If labour migration were to remain restricted and if the labour-sending countries were instead offered private foreign capital investment to compensate for the loss of remittances and income, how much capital investment would be required?

A recent study answered this question for five Asian economies by assessing the full income effect of remittances of the workers' home-country economy and the incremental capital- output ratios for the countries of emigration.

The compensatory capital per migrant ranges from $12,200 in Bangladesh to $32,400 in the Philippines--and the financing gap from $1.3 billion to $20.2 billion for the same countries. In relation to foreign direct investment (FDI), however, the gap story changes. The required compensatory capital is 1,020 times the FDI in Bangladesh and 25 times than in the Philippines--and less than three times that in Thailand.

Clearly, labour migration appears to be the most viable and practical alternative for countries that do not have to mobilize the requisite policy commitment to reform and restructure its own economies to be better prepared for letting some economic opportunities travel to countries with high unemployment and underemployment.

Source: United Nations Development Programme