By Lovens Gjed
Did you know that migrant workers sent close to half a trillion dollars to their developing home countries in 2017? Or most importantly, that this positive trend is likely continue for the next decades? Yet, aspiring business leaders and investors may be misled to summarize the future of business worldwide to only two main global processes, namely automation and globalization. To a lesser extent, migration is also prevalent in business settings but arguably maintains the same relevance it has had over the previous decades. That is, it mostly implies a reserve pool of human resources for Multinational Corporations (MNCs) in need of cheap labor.
In some instances, MNCs may even mistakenly undervalue the market opportunities in source countries (i.e., home countries of immigrants and migrant workers), partly because remittance inflows are in many cases secured by exclusive partnerships between a single money transfer company and local government representatives. At the same time, the internet is currently providing innovative ways for remittances recipients to bypass those closed circles. Therefore, interested parties should account for the resulting implications for businesses who may want to increase their revenue streams into source or brain-drained countries.
In fact, easier access to technologies in those countries may eventually cut down on middle-man and transactions costs, leaving much flexibility for businesses who seek to cater to local consumers with infrastructural needs. For example in 2011, Bill Gates noted that cutting down transaction costs on remittances worldwide_ from around 10% to an average of 5%_ would unlock about $15 billion a year in developing countries. In this article, I contend that a focus on infrastructural growth in brain-drained countries may leverage remittances to cut down on South-North migration, determining the future of business for them. One particular example is my home country, Haiti.
Haiti, like many other brain-drained countries, has been “open for business” for a while now. According to a 2013 Columbia University paper, close to 4 out of 5 of its college-educated citizens were living abroad as of 2013_ before its recent migration waves to South America. In 2016, its diaspora sent in over $US 2 billion to their home communities in Haiti, more than 30% of its recorded GDP for the year. Yet, what does that mean in terms of market opportunities in a source country?
In general, many source countries do not or cannot track the totality of their remittance inflows, fueling the emergence of an informal economy. If you have traveled abroad to some of the most impoverished communities, don’t you find it fascinating that many of the locals have an iPhone 8 just like you? Or that they abide by the latest fashion standards? They are so-called impoverished because their jobs and incomes are not accounted for by any local agency, but they can afford quite a living. Although at the same time, they may also be lacking proper electronic waste disposal systems for example. Therefore, market opportunities for MNCs reside in their integration of the informal economy to better serve remittances recipients in developing countries.
In fact, some business models have embraced ideas from scholars such as the late Professor C.K Prahalad to accommodate the particular needs of poor communities; that is, by providing affordable, yet high-quality, consumer goods to the “bottom of the pyramid” (i.e., the poorest 4+ billion people). In the age of social entrepreneurship, MNCs may turn to those ideas in addition to putting in place the ideal infrastructures for informal economies.
What would be an ideal infrastructure? Simply put, one that engages the diasporas (i.e., immigrants and migrant workers) and leverages the increasing buying power of source countries to grow from within. There is evidence that high exposure to environmental risk may lead to an increase in remittance inflows to those communities as addressed by Dilip Ratha, the lead author of the most recent World Bank’s Migration and Development Brief. For example, in Haiti, inefficient irrigation systems have led to higher vulnerability to natural disasters in the country and coincided with an additional $US 92 million from newly-arrived Haitian migrant workers in Chile in 2017_ a 156.1% remittances increase within 12 months.
In their local efforts, MNCs would incorporate multi-partisan interests, the particular demands of the informal economy, and also consider the cultural and economic contributions of the diaspora.
To that end, efficient diaspora engagement programs may give valuable insights and the best approaches to initiate long-term infrastructural projects. For example, in North America migrant workers may send up to 10 percent of their income to their home countries. However, that relatively small contribution has been one of the surest ways to reach those living at “the bottom of the pyramid” and can make up to 80 percent of their household incomes. All things considered, the rewards are high for MNCs who bet on the growing emotional connectivity between diasporas and their homes to create community wealth by re-routing remittances to infrastructural projects.
However, while higher climate vulnerability may translate into an increase in remittance inflows, this pattern may also incite some involved parties to favor more fatalities from natural disasters. This shortsightedness should not get in the way of sustainable development in the home countries of immigrants and migrant workers.
Beyond the particular case of Haiti, I believe that the future of business is in making transaction costs for remittances as low as possible to leverage the increasing buying power of source communities; hence, the interconnectivity between automation (such as in blockchain technologies), globalization (via MNCs) and migration. I hope that current and aspiring business leaders will work with MNCs to venture in informal economies and contribute to cutting down on South-North human capital flights, determining a more promising future for those at “the bottom of the pyramid.”
Lovens Gjed is an award-winning student entrepreneur from Gonaives, Haiti and a rising senior student in Sustainable Development at Columbia University in New York. Follow him on Instagram or Twitter.