Remittances from migrants soften global economic crisis blow

Remittances from migrants soften global economic crisis blow

Photo document of Indonesian migrant workers in Abu Dhabi. (ANTARA/Yudhi Mahatma)

"Remittances can rise sharply by up to 30 percent during every Ramadan and ahead of Lebaran, compared with other months."
Jakarta (ANTARA News) - A huge banner reading, "Welcome Foreign Exchange Heroes," has been put up in the arrival lounge of the Soekarno-Hatta International Airport, to welcome Indonesian migrant workers, which mostly include young women from rural areas who work overseas as domestic helpers.

With annual remittances totaling around US $6 billion, migrant workers have become the second largest contributor to Indonesia`s foreign exchange reserves.

Quoting from a recent World Bank report, Moh Jumhur Hidayat, the chairman of the National Agency for the Placement and Protection of Indonesian Migrant Workers (BNP2TKI) said that migrant workers have helped mitigate the impact of the global economic crisis in their respective countries, which are mostly developing nations.

The 468-page report titled, "Migration and Remittances during the Global Financial Crisis and Beyond," also pointed out that remittances from migrant workers have become a reliable source of foreign exchange for developing countries facing an economic crisis.

As a result countries such as Indonesia, the Philippines, Bangladesh, India, China, and Mexico were not affected by the global economic crisis that began in 2008, the report said.

"The study also revealed that these countries have many migrant workers working abroad," Hidayat said Medan in North Sumatra.

Some economists had predicted a plunge in remittances as migrant workers returned to their countries from the United States, the Middle East and Europe, which have been hurt the most by the global economic crisis.

Migrant workers often become the first casualties of tough economic conditions, as they are at a risk of losing their jobs or being offered to work for lower wages.

Despite the difficulties faced by migrants in these countries, the number of prospective migrant workers has gone up and total remittances have only slightly dipped.

Remittances dropped 6 percent in 2009, compared with 2008, but this drop was negligible compared with the over 40 percent plunge in foreign direct investments during the same period in countries like India, Indonesia and Philippines.

The World Bank also said that migrant workers, who end up lower incomes during a recession, still figure a way out to save money and send their dollars home, as they tend to cut down on their expenses and live in a shared accommodation.

Remittances have increasingly played a large role boosting the economies of many countries, by contributing to economic growth and to improving the livelihoods of less prosperous people.

With migrant workers projected to remit about US $399 billion to their home countries in 2012, compared with $372 billion in 2011, remittances have become the most tangible link between migration and development, the World Bank's report said.

"The resilience of remittances is good news for developing countries as they remain one of the less volatile sources of foreign exchange earnings, particularly for less developed countries."

"At the household level, these cash transfers are, in many cases, the only lifeline for families in the home countries," Hans Timmer, the World Bank`s director of development prospects said.

For receiving countries, a key factor behind the resilience in remittances is the diversification of migrant destinations.

Till date, Indonesia has sent around six million migrants to work in 116 countries with, with their annual remittances pegged at Rp100 trillion.

Most Indonesian migrants work in the organized sector and those working in the unorganized sector are only found in 14 countries.

Hidayat expressed his gratefulness to the migrant workers for helping Indonesia bear the impact of the economic crisis.

"If there are lay-offs during a global economic crisis, poorly paid migrant workers are usually the last ones to lose their jobs."

Remittances from Indonesian migrants are expected to reach Rp65 trillion or more than US $6.5 billion in 2012, Muhaimin Iskandar, the Manpower and Transmigration Minister said.

"This figure is based on data gathered from banks and non-banking financial institutions only," he said, adding that many workers also send money home in cash through friends who return home for the post-fasting holiday.

He added that as per Bank Indonesia, Indonesia`s central bank, remittances through non-banking financial institutions are expected to reach Rp15 trillion, while those from banks are estimated to touch Rp50 trillion.

Remittances usually go up during the fasting month of Ramadan, and when the fasting holiday of `Lebaran` or `Idul Fitri` is near.

"Remittances can rise sharply by up to 30 percent during every Ramadan and ahead of Lebaran, compared with other months," Iskandar said.

The state-owned operator of pawnshops PT Pegadaian, also predicts the rise in remittances from Indonesian workers abroad ahead of Idul Fitri.

Tyas Ari Hidayat, an official with the Senen branch of PT Pegadaian said, remittances are expected to surge by as much as 50 percent ahead of Idul Fitri on August 19.

He said Pegadaian intends to comply with the Western Union`s regulation prohibiting pawnshops from receiving remittances higher than Rp100 million from one person.

Remittances from Indonesian migrants working in Malaysia almost doubled during the fasting month of Ramadan, compared with a month ago.

"Before Ramadan, we recorded 200 to 300 remittance related transactions daily, but they jumped to between 500 to 600 transactions a day during the fasting month," Alhana, the Remittance Golden Kuala Lumpur branch office head, said in Kuala Lumpur, Thursday.

The minimum value for remittances varies from as low as 50 ringgits or Rp150,000 to as high as 50,000 ringgits or Rp150 million.

A similar increase was also reported in Cianjur in west Java, where money orders sent via the local post office totaled Rp47.7 billion in July.

Suhana, the post office sales manager also said that remittances are expected to increase ahead of Idul Fitri. Remittances in 2011 totaled Rp60 billion, but 2012's receipts are expected to be bigger.

Remittances were received mostly from migrants in the Middle East, mainly in Saudi Arabia and the United Arab Emirates, which accounted for 80 percent of the total amount.

However, Indonesia has currently halted migration of labor to Saudi Arabia and Malaysia following reports of alleged maltreatment of Indonesian workers in the two countries.

But the freeze has not resulted in a decline in remittances by Indonesian workers abroad, Lisna Yoelani Poeloengan of BNP2TKI said.

This is because of the change in the percentage of workers categories supplied by the country, Poeloengan said.

She added that the percentage of skilled social workers has risen to 45 percent, though housemaids remain dominant migrant group and make up for 55 percent of the total number of workers sent abroad.

Based on figures from official sources including banks, between 2009 and 2011, remittances averaged US$6.5 billion a year, Poeloengan said.

They fell in West Nusa Tenggara (NTB), which received remittances worth Rp237.71 billion in the first semester of 2012, a drop from the Rp500 billion received during the same period last year.

This was due to ongoing ban on the migration of Indonesian workers to Saudi Arabia, Syahrum, the head of the Mataram BP3TKI said.

"This freeze has led to a drop in remittances to West Nusa Tenggara, as most of them were coming from workers in Saudi Arabia and Malaysia," he said.

But remittances coming to NTB could be more than what official data projects, as it does not include the money sent via non-banking services, Syahrum said.

NTB sent 14,950 migrant workers overseas from January through June in 2012. Of these, 13,800 or 99 percent went to Malaysia, while the rest migrated to Brunei Darussalam and Timor Leste.