Missing Links

The New Diaspora

New links between émigrés and their home countries can become a powerful force for economic development.

Lucio García, a gardener in Merrifield, Virginia, speaks daily to his family in a remote town in Bolivia using a prepaid phone card that costs him a few cents a minute. Eddie Baron Levi, a Mexican Congressman, commutes weekly from Mexico City to Los Angeles, where he and his constituents reside. Iqbal Farouqi, a Pakistani waiter working in Milan, has used the money he earns to purchase two small trucks in Karachi that he rents to relatives and manages through the Internet.

This is not your parents’ diaspora. Globalization has greatly expanded the means through which people in one country can remain actively involved in another country’s cultural, economic, and political life. In fact, money transfers, travel and communications, networks and associations of nationals living abroad, and other new or improved opportunities for expatriates to "live" in one country even as they reside in another may be creating a powerful tool for development.

In the old days, the main methods for communities of émigrés to keep in touch with their homelands and their cultures were through language, cooking recipes, and the occasional letter or visit to their countries of origin. Now cheaper travel allows for more frequent trips to their original homelands and for more friends and family to reciprocate the visits. Trade liberalization and export promotion mean that more goods from the old countries are available in the new ones. Émigrés can sip their morning coffee while reading online newspapers from their native countries or even listening to the radio stations they left behind. In the evening, satellite dishes allow immigrants to catch the broadcast news of their homelands. Phone calls back home are a fraction of their cost a decade ago, fueling a fivefold boom in the number of minutes billed to prepaid phone cards since 1997 and making such cards a $4 billion a year market. And none of these privileges are necessarily limited to the well-to-do.

Moreover, the deregulation of international financial markets coupled with new technologies has made sending money back home easier and cheaper than ever. Last year, people residing abroad sent home more than $100 billion. For many families, the money sent by family members overseas spells the difference between relative poverty and total indigence. That goes for many countries, too. Worker remittances account for 24 percent of Nicaragua’s gross domestic product, 19.6 percent of India’s, and 6.5 percent of Morocco’s. In Mexico, remittances are the third largest source of foreign exchange after oil exports and tourism. And in Turkey, they are four times larger than the country’s inflows of foreign direct investment. In most developing countries, remittances are far larger than funds received through official development assistance or foreign portfolio investment. In fact, many expatriate communities routinely organize events to raise money for projects in their home countries.

But the impact of these economic ties goes well beyond supporting individual relatives or helping rebuild the local school. For example, surveys show that about 10 percent of Hispanic immigrants in the United States also trade with their home countries. In fact, the engagement of immigrants in international trade can have a significant economic impact. As James E. Rauch writes in the December 2001 Journal of Economic Literature, over time "a 10 percent increase in immigrants to the United States will increase U.S. exports to the country of origin by 4.7 percent and U.S. imports from the country of origin by 8.3 percent." Rauch also reports that in Canada a 10 percent increase in immigrants from a given country eventually increases Canadian exports to that country by 1.3 percent and imports from there by 3.3 percent.

Successful entrepreneurs of Indian, Israeli, Chinese, Taiwanese, Mexican, and Pakistani origin who live in the United States, Europe, or the Gulf states have also become important investors in their home countries. They bring back not just money but an infusion of entrepreneurial spirit and skills that their home countries often sorely lack. A recent survey by the Public Policy Institute of California has found that foreign-born (particularly Chinese and Indian) highly skilled immigrants in Silicon Valley have "successfully adopted both the technological capability and the venture-financed, high-growth business model that distinguishes many U.S. firms in the high-technology sector." Half of the respondents to this survey have set up subsidiaries, joint ventures, subcontracting arrangements, or other business operations in their native countries. Most of those who haven’t yet done so are considering establishing businesses in their home countries.

This trend surely challenges the traditional idea of the "brain drain." Whereas the talented engineers, scientists, or managers who migrated to another country used to maintain few ties to their home countries, today a new pattern is being established: a "brain gain" that provides new opportunities for trade and foreign investment as well as a powerful font of entrepreneurial energy. As the Public Policy Institute’s study notes, the brain drain (in the case of the Chinese and Indian professionals it surveyed) was replaced by "brain circulation," meaning a variety of two-way flows of highly skilled workers between the technologically advanced countries where they reside and the less-developed countries where they were born.

Politicians and governments have increasingly focused on tapping the money and political power of this new breed of expatriates. One of many Colombians living in Miami, Jairo Martinez recently won a seat in the Colombian Congress representing his compatriots living abroad. Mexican politicians now routinely campaign and raise funds in Los Angeles, Houston, and other U.S. cities.

But tapping the wealth of resources and talents contained in immigrant communities largely for political gain seems like a wasted opportunity. Just as governments have made it a national priority to entice multinational corporations and international fund managers to invest in their countries, so they should now make the seduction of the new diaspora a key part of their strategies for development.

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