Workers' Remittance Flows in Southeast Asia © 2006 Asian Development Bank All rights reserved. Published 2006. Printed in the Philippines. Publication Stock No. 011806 The views expressed in this book are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank or its Board of Governors or the governments they represent. The Asian Development Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. Use of the term “country” does not imply any judgment by the authors or the Asian Development Bank as to the legal or other status of any territorial entity. Table of Contents Abbreviations vi Foreword ix Acknowledgment x I. Introduction 1 II. Migration 3 A. Migration Trends in Southeast Asia 3 1. Hong Kong, China 4 2. Malaysia 6 3. Japan 8 4. Singapore 11 5. Women as Migrants: A Cross-Border Reality 11 B. Migrant Characteristics 12 1. Gender and Professions 12 2. Age and Education 13 3. Income 13 4. Duration in Destination Country 15 C. Immigrant Family Characteristics 16 1. Household Size and Income 16 2. Type of Beneficiaries 17 3. Gender and Age 17 III. Patterns among Senders and Recipients and Estimating Flows 18 A. Defining Remittances 18 B. Characteristics of Remittance Senders 20 1. Amount and Frequency 20 2. Expenditures 21 3. Contact with Country of Origin 22 C. Characteristics of Receiving Households 23 1. Amount and Frequency 23 2. Expenditures 24 3. Contact with Family Members Overseas 24 D. Estimates of Values 27 1. Estimates of Remittances Sent from Japan 28 2. Remitting from Hong Kong, China 28 3. Remitting from Singapore 29 4. Remitting from Malaysia 30 5. Regional Flows 31 IV. The Marketplace of Money Transfers: Rules, Players, and Competition 32 A. Regulatory Environment 32 1. Regulatory Bodies 32 2. Authorized Remittance Licensed Players 33 3. Capital Requirements 34 4. Identification Documents for Banking Transactions 35 i 5. Regulations on Pricing and Other Transaction Costs 36 6. Regulation on Bulk Remittances 37 7. Remitting Country–Receiving Country Relations 38 8. International Regulatory Standards: Anti-Money Laundering and Know-Your-Customer Policy 38 9. Enforcement I: Conditions 39 10. Enforcement II: Case Examples 40 11. Information and Data Gathering by Regulators 40 B. Players in the Intermediation of Remittance Transfers 40 1. Formal and Informal Markets 40 2. Key Players in Money Transfers 44 C. Transaction Cost 49 1. Sending Money from Japan 50 2. Sending Money from Hong Kong, China 50 3. Sending from Singapore 52 4. Sending Money from Malaysia 53 V. Remittances and Financial Intermediation 55 A. Migrants’ Access to Financial Intermediation 55 B. Recipients’ Access to Financial Institutions 57 VI. Conclusions and Recommendations 60 A. Data Management and Analysis 61 B. Regulatory Environment 62 C. Transaction Costs and Informality 62 D. Financial Intermediation 63 E. Regional Remittance Agenda Setting 64 F. Migration Issues and Remittance-Related Policy 64 VII. Methodology 66 A. Interviews 66 B. Survey Samples 66 1. Hong Kong, China, Survey Methodology 67 2. Japan Survey Methodology 68 3. Malaysia Survey Methodology 68 4. Singapore Survey Methodology 68 5. Indonesia Survey Methodology 69 6. Philippines Survey Methodology 69 C. Remittance Transfer Cost Data Set 70 D. Estimating Weighted Averages 70 Appendixes Appendix 1: Regulatory Framework 73 Appendix 2: Country Report: Hong Kong, China 89 Appendix 3: Country Report: Indonesia 117 Appendix 4: Country Report: Japan 145 Appendix 5: Country Report: Malaysia 173 Appendix 6: Country Report: Philippines 197 ii Appendix 7: Country Report: Singapore 221 Tables Table 2.1: Southeast Asian Migration Corridor—Main Economic Indicator 3 Table 2.2: Filipinos in Malaysia as of December 2004 7 Table 2.3: Immigrant Labor Population in Selected Host Countries 11 Table 2.4: Percent of Female Migrants in Destination Countries 12 Table 2.5: Average Number of Years in Destination Country 15 Table 2.6: Main Remittance Beneficiaries 17 Table 3.1: Average Amount Sent Each Remittance 21 Table 3.2: Annual Average Number of Transactions a Migrant Makes 21 Table 3.3: Top Three Expenditures According to Senders 22 Table 3.4: Remittance Expenditures According to Recipients 24 Table 3.5: Level of Engagement 26 Table 3.6: Japan, Average Amount Sent, Frequency of Sending and Migrant Population 28 Table 3.7: Estimated Volume of Remittances from Japan 28 Table 3.8: Income, Remittances, and Ratio of Remittances to Income 29 Table 3.9: Average Amount Sent, Frequency of Sending and Migrant Population in Hong Kong, China 29 Table 3.10: Estimated Volume of Remittances from Hong Kong, China 29 Table 3.11: Average Amount Sent, Frequency of Sending and Migrant Population in Singapore 30 Table 3.12: Estimated Volume of Remittances from Singapore 30 Table 3.13: Average Amount Sent, Frequency of Sending and Migrants in Malaysia 31 Table 3.14: Estimate Volume of Remittances from Malaysia 31 Table 3.15: Regional Comparison of Remittance Sending by Migrants 31 Table 3.16: Regional Flows to Three Selected Remittance Recipient Countries in Southeast Asia 31 Table 4.1: Examples of Amounts of Documentary Stamps Levied in the Philippines by the Philippine National Bank 36 Table 4.2: Percent of Immigrants in Japan Using Sending Methods 41 Table 4.3: Indonesians in Japan Use of Friends to Remit Money and Fee 41 Table 4.4: Relationship between Choices of Using Friends to Remit to Indonesia from Japan 42 Table 4.5: Sending Methods from Hong Kong, China 42 Table 4.6: Sending Methods from Singapore 42 Table 4.7: Sending Methods from Malaysia 43 Table 4.8: Malaysia Variables in the Equation 43 Table 4.9: Methods of Receiving Money among Filipinos 44 Table 4.10: Decides which Money Transfer Agency to Use when Transfering Money 44 Table 4.11: Preference of Informal Method among Recipients 44 Table 4.12: Examples of Institutions Offering Remittance Transfer Service 45 iii Table 4.13: Players in Singapore’s Remittance Marketplace 46 Table 4.14: Players in Hong Kong, China’s Remittance Marketplace 48 Table 4.15: Banks (or subsidiaries) in Hong Kong, China Providing Remittance Transfers to the Philippines (a sample) 48 Table 4.16: Remittance Transfer Costs in Japan to Indonesia, Malaysia, and the Philippines 50 Table 4.17: Commission on Foreign Exchange and Fees to Remit from Hong Kong, China, to the Philippines 51 Table 4.18: Transfer Costs to Remit from Hong Kong, China, to the Philippines 51 Table 4.19: Commission on Foreign Exchange and Fees to Remit from Hong Kong, China, to Indonesia 51 Table 4.20: Transfer Costs to Remit from Hong Kong, China, to Indonesia 52 Table 4.21: Remittance Price Comparison 52 Table 4.22: Western Union Charges in Malaysia 53 Table 4.23: Exogenous Factors on Transaction Cost in Southeast Asia 54 Table 5.1: Length of Time Living Host Country 56 Table 5.2: Immigrants with Bank Accounts 56 Table 5.3: Sending Remittances through Banks and Owning a Bank Account 56 Table 5.4: Extent of Financial Obligations among Immigrants in the Host Country 57 Table 5.5: Remittance Recipients’ Top Two Economic Activities 59 Table 7.1: Number of Individuals Interviewed 66 Table 7.2: Sample Size of Remittance Senders 67 Table 7.3: Sampel Size of Remittance Recipients 67 Table 7.4: Percent Distribution of Average Amount Sent by Number of Times a Year Sending that Amount 70 Table 7.5: Weighted Average Remittance Sent 71 Figures Figure 2.1: Average Age of Migrants in Destination Countries 13 Figure 2.2: Average Annual Income of Migrants 14 Figure 2.3: GNI per Capita (2003) Compared with Average Migrant Income (2005) 15 Figure 2.4: Average Annual Recipient Income (2005) Compared with GNI per Capita (2003) 16 Figure 3.1: Percent of Migrants who Brought US$3000 or Less on their Last Visit Home 23 Figure 3.2: Length of Time Receiving Remittances and Length of Time Relative to Living Abroad 24 Figure 3.3: How Migrants Contact their Family Members 25 Figure 3.4: SMS Use by Migrants in Remittance Sending Countries 26 Figure 4.1: Transaction Cost to Send Average Amount to Selected Southeast Asian Countries 54 Figure 5.1: Percentage of Remittance Recipients and Senders Who Have a Bank Account in the Country of Origin 58 iv Figure 5.2: Percentage of Remittance Recipients and Senders Who Responded that Some of the Remittance is Allocated to Savings in the Country of Origin 58 Boxes Box 5.1: Philippines: Rural Net 59 Attachment Attachment 1: Survey Methodology and the Backgrounds 245 References 247 v Abbreviations ABROI Association of Bank Remittance Officers, Inc. (Philippines) ADB Asian Development Bank ADWU Asian Domestic Workers Union AEG Advisory Experts Group AI authorized institution AMCB Asian Migrant Coordinating Body AML Antimoney laundering AMLC Anti-Money Laundering Council (Philippines) AOTS Association for Overseas Technical Scholarship ASEAN Association of Southeast Asian Nations ATKI-HK Asosiasi Tenaga Kerja Indonesia di Hong Kong (Association of Indonesian Migrant Workers in Hong Kong, China) ATM automated teller machine BAFIA Banking and Financial Institutions Act BCA Bank Central Asia BCB Bumiputra Commerce Bank BDO Banco De Oro BI Bank Indonesia BII Bank Internasional Indonesia BNI Bank Negara Indonesia BNM Bank Negara Malaysia BOJ Bank of Japan BOP balance-of-payment BOPM5 Balance of Payment Manual (fifth edition) BPI Bank of the Philippine Islands BRI Bank Rakyat Indonesia BSP Bangko Sentral ng Pilipinas (Central Bank of the Philippines) CAD Commercial Affairs