Discussions are underway on the global front to lower remittance costs for developing nations, including projects in the Pacific region aimed at achieving this goal. The World Trade Organization (WTO) is working alongside the World Bank, International Labour Organization (ILO), International Organization for Migration (IOM), and central banks of developing countries to find effective strategies.
According to the Australia-based Lowly Institute, the average remittance costs for Fiji and Vanuatu have been notably high, standing at 10.2 percent and 14.0 percent, respectively, from 2009 to 2022. The United Nations Sustainable Development Goal (UNSDG) target 10 seeks to reduce remittance transaction costs to less than 3 percent by 2030.
World Bank economist Christopher Miller, based in Sydney, indicated that no Pacific country has yet achieved this target. He highlighted the World Bank’s corresponding banking relationship (CBR) project, which aims to assess and address remittance costs in the region. With Samoa experiencing an average remittance cost of 8 percent, he underlined the potential for significant improvement to meet the UNSDG goal.
Miller identified three areas where authorities can impact remittance pricing. First, increasing transaction volumes can create economies of scale, and the CBR project is set to explore regional payment mechanisms that could aggregate payment volumes to enhance bargaining power and lower prices. Second, fostering competition in the remittance market is essential, as the Pacific already has several exchange operators facilitating these transfers. Finally, he pointed out the importance of integrating more money into the digital economy, noting the need for improvements in payment system infrastructure and interoperability. He noted that digital transfers are generally more cost-effective than relying on numerous physical agents.
Miller praised Fiji’s recent integration of mobile network operators into its national payment system, which he believes will significantly help lower remittance costs as competition grows.
WTO Deputy Director-General Ambassador Xiangchen Zhang acknowledged that discussions are still in the early stages, following requests from developing countries to reduce remittance costs. He indicated that the next step will involve submitting recommendations to the WTO’s Trading Service Committee to further explore this issue.