Contacts: In Washington DC: Elisabeth Mealey tel: (202)458 4475 emealy@worldbank.org In Sydney: Sue Spencer, tel +61 2 9235 6551 or +61 409 740 725 sspencer@worldbank.org Tomas Ernst, tel: +61 2 9235 6542 Sydney, September 13, 2007 - Pacific Island communities in Australia and New Zealand face steep transaction costs when sending money home, known as remittances. Financial institutions and money transfer operators are charging fees ranging from 15 to 50 percent, when international best practice is in the range of one to five per cent. “The cash that immigrants send home is a vital source of income for the daily survival of Pacific Island households,” said Dr. Manjula Luthria, senior economist for the World Bank’s Pacific office. “High transaction fees in the Pacific are eroding this income support and run counter to best practice in other parts of the world. Action is needed now and we are working to resolve this issue.” Twelve months ago, the World Bank launched the report “At Home and Away: Expanding Job Opportunities for Pacific Islanders Through Labour Mobility”. It drew attention to the importance of migration and remittances for Pacific Island countries. The most recent figures show remittances to the Pacific region tripled over the past decade to reach US$425 million (AUD 519 million). Tonga, Samoa and Fiji are the largest recipients of remittances in the Pacific, with remittance receipts accounting for a growing percentage of country GDP: 41.9 percent of Tonga’s GDP; 26.3 percent of Samoa’s GDP and 6.7 percent of Fiji’s GDP. Globally remittances totaled nearly US$276 billion (AUD 337 billion) in 2006 and it has been estimated that if migrant/guest workers were incorporated as a company, it would rank number 3 on the Fortune 500 list, behind Wal-Mart and Exxon-Mobil in annual revenue. Money transfer services have been made more efficient in other parts of the world. For example, transaction costs between the United States and Mexico have fallen 60 per cent since 1999 as a result of improved regulation, product innovation and stronger competition. Significantly, the cost of money transfers in the Pacific is way above global norms. Over the last six months, consultations between the World Bank and Pacific Island communities in Australia and New Zealand have revealed hard-working Pacific Islanders are struggling to meet the high costs involved in sending money home. These consultations have been an important follow up to the “At Home and Away” report. Furthermore, they have been used to inform a recent high-level dialogue with representatives from ANZ, Westpac, MoneyGram, Visa International, AusAID, Reserve Bank of Fiji, Central Bank of Samoa, Central Bank of Tonga and the Reserve Banks of New Zealand and Australia. The dialogue was an opportunity to discuss how money transfer services could be made more efficient and to identify a number of concrete initiatives to meet that goal. Participants agreed to move forward quickly. The Central Banks are seeking to strengthen reporting and disclosure requirements in order to improve transparency for financial consumers. The private sector agreed to explore implementing a number of innovative financial products that have been successful in other regions. The World Bank is partnering with each organization to ensure the expertise of the commercial sector and the targeted efforts of regulators translate into cost savings for Pacific consumers. “We now have commitment and this is an excellent opportunity to build on the value of remittances in contributing to poverty alleviation in Pacific Island countries,” Dr. Luthria said. “We are anticipating that the roll-out of these important initiatives to reduce fees and improve remittance services will occur over the next 12 months.”
For further information on the World Bank’s activities in the Pacific and to download a copy of the report “At Home and Away,” go to the World Bank website at www.worldbank.org/pi |
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