form of assistance.  Success depended on three to five people forming the venture capital firm in an area they understood.  Obstacles in relation to both those phenomena were well known, but the need now was to develop a scale for fixed income, which involved joining up with neighbours to establish the fixed income market and attract venture capital.  Champions for those activities must be recruited.

In the ensuing discussion, delegates asked how migrant issues and remittances could be taken into account when developing poverty reduction plans; how the ad hoc working group had dealt with Government regulatory reform; how the private sector contributed to create financing and business opportunities; and about the experiences of migrants who had left their countries at different times and for varying reasons.

Other questions and comments centred on encouraging and capitalizing on the reversal of the brain drain as conditions improved back home, and how the benefits of investment could be turned into improvements in health and education without the diaspora necessarily returning if they had become integrated into their new homes.  What was the effect of globalization and transnationalism on individual countries as far as remittance monies were concerned?  They were the networks between countries and economic opportunities.  Remittances should neither be cruelly withheld from families nor replace official development assistance.

Committee members also raised questions about potential conflicts between diaspora private investors and those who were nationals of other countries, as well as between investment initiatives and banks.  Pointing to projects such as banking festivals to spread the use of credit cards and bring down the price of processing remittances, they asked for more clarification on bridging the gap between diaspora skill sets and local societal needs.

The delegates offered suggestions for moving into a more systemized phase on remittances, perhaps by offering tax incentives for eco-development projects, small and medium-sized projects and networking projects, such as in the area of housing.  Tax incentives could also be offered to migrants who wished to invest in their home countries, with additional consideration for “value added” projects, such as those that contributed to knowledge and training.  Those initiatives should be developed in dialogue with migrants in order to derive maximum benefits from remittances for both developed and developing countries.

Responding to questions, Jomo Kwame Sundaram, Assistant Secretary-General for Economic and Social Affairs, said United Nations efforts to reduce remittance costs were being carried out in connection with both development and poverty reduction.

Mr. Gupta said the diaspora members could help facilitate major initiatives in their home countries by bringing unique connections, stressing also that stakeholders at home must be included.  A recent example of cooperation among Government, the private sector and civil society in which the diaspora had been a catalyst was the creation of India’s Public Health Foundation.  Each sector had provided funding and $100 million had been raised to launch six public health institutes.  The project would not have happened without the impetus of the diaspora, who had helped bring in expertise from the United States health sector, but who also needed the participation of stakeholders at home.

In response to a question about the varying attitudes of diaspora groups, Ms. Pollack of Chile Global said attitudes differed according to how overseas Chileans regarded their country of origin and their level of comfort.  Many who had left for political reasons were doing very well and wished to contribute to their respective new countries, but a growing number who had moved abroad were now aware of opportunities back in Chile.  The Chilean head of a major United States software company, for example, had set up an office in Chile.  All embassies served as focal points that helped identify potential network members.

Mr. Chikezie of the African Foundation for Development urged a long-term view about a new “transnational age”, pointing out that the diaspora paid a large amount in taxes.  Ms. Michuki spoke about the importance of “champions” to promote development investment.  Ms. Curtis of the Department for International Development emphasized that the diaspora should be considered as early risk-takers, not as those who would be privileged later down the line with special favours because of their investments.  Private lending should be encouraged and private sector policies reviewed to ensure that incentives were in line with sound fiscal policies.  The diaspora’s role was critical in that process because they led the rest of the investment community in signalling when it was safe to invest.

Finally, Mr. Saxema of Indus pointed out that diaspora investors were willing to give up something in exchange for another gain, like taking a lower rate on notes if a concrete benefit were to derive from that action.  As for the notion that the diaspora was a fad, it was a thousand-year fad that would end when world peace was ushered in.

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For information media • not an official record