Over
the last two decades,
remittances by
migrants or temporary
workers have made
a major socio-economic
contribution in
the countries
of their origin.
At the social
level, remittances
have added to
family incomes
and boosted consumption.
At the national
economic level,
remittances have
reduced, in some
cases substantially,
the current account
deficit of many
developing countries.
Despite the ever-increasing
size of international
remittances, little
attention has
been paid to their
effect on poverty
and income distribution
in developing
countries and
many policy questions
remain unanswered.
Remittances add
to a country's
foreign exchange
earnings, enabling
the country to
boost imports
and spur growth.
Indeed, as remittances
are a non-debt-creating
external resource,
many developing
countries like
Bangladesh find
it more useful
than other forms
of external finance.
Remittances increase
a country's international
creditworthiness
and lead to lower
borrowing costs.
If financial institutions
in the home countries
can securitize
remittance deposits,
they can increase
their access to
and participation
in international
capital markets,
thus enhancing
the home countries'
integration in
such markets.
Furthermore, remittances
tend to be stable
and may be counter-cyclical,
thus smoothing
out household
consumption and
investment patterns
during episodes
of unemployment
and high inflation
in the home countries.
Recent data published
by Economic and
Social Survey
of Asia and the
Pacific 2006 indicate
that remittances
from high-income
countries to developing
countries reached
more than $167
billion in 2005,
an unprecedented
sum, amounting
to twice the level
of official development
assistance from
all sources. Indeed,
total remittances
worldwide reached
$232 billion in
2005, underlining
their growing
importance as
a source of external
finance. Of the
top five remittance
receiving countries
in the world in
2004, three were
in the Asian and
Pacific region:
India ($21.7 billion),
China ($21.3 billion)
and the Philippines
($11.6 billion).
The other major
remittance-receiving
countries in the
region include
Bangladesh, Pakistan
and Sri Lanka.
For many countries
in the region,
remittances now
far exceed inflows
of FDI and official
development assistance.
Bangladesh with
a huge population
has an advantage
of exporting manpower.
In 30 years since
the country entered
the overseas employment
market in the
middle 1970s,
it has received
$41.40 billion
foreign exchange
remittance from
abroad. In fiscal
2005-06, Bangladesh
received over
US$ 4.8 billion
in a record inflow
of remittance
from expatriate
workers. Recently
manpower export
and the inflow
of remittance
have been increased
due to the reopening
of job markets
in South Korea
and Malaysia for
the Bangladeshi.
The total inflow
of the foreign
earnings of workers
rose by more than
100 percent between
2001 and 2006.
Bangladesh expatriates
sent home a record
US$ 3.81 billion
in the first eight
months of fiscal
2006-07. Curbs
on illegal transaction
of money have
contributed favourably
to the growth
of foreign remittances
in the country
recently. It reached
an all time high
with the Bangladeshi
expatriates remitting
$4.00 billion
until March of
the current fiscal
2006-07. At this
time the country's
foreign exchange
reserve reached
the ever-highest
level and crossed
the US$ 4.00 billion
for the first
time due to significant
inflow of remittance.
Informal fund
transfer channel
like 'hundi' and
'money laundering'
are major obstacles
to the inflow
of foreign remittance
in Bangladesh
and other developing
countries. Money
laundering is
not only limited
to the banking
system but also
the non-banking
system.
Money laundering
prevention bill,
2002 was passed
in the National
Assembly of Bangladesh
on 5 April 2002
and Gazette Notification
was made on 7
April 2002. According
to the law, money
laundering means
(a) "Earnings
or receiving properties
through direct
or indirect illegal
activities"
(b) "Receiving
of properties
legally or illegally
which may be transferred,
transformed, hiding
in a place or
helping to do
so illegally".
There are three
stages involved
in money laundering-placement,
layering and integration.
Placement: This
is the movement
of cash from its
source. On occasion
the source can
be easily disguised
or misrepresented.
The money is then
circulated through
financial institutions,
casinos, shops,
bureau de change
and other businesses-both
local and overseas.
The placement
can be carried
out through many
processes including:
Currency Smuggling,
which is the physical
illegal movement
of currency and
monetary instruments
out of a country.
Asset Purchase:
The purchase of
assets with cash
is a classic money
laundering method.
The major purpose
is to change the
form of the proceeds
from conspicuous
bulk cash to some
equally valuable
but less conspicuous
form.
Bank Complicity:
A financial institution,
such as banks,
if owned or controlled
by unscrupulous
individuals suspected
of conniving with
drug dealers and
other organised
crime groups,
can make the process
easy for launderers.
The complete liberalisation
of the financial
sector without
adequate checks
also provides
leeway for laundering.
Currency Exchanges:
In a number of
transitional economies
the liberalisation
of foreign exchange
markets provides
room for currency
movements and
as such laundering
schemes can benefit
from such policies.
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