5: Migrant-worker remittances and Burma: an economic analysis of survey results

Sean Turnell, Alison Vicary and Wylie Bradford

Table of Contents

Introduction
The importance of remittances
Individual poverty alleviation
Broader concerns: remittances and economic development
Negative aspects of remittances
Remittance channels and instruments
Formal funds-transfer schemes
Informal funds-transfer schemes
Personal delivery
Choosing between formal and informal transfer schemes
Survey findings
Results: amounts sent
Uses for remittances
Methods and instruments
Gender differences
Some conjectures
Remittances and foreign reserves
Remittances and business capital
Remittances and financial development
Impact of the ‘Saffron Revolution’
Concluding thoughts
References

Introduction

In recent years, great interest has awakened in the question of migrant remittances. The potential for remittances—a phenomenon hitherto regarded as of little consequence—to act as a means for poverty alleviation and economic development has increasingly come to enjoy a broad consensus. In the light of this, and the recognition that for many developing countries remittances constitute a larger and more stable source of foreign exchange than trade, investment or aid, a vast and growing literature on the topic has emerged. Notwithstanding this broad interest, there is, however, yet to appear any major study with respect to the question of migrant remittances to Burma.

This chapter seeks to at least partially redress this void by examining the extent, nature and pattern of remittances made by Burmese migrant workers in Thailand. Drawing on a survey of such workers conducted by the authors, it was found that remittances to Burma were large, were used disproportionately to ensure simple survival and were realised overwhelmingly via informal mechanisms. The last two attributes are a direct consequence of Burma’s dysfunctional economy, which sadly also severely limits the gains to the country that remittances might otherwise bring.

For many developing countries, the remittances that their citizens send from abroad constitute a larger source of foreign exchange than international trade, aid or foreign investment. In 2006, such remittances, which were made by an estimated 150 million migrants across the globe, amounted to about $US300 billion. In the same year, total aid and foreign direct investment (FDI) to developing countries were about $US270 billion. The sheer volume of remittances, coupled with the fact that they are relatively stable and often counter-cyclical, makes them a potentially powerful source of development finance for receiving countries.

Many of the issues relating to remittance payments, however, are clouded by lack of data and considerable mystery as to the means by which they are made. The International Monetary Fund (IMF) records annual data for official worker remittance payments in its Balance of Payments Statistics Yearbook, but such data record only those payments that are made through official banking channels. Remittances that flow through private and unofficial channels, and via a variety of non-banking instruments, are not recorded. This is problematic for many countries and circumstances, but it is especially significant for migrants from countries in which trust in banks is mostly absent.

In Burma, there is all pervasive mistrust—not only in banks, but in just about all of the country’s institutions, financial and otherwise. Add to this an oppressive, secretive state and we have a comprehensive package of circumstances that makes data for the country highly unreliable. According to the IMF, official worker remittances to Burma totalled $US81.3 million in 2004 (the latest data available), from which must be deducted the remittances of foreign workers in Burma (mostly working for multinational corporations and international aid agencies) of $US24.5 million—delivering a net remittance surplus of $US56.8 million. Of course, these official flows (the inward component of which is due largely to funds sent home by Burmese merchant seaman) greatly understate the remittances sent by Burma’s estimated two million or so migrant workers and refugees who live outside its borders, and which are made (overwhelmingly) via informal payment mechanisms of various types. Such remittances are likely to be three to four times the official flows and their existence represents a lifeline that permits the survival of many thousands of families in Burma.

The importance of the remittance issue has triggered a vast and growing literature on the topic and great interest from multilateral agencies such as the World Bank, the IMF and the Organisation for Economic Cooperation and Development (OECD). Remittances have also come to the attention of international banks and other financial institutions, with their eye for market opportunities, anxious to grab a share of this potentially lucrative trade. No study, however, has yet been undertaken in relation to Burma, especially with respect to the informal remittance channels that dominate most payments into and out of the country.

The purpose of this chapter, accordingly, is to attempt to remedy this neglect at least partially by shedding some light on the nature, patterns and magnitude of the remittances sent by Burmese migrant workers and refugees in Thailand. Central to this analysis is the survey conducted by the authors across 2002–03. The use of a survey is necessary in the context of Burma since, firstly and simply, information and data scarcely exist in any other form. A survey is, however, also useful for other reasons when exploring remittances, including the fact that it can shed light on the uses of funds sent, the incentives faced by senders and recipients and other salient facts beyond simply financial data. Similar studies using household and individual survey data have yielded much information regarding remittances in other countries and regions, but this is the first such study regarding Burma and its population in Thailand.

The chapter is divided into seven sections. It begins by considering the broader context of remittances and why they are important—for the individuals directly concerned as senders and receivers and, more generally, for recipient countries. Section three considers the types of instruments and channels through which remittances are sent. The focus is particularly on informal remittance devices. As will become clear, such devices are not only the most important means by far through which remittances are sent into Burma, they are the least understood. Section four examines why migrants are often likely to choose informal remittance devices, despite the benefits formal methods confer. Section five details the results of our survey and examines the amounts sent, the costs of sending, the end uses of funds and methods of delivery, as well as the factors that determine these. Section six offers some conjectures on the survey results, relating the experiences revealed to those of other people and situations and highlighting the differences that set Burma apart. The chapter concludes with some thoughts about how Burma’s economic mismanagement squanders the development potential of the country’s remittance flows.