06 November 2009
Diasporas Contribute to Prosperity in Homelands of Those Who Left
Washington — Diaspora communities are potent sources of investment in the countries of origin of people who migrate.
“Innovations in transportation and communication technologies now allow migrants to psychologically and physically connect with their countries of origin in ways that were virtually unimaginable in the past,” Liesl Riddle, a scholar at George Washington University in Washington, writes in an article titled “Diasporas: Exploring Their Development Potential.” The term “diaspora” historically has referred to the dispersion of Jews, but in recent years it has come to include the dispersion of any group of people to areas outside their traditional homeland.
Riddle writes that migrants tend to acquire new knowledge, skills, social contacts and financial resources in the countries where they take up residence. They often are wealthier than their compatriots who remain in the home countries, and many are motivated to help their less fortunate countrymen, she writes. Hence, diaspora investors may be more likely than other foreign investors to keep money in a particular country rather than repatriate the profits, even in times of crisis, according to Riddle.
In an interview with America.gov, she said that hard facts and figures about diaspora investment flows are impossible to calculate today because of lack of data. “Foreign direct investment flows into a country, in most cases, are not tagged as coming from ‘diasporan’ versus ‘nondiasporan,’ and remittances are not tagged as for investment or other purposes,” she said, but added that more detailed data are beginning to be collected.
MENTALITY SHIFT
India and Ethiopia recently established visa categories for investors of Indian and Ethiopian origin. “We are just now starting to get data to analyze diaspora versus nondiaspora investment in certain countries,” Riddle said.
In the past decade or so, emigrant investors have devised very creative ways to invest in microenterprises and small-scale service businesses, such as hair salons, taxi companies, restaurants and so on, according to Riddle. “People who have set up businesses here in the United States typically have gone back and set up similar businesses back home, typically family-based businesses,” Riddle said. “Some have set up chains of business, so they are bringing back the concept of branding and pushing for reforms of business laws to protect franchises.”
Until recently, governments in most developing countries did not pay much attention to small-scale investments by their ex-residents because the governments felt that the investment sums were not large enough to have an economic benefit.
“Unfortunately, in the past when they thought about diaspora investment, they thought about wealthy millionaires or billionaires coming back and bringing large-scale manufacturing. They were often disappointed,” Riddle said.
But if diaspora investment does not often bring in huge fortunes, it does offer the potential for many human-capital transfers, such as franchising, branding, business skills, cash management, customer relations and marketing. “These are hard to measure, but they are economically powerful,” Riddle said.
As governments in developing countries awaken to the economic potential of diasporas, they are beginning to partner with development organizations, businesses and diaspora groups to attract capital. For example, Vietnam, in partnership with the United Nations, has established a program called TOKTEN, a shorthand expression for “transfer of knowledge through expatriate nationals,” to bring professional expertise back to Vietnam from its overseas community. The TOKTEN office is the Vietnamese government’s interface point with Vietnamese diaspora groups, which pressure the Vietnamese government to clarify and reform its taxation procedures and to reduce corruption. Many diaspora groups say they are eager to invest in their countries of origin but are reluctant to do so if their money winds up in the pockets of corrupt officials, according to Riddle.
The Jamaican government plans to issue a bond in 2010 targeting investors in the Jamaican diaspora.
Representing the commercial world, the world’s largest money transfer company, Western Union Company, has partnered with development organizations and governments to help make diaspora investment more effective. In one initiative, Western Union is co-sponsor of the African Diaspora Marketplace competition along with the U.S. Agency for International Development.
The competition calls for entrepreneurial proposals from African immigrants in the United States, proposals for ways to develop new businesses in sub-Saharan Africa. The winners of the competition are to be announced in January 2010. Each of the 10 to 20 winners will receive a grant of between $50,000 and $100,000 to finance his or her business project.
