Remittances - funding luxuries rather than development

Remittances from Comorans living abroad are seen as a lifeline for impoverished communities at home, where there is little hope that the government will be able to meet their daily needs. With almost one-third of its population living outside the country - mainly in France - recent research has shown that, where the state has failed, contributions from the Comoran diaspora are playing a central role in providing basic services. In terms of its dependence on remittances per capita, the Indian Ocean archipelago ranks second after Eritrea in the African continent. According to a report released by the World Bank (WB) last year, the Comoran diaspora remitted an estimated KMF 16.7 billion (US $36.4 million) in 2003 - well over two and half times the level of merchandise export receipts, and approximately 12 percent of gross domestic product. This did not include goods transfers, which were estimated to be worth an additional $15 million to $20 million. But WB researchers pointed out that a large portion of the financial contributions received from abroad went into 'private consumption', with very little channelled towards savings and productive investments. Although remittances were also used to improve nutrition, shelter, education and health, the survey highlighted that a substantial portion was spent on luxury goods, unrelated to poverty reduction. One such 'luxury' is the 'Anda' wedding ceremonies, which are estimated to account for over half the expenditure of all remitted funds. Anda wedding ceremonies are a series of elaborate rituals which involves an exchange of expensive gifts between the couple's families and feasts for an entire village. The cost of the ceremony can amount to between $20,000 and $60,000, raised primarily by pooling the remittances administered by community associations. In its report the WB observed that while investing remittances in activities such as 'Anda' served to increase individual wealth among community members in the long term, it failed to contribute in any meaningful way to the development of the island's economy. "The share of remittances invested in actual revenue-generating activities is actually estimated to be very small, and comprises primarily the purchase of vehicles to use as taxis, and imported goods for resale," the report commented. CONCERNS Although existing research showed a steady inflow of remittances to the Comoros in recent years, there were concerns that this might slow down as the demography of the diaspora changed. WB researchers argued that as the third generation of Comorans became more integrated into French society, it was likely to result in a weaker relationship with the homeland, impacting on the willingness to remit, particularly if transfers were spent in an apparently wasteful manner. Members of the younger generation are reportedly already showing 'remittance fatigue'. As one of the principal donors, the diaspora has the potential to become an agent for change. "The diaspora is starting to voice its own demands for transparency, accountability and, to a lesser extent, effectiveness in the spending of diaspora funds," the report noted. Besides concerns over the apparent 'misuse' of remittances by local populations, "the continuation of autonomous investment [from abroad] also weakens the capacity of the state to intervene where it should be taking the lead - in the provision of public services", the WB said. The assumption that contributions from the diaspora would finance activities in areas where the state was failing had particularly negative effects on the poorest parts of the country, which do not benefit from remittances. At the same time, remittance-funded investments were often found to be highly inefficient, poorly managed and unsustainable. World Bank research indicated that although private funds from the diaspora had built hospitals and schools, a lack of communication with the government often led to staff shortages in these facilities. It suggested that a "closer and formalised" government-diaspora dialogue would go a long way to strengthening the role of remittances in broader economic development. Major donors have been in the process of reviewing their assistance to Comoros, which could provide an opportunity for both the government and the international community to see how their programmes could work together, and in cooperation with diaspora community initiatives, the report argued. Years of political instability, characterised by coups and counter-coups, have resulted in capital flight from the Indian Ocean island. However, the World Bank pointed out that even though remittances are a defining factor in the Comoran economy, the wellbeing of the population depends on the resolution of Comoros' long-standing governance crisis. "The degree to which Comoros will be able to avoid negative long-term effects from remittance inflows will depend far more on the nature of the domestic economy, and the general policy environment, than any policies specifically related to remittances," the WB noted. See IRIN's global overview: Remittances - money makes the world go round