ISBN 92-861-0396-4 FEMIP Facility for Euro-Mediterranean Investment and Partnership • Facility for Euro-Mediterranean Investment and Partnership Facility for Euro-Mediterranean Investment and Partnership • FEMIP Trust Fund European Investment Bank 100, boulevard Konrad Adenauer 3 (+352) 43 79 1 L-2950 Luxembourg 5 (+352) 43 77 04 countries Findel Offices: 4, rue Lou-Hemmer L-1748 Findel www.eib.org/femip – U [email protected] Mediterranean in FEMIP External Offices: Facility for Euro-Mediterranean Egypt EUROMED remittances 6, Boulos Hanna Street 3 (+20-2) 336 65 83 Investment and Partnership Dokki, 12311 Giza 5 (+20-2) 336 65 84 U [email protected] workers’ of Morocco Study on improving the efficiency of workers’ remittances Riad Business Center 3 (+212) 37 56 54 60 Immeuble S3, Aile sud, 4ème étage, 5 (+212) 37 56 53 93 in Mediterranean countries efficiency Boulevard Er-Riad U [email protected] the Rabat Tunisia improving 70, avenue Mohamed V 3 (+216) 71 28 02 22 on TN-1002 Tunis 5 (+216) 71 28 09 98 U [email protected] Study © EIB – 03/2005 – EN – QH-X1-06-001-EN-C © EIB Photo Library A word from the Vice-President his study on remittances to their countries of origin made by Mediterranean Tworkers who have emigrated to the European Union is a first in more ways than one. It is the first study financed by the FEMIP Trust Fund. This Fund, which was established in 2004 and has been financed – to date – by 15 EU Member States and the European Commission, is intended to support the development of the private sector via the financing of studies and technical assistance measures and the provision of private equity. This study also illustrates FEMIP’s desire to make available to all those involved in the Euro-Mediterranean Partnership the analytical data required to increase understanding of the economic and financial issues associated with the development of the partner countries and, in particular, of the factors that can help towards strengthening the financial and banking sector of the countries in question. With that in mind, FEMIP has already undertaken a survey of the sovereign debt markets in the Mediterranean countries (published in 1 December 2005 ) and defined an ambitious programme of work on access to Philippe credit for businesses. de Fontaine Vive Curtaz This document is the first detailed analysis of financial flows from Member of the EIB’s Management Mediterranean migrants in Europe, an overlooked subject that has not yet Committee responsible for FEMIP been fully measured. It shows, first, the extent of the phenomenon – some EUR 7 billion is “officially” transferred every year from Europe to eight Mediterranean countries – and, secondly, that the methods of transfer used do not enable this money to be put to sufficiently good use in order to finance productive investment. The range of questions raised and recommendations made leads me to believe that this document provides a solid basis for engaging in a process of information and consultation on improving both the terms offered to migrant workers for transferring funds and the efficiency of such remittances. With that in mind I look forward to receiving your reactions and ideas that could contribute to the discussion of the issues in question following this report, which I hope that you will enjoy reading. 1. Available on the EIB’s website at: www.eib.org/publications/publication.asp?publ=242 March 2006 Study on improving the efficiency of workers’ remittances in Mediterranean countries FTF/REG/01/2005 Final Report The authors take full responsibility for the contents of this report. The opinions expressed do not necessarily reflect the view of the European Investment Bank. Client: European Investment Bank Project team: Jacqueline Barendse Dr. Andrea Gallina Kirsten Guijaux Christian Hiddink Agnes Janszen Jan Jonkheer Dr. Nick van der Lijn ECORYS, Macro & Sector Policies In cooperation with: Inclusion Group Federico Caffè Centre, (Dept Social Sciences, Roskilde University) Rotterdam, February 2006 ECORYS-NEI P.O. Box 4175 3006 AD Rotterdam Watermanweg 44 3067 GG Rotterdam The Netherlands T +31 10 453 88 00 F +31 10 453 07 68 E [email protected] W www.ecorys.nl Registration no. 24316726 JB/mr AV13261 Table of contents Preface 9 Executive summary 11 1 Introduction 15 1.1 Objective of the study 15 1.2 Policy context 16 1.3 Improving the efficiency of workers’ remittances 17 1.4 Sources of information and activities undertaken 18 1.5 Usage of definitions 19 1.6 Outline of the report 25 2 General background on remittances 27 2.1 Introduction 27 2.2 Remittance trends, usage and economic impact 27 2.3 Channels of transmission 28 3 The EU – MPC Corridor 31 3.1 Introduction 31 3.2 Remittances in the EU-MPC corridor 31 3.3 Importance of remittances for MPC countries 32 3.4 Important EU countries within the EU–MPC corridor 33 3.5 Important corridors within the EU–MPC corridor 34 3.6 Selection of corridors for this study 34 4 Payment infrastructure in the EU 37 4.1 Introduction 37 4.2 Current payment systems and regime for remitters in the EU 37 4.3 Developments regarding payment systems 40 4.4 The future regime for remitters banks and MTOs in the EU 41 5 Germany – Turkey 43 5.1 Introduction 43 5.2 Registered remittances 43 5.3 Migrants 45 5.4 Channels 46 5.5 Financial sector in Turkey 49 5.6 Use of remittances 51 5.7 Observations, impediments, recommendations 54 6 Spain - Morocco 57 6.1 Introduction 57 6.2 Registered remittances 57 6.3 Migrants 58 6.4 Channels 60 6.5 Financial sector in Morocco 62 6.6 Use of remittances 64 6.7 Observations, impediments, recommendations 66 7 France – Tunisia 69 7.1 Introduction 69 7.2 Registered remittances 69 7.3 Migrants 70 7.4 Channels 72 7.5 Financial sector in Tunisia 75 7.6 Use of remittances 77 7.7 Observations, impediments, recommendations 79 8 France – Algeria 83 8.1 Introduction 83 8.2 Registered remittances 83 8.3 Migrants 84 8.4 Channels 86 8.5 Financial sector in Algeria 88 8.6 Use of remittances 89 8.7 Observations, impediments, recommendations 90 9 Italy – Egypt 93 9.1 Introduction 93 9.2 Registered remittances 93 9.3 Migrants 95 9.4 Channels 96 9.5 Financial sector in Egypt 100 9.6 Use of remittances 101 9.7 Observations, impediments, recommendations 103 10 Germany – Lebanon 107 10.1 Introduction 107 10.2 Registered remittances 107 10.3 Migrants 108 10.4 Channels 110 10.5 Financial sector in Lebanon 113 10.6 Use of remittances 113 10.7 Observations, impediments, recommendations 114 11 Germany – Jordan 117 11.1 Introduction 117 11.2 Registered remittances 117 11.3 Migrants 118 11.4 Channels 119 11.5 Financial sector in Jordan 122 11.6 Use of remittances 123 11.7 Observations, impediments, recommendations 124 12 Germany – Syria 127 12.1 Introduction 127 12.2 Registered remittances 127 12.3 Migrants 128 12.4 Channels 129 12.5 Financial sector in Syria 132 12.6 Use of remittances 132 12.7 Observations, impediments, recommendations 133 13 Observations 135 13.1 Introduction 135 13.2 Transaction cost 135 13.3 Usage of remittances 136 13.4 Usage of channels 136 14 Recommendations 137 14.1 Recommendations for improving the efficiency of remittances 137 14.2 Other policies affecting remittance flows 144 14.3 Summary of recommendations per corridor 144 Appendix 1 References 147 Appendix 2 Overview of key characteristics 163 Appendix 3 Overview of transaction costs 165 Appendix 4 Results mini-surveys 167 Appendix 5 ToR 171 Preface The project team would like to thank all representatives of migrant organisations, financial institutions, Money Transfer Operators (MTOs) and other organisations and experts that contributed to this study through responding to specific questions and providing us with relevant documents and information. We are grateful for the cooperation with the European Investment Bank and Peter Künzel in particular for the constructive comments during the study. We also like to thank our partners in the Mediterranean Partner Countries who provided valuable input: CEGEP in Algeria; Renova, Economics & Investment Consulting Ltd. in Turkey; Fidunion in Tunisia; Consultation & Research Institute (CRI) in Lebanon; North South Consultants (NSCE) in Egypt; Al Jidara in Jordan; Allied Management Consultants (AMC) in Syria; Dr El Ghanjou in Morocco, Karine Hermans in France, Hedi Ammari in Italy, Herman Janszen in the Netherlands and Antje Kangiesser in Germany. Victoria Iiova, Sabina Sebellin and Diana Sainz were a great help in collecting data on migrants, remittance flows, usage, financial sector and good practises. And last but not least we express our appreciation to the participants of the workshop discussing the preliminary findings and recommendations for their comments and suggestions: Andy Sundberg (World Diaspora Forum), Dominic Thorncroft (representative of Chequepoint and of the UK Money Transmitters Association), Peter van Roosmalen (CEO Inclusion Group), Peter van Dijk (Inclusion Group) and Peter Künzel (European Investment Bank). We want to stress that the authors take full responsibility for the contents of this report and that the opinions expressed do not necessarily reflect the view of the European Investment Bank. Study on improving the efficiency of workers’ remittances in Mediterranean countries 9 Executive summary With a few qualifications, the potential beneficial impact of workers’ remittances on the development of recipient countries is now widely accepted. However, there is evidence in the existing literature that workers’ remittances are generally hampered by high transfer costs and that the efficiency of their use in recipient countries is constrained.