Discussions are underway internationally to lower the cost of remittances for developing nations, including those in the Pacific region, where various initiatives are being launched to meet this goal.
The Fiji Times has learned that the World Trade Organization (WTO) is joining forces with the World Bank, International Labour Organization (ILO), International Organization for Migration (IOM), and the central banks of developing countries to effectively tackle this issue.
Research from the Australia-based Lowly Institute indicates that from 2009 to 2022, the average remittance costs were 10.2 percent for Fiji and 14.0 percent for Vanuatu, both of which receive significant remittances.
The United Nations Sustainable Development Goal (UNSDG) target 10 aims to decrease the transaction costs of remittances to below 3 percent by the year 2030.
Christopher Miller, an economist based in Sydney with the World Bank, pointed out that no Pacific nation has yet achieved this target. He highlighted the World Bank’s corresponding banking relationship (CBR) project in the region, which aims to analyze remittance costs.
Miller mentioned that Samoa has an average remittance cost of 8 percent, indicating a considerable gap to achieve the UNSDG goal. He identified three key areas where authorities could influence remittance pricing.
“One area is economies of scale; you want higher transaction volumes. The CBR project will implement a mechanism, and there is a feasibility study on setting up a regional payment system to aggregate payment volumes. This approach can enhance economies of scale and increase bargaining power, leading to lower prices,” Miller explained in response to inquiries.
He also suggested that increased competition within the market could play a role, noting that several exchange operators already conduct remittance transfers in the Pacific. Additionally, he emphasized the importance of expanding the digital economy.
“There is substantial work needed on payment system infrastructure and interoperability. Digital transactions are generally cheaper than transactions that rely on numerous physical agents,” he added.
Miller cited Fiji’s recent integration of mobile network operators into its national payment system as a positive development that will “definitely help” in lowering remittance costs due to increased competition.
WTO Deputy Director-General Ambassador Xiangchen Zhang informed the newspaper that discussions are still in the preliminary stages following requests from developing countries to address remittance costs. He indicated that the next step would be to present recommendations to the WTO’s Trading Service Committee to further the debate on this critical issue.