Migrants' remittances home exceed ODA

Elisa Rey puts a wad of yen into a small, brown envelope at her home. Far away in Peru, her monthly remittances — set aside from her job in an electronics factory south of Tokyo — have already built a house that few could dream of in her poor suburb of Lima.

Rey is one of thousands of foreigners who have migrated to Japan in the last decade and turned this country into an unexpected source of remittances that is supplying more money to developing countries than Tokyo’s hefty foreign aid budget.

“The surge has been spectacular” in remittances from Japan, said Armando Ouchida, executive director of Convenio Kyodai, a cooperative used by many of Japan’s 52,000 Peruvian residents, the country’s fifth-largest foreign worker community, to send money home.

The remittances go directly into building businesses, homes and futures for poorer families, who often see little in government aid, trade or business investment trickle down to their low-income communities.

Money sent by foreign residents of Japan has caught the attention of officials before — most notably some 4 billion yen in hard currency sent annually to North Korea by Koreans in Japan. The government, seeking a means of pressuring Pyongyang into abandoning its nuclear weapons program, enacted a law in February that enables it to block those remittances.

But increasingly, remittances are being touted by aid officials as an important development tool. Japan has emerged as a remittance juggernaut despite a proportionally tiny number of foreign laborers — less than 1.5 percent of Japan’s workforce of 53 million.

Japan is the world’s second-largest foreign aid donor after the U.S., dispensing 857.8 billion yen in official development assistance in fiscal 2003.

But, by some estimates, foreign workers in Japan annually remit more than that back to their home countries — money that goes straight to “the pockets of the poor people,” Inter-American Development Bank President Enrique V. Iglesias said on a recent visit to Tokyo.

Rey, the Peruvian electronics worker, said she and her two brothers send their parents about 40 percent of their monthly salaries, which built a four-story family home finished this year in the town of Chancay, just north of Lima.

The 31-year-old Rey came from Peru seven years ago after Japan — facing a labor crunch — began allowing in foreign workers who can trace blood ties to Japanese who had emigrated abroad. She said it’s difficult to live on little more than half her salary but added building the house was worth the sacrifice.

“Now it’s all paid off, we have something to go back to — a home, a life,” she said.

Takashi Kadokura, senior economist at Dai-ichi Life Research Institute Inc., said foreign worker remittances are “a big benefit for those economies receiving this money.”

In a study published last October, Kadokura estimated that 608.2 billion yen is sent annually through unofficial channels by illegal foreign workers in Japan, primarily Chinese, Koreans and Filipinos.

Combined with the 301.5 billion yen in declared remittances recorded by Japan’s central bank in 2002, foreign workers are sending more than 900 billion yen annually out of Japan.

Such funds have already proved an unexpected boon to developing countries.

Latin American and Caribbean workers sent a record $38 billion back home in 2003 — more than foreign direct investment and official aid combined to the region, according to the Inter-American Development Bank.

About $31 billion of that came from an estimated 14.5 million Latin American-born migrant workers in the United States.

But the second-largest source of funds was Japan, whose 350,000-member Latin and Caribbean community sent $3 billion, outstripping Europe, Canada and interregional remittances.

Remittances from Japan to Brazil last year — at about $2.5 billion — outstripped the value of the country’s coffee exports. Peruvians in Japan comprised only 2 percent of the country’s foreign migrant workers, but they contributed 16 percent of the total $1.2 billion that Peru received.

Filipino workers in Japan remitted $413 million in 2003, making them the third-largest source after the United States and Saudi Arabia, according to the Philippines central bank.

“Overseas workers are one of the pillars of the (Filipino) economy — without it, there would be no foreign reserves,” said Brenda Tenegra at Tokyo’s Ochanomizu University who researches Filipino workers in Japan. “Per capita, Japan is one of the largest remitters.”

Authorized and unauthorized banks have also cropped up in recent years, remitting a steady stream of funds to places that include Taiwan, South Korea and Thailand.

Exact figures for Chinese — Japan’s largest migrant population — are unavailable. But Kadokura’s study of illegal banks indicates that Chinese workers send much of the 600 billion yen in undeclared annual remittances.

With foreign workers in Japan proportionally contributing more than their counterparts elsewhere, they are catching interest as a serious source of finance.

“Japan is an important source of remittances,” Iglesias, the Inter-American Development Bank president, told reporters. “It is a major, major source of income. We’d like now to study how to make remittances more productive.”

Projects are in the pipeline to help migrant workers better use their remittances to start small businesses when they return home, including a $12 million venture capital fund for Brazilian workers in Japan that provides seed capital and training.