Last several years, we have been observing a steady growth in world remittance flows. Since 2004, the yearly average growth of world remittance is around 14 percent. In 2007, the total global remittance inflow was $337 billion, an increase of 11 percent from 2006. More importantly, the developing countries are increasingly strengthening their share in the global remittance inflow.
The remittance inflow to the developing countries was $251 billion in 2007 -- 2.16 times higher than 2002. The share of global remittances inflow to the developing countries was 68 percent in 2002, which increased to 75 percent in 2006. In 2007, 74 percent of the world remittance flowed towards the developing countries. Out of the total remittance of $251 billion, $61 billion flowed to the developing countries of Latin America and Caribbean region, out of which $25 billion flowed into Mexico.
The other countries in this region that made notable progress are El Salvador, Honduras and Guatemala. Europe & Central Asia gained 13.9 percent of global remittance, whereas, the Middle-East and North Africa secured 8.6 percent. Other developing nations of the Sub-Saharan African region had an inflow of $12 billion, which is a 7 percent growth over 2006 and a global share of 3.6 percent.
Now let us look at Asia. East Asia and the Pacific region has the second highest share of remittance inflow of the total inflow to the developing countries, which is $59 billion and 17.5 percent of the world remittance inflow. On the other hand, inflow to South Asia also increased by $4 billion in 2007 over the previous year and the region had inflow of $44 billion, which is 13 percent of world remittance and 17.5 percent of total remittance inflow to developing nations.
In Asia, India and China have the highest inflow of $27 billion and $25.7 billion respectively. They are the top two nations in terms of remittance inflow, followed by Mexico ($25 billion), Philippines ($17 billion), France ($1.25 billion), Spain ($8.9 billion), Belgium ($7.2 billion), Germany ($7.1 billion), UK ($7.0 billion) and Rumania ($6.8 billion).
Inward remittance helped boost up per capita income of several nations in the world. According to the latest World Bank's income classification, India, Mongolia, Sudan, and Timor-Leste are now considered middle income countries instead of low income countries. Hungary and Slovak Republic are now high income members of the Organisation of Economic Cooperation and Development.
As a result of these upward revisions to incomes, especially for India, the largest remittance recipient among all developing countries, the share of remittance to low income countries is now smaller and the share of middle income countries larger.
As per World Bank's forecast, Bangladesh is expected to be a middle income country by 2016, if the annual GDP growth rate sustains at 7.5 percent throughout the period. It is a matter of pride for us that Bangladesh is ranked 11th in the world in 2007, having remittance inflow of $6.4 billion, which is 14.6 percent of the total remittance inflow to South Asia region and 1.9 percent of the world inflow. Pakistan is ranked 12th with a remittance inflow of $6.1 billion, followed by Indonesia with an inflow of $6 billion.
Remittance inflow plays a significant role in shaping up a country's economy. Remittance constitutes significant share in country's GDP for Tajikistan (36 percent), Tonga (32 percent), Kirghiz Soviet Socialist Republic (27 percent), Honduras (26 percent) and Guiana (24 percent). Given the narrow export base of the country, Bangladesh is not an exception either. Inward remittance inflow had always been vital to our economy and contributed a great deal to build up the country's foreign exchange reserve. At present only five items (knitwear, woven garments, frozen food, jute goods and leather) constitute around 85 percent of export earnings.
If we look at the table, we can see that annual growth in remittance inflow exceeded annual growth of export receipts substantially in the last three years. Remittance to export ratio has increased significantly from 42 percent in fiscal year (FY) 2001-02 to about 56 percent in FY2007-08. Contribution of remittance to the country's GDP doubled in the last three years, from 8 percent in FY2004-05 to 16.6 percent (provisional) in FY2007-08. This has been used in financing the import of capital goods, raw materials and industrial development. The steady flow of remittance has resolved the foreign exchange constraints, improved the balance of payments, and helped increase the supply of national savings. Remittance also served as a very important source of the country's development budget.
Total remittance outflow of the world in 2007 was $238 billion, out of which, the share of developing countries was $52 billion (22 percent of total outflows). High Income OECD countries contributed the lions share of $159 billion or 67 percent of total world outflow, whereas the contribution of these countries was $81 billion or 24 percent of total inflows. The US was the top contributor to the remittance outflow in 2007. The total outflow from USA was $42.2 billion, followed by the Kingdom of Saudi Arabia ($15.6 billion), Switzerland ($13.8 billion), Germany ($12.3 billion), Russia ($11.4 billion), Spain ($11.0 billion), Italy ($8.2 billion), Luxemburg ($7.5 billion), Malaysia ($5.6 billion) and United Kingdom ($4.5 billion). The Gulf Cooperation Council (GCC) countries are currently experiencing an economic boom due to high commodity prices, resulting in an increasing demand for migrant labor. The GCC countries have among the highest number of migrants as a share of population in the world: 78 percent in Qatar, 71 percent in the U.A.E, 62 percent in Kuwait, 41 percent in Bahrain, 26 percent in Saudi Arabia and 24 percent in Oman.
Bangladesh, like all other developing nations, is now fighting against the economic shock of global food crisis and oil price hike. A steady growth of remittance is helping us to a large extent to mitigate the impact of high food and oil prices. In FY 2007-08, Bangladesh earned $2.0 billion from Saudi Arabia, followed by USA ($1.2 billion), UAE ($ 1.0 billion), UK ($ 0.82 billion) and from Kuwait ($0.77 billion).
Even in July-August, the first two months of FY2008-09, $1.5 billion of remittance flowed into Bangladesh. Hence, to accelerate the growth of our economy, the government should facilitate the wage earners to send more inward remittance by upgrading their skill sets, issuing investor friendly savings and investment instruments including attractive exchange rates, favorable policies and ensuring protection and facilitation of the wage earners abroad, including expanded market access for our unskilled, semi skilled and skilled manpower through building up effective relationship with the 'top echelon' in the destination countries.
The writer is a banker and an economic analyst.