THE preoccupation with remittances has prevented a broader understanding of the dynamic effects of migration which may often be more important. Two such effects that need consideration in the context of our study are: the role of the diaspora and the transfer of technology. This article concentrates largely on the first and discuss the role of diasporas in three major countries, China, India and Pakistan.
Diasporas, the accumulated stock of migrants (and their offspring) still having links with the home country, seem to have played an important part in both facilitating the migration of other compatriots, but also, more importantly, as conduits for resource transfers. The broader spill over effects of diasporas may be occurring through several mechanisms. There is anecdotal evidence that “social remittances” may be playing an important role in reshaping individual and social preferences as well as social norms and expectations in the country of origin with attendant political and economic consequences.
The role of diasporas in contemporary economic life can be better understood if markets are seen not just as price-making mechanisms but in the broader Coasian sense of markets as social institutions that facilitate exchange. Networks imbedded in social mimic market structures through signalling and informational exchange among participants.
Networks affect the flow of information in fundamental ways shaping content, access and credibility of information. Their role in employment and labour markets is well documented as well as in immigration and immigrant entrepreneurship. Once in place networks create self-sustaining migratory flows that gradually transcend the conditions that generated immigration in the first place. The reason why ethnic groups with very small numbers in the overall population concentrate spatially and in occupations/trades is related to the “chain migration” often observed in several countries. For example, the Mirpuris (from Pakistani part of Kashmir) in UK or Patels (Gujratis from India) in the motel business in USA. Employers have strong reasons to hire individuals with a credible imprimatur and referral by existing employees is an important mechanism.
Hiring new employees or contractors from networks that have delivered reliability in the past reduces search costs. In addition to employment, these networks provide access to resources, either informational or financial.
The patterns of endearment in which diasporas interact with home countries, however, differ widely. While the Chinese diaspora is famously known for undertaking massive direct foreign investment in China since the opening up of the economy in 1979, the South Asian diaspora, particularly in India, has benefited the home country through the development of technology networks and being a catalyst for foreign direct investment, particularly in the IT and outsourcing sectors.
The South Asian diaspora has also been active in taking NGO-propelled initiatives in the areas of poverty alleviation, education, health, housing and microfinance, among others.
While the Chinese diasporas have tended to invest back in the country of origin (China), those from South Asia (India, Pakistan, Sri Lanka and Bangladesh) and Southeast Asia (the Philippines, Thailand, Indonesia) send mainly remittances to their countries of origin. For instance the ratio of foreign investment by the Chinese diaspora is nearly twenty fold that of the Indian diaspora, while remittances by the Indian diaspora are about seven times that of the Chinese diaspora ($49.8 billion and $7.6 billion respectively between 1991-1998). The reasons behind these starkly different numbers are complex and depend on the rather unique social, cultural and political factors of China vis a vis other Asian, especially, South Asian countries.
The South Asian diaspora, especially those living in developed countries, consists largely of professionals while the Chinese diaspora is more entrepreneurial. Hence although the former is well off in the aggregate (for instance it is one of the wealthiest ethic groups in the U.S.), it did not have substantial numbers of high net worth individuals who would serve as potential investors.
Second, South Asia, especially India, was hostile to foreign investment until the early 1990s while China opened up a decade earlier. Third, China, unlike India, did not have a strong domestic capitalist class when it opened up – and hence faced little domestic opposition to incentives granted to the diasporic investors.
The South Asian diaspora is, however, very diverse. The temporary migrant worker in the Gulf can hardly compare his life-style with that of the South Asian professionals and businessmen in the US and UK or even in the Gulf, for that matter. Many of the permanently settled Pakistanis in North America and Europe, for instance, now hardly send any remittances on a regular basis, the bulk of which still comes from the Gulf.
Indeed most of the non-Gulf emigrants facilitate capital flight from Pakistan by helping their relatives and friends to emigrate to foreign lands by acting as intermediaries in the transfer of the sale proceeds of their assets or through help in obtaining jobs.
However, there are many instances in which the South Asian diaspora has played a positive role by undertaking investment and transfer of technical know-how to assist the development of their home countries.
The Pakistani diaspora has until recently tended to see itself more as a part of the larger Muslim community and has engaged in religious and charitable work in solidarity with the Muslim umma (community) than on the basis of patriotism.
Religious, cultural and sectarian divisions have also tended to prevent the emergence of a national identity, which is far more articulate and assertive in the case of other South Asian nations, especially India.
More recently, however, affluent Pakistanis abroad have started taking interest in the country’s economic, political and social development. Many professionals of Pakistani origin, especially doctors, have helped create medical and educational facilities in Pakistan, through their collective efforts.
A number of emigrant-sponsored NGOs have launched educational and social uplift projects in the poorer regions of Pakistan. They have also started to take important advocacy role in women’s emancipation and one of them has been instrumental in highlighting the recent high-profile rape cases in Pakistan, besides arranging financial help for the victims.
The degree of national and cultural cohesion, which is perhaps most evident among the Chinese, as well as the responsiveness of the home government to the diaspora’ explains to a large extent the degree of a diaspora’s commitment to the home country.
The South Asian governments have directed most of their efforts to attract remittances and portfolio investments from their diaspora and have offered them considerable facilities, such as dual nationality status, travel facilities, import of personal baggage, preferential housing, health and educational schemes, as well as investment incentives . These efforts have been successful mostly in mobilizing remittances, but much less so in the area of direct investment.
However, the success of overseas Indians in Silicon Valley has had a significant indirect effects on India’s overall development. Unlike China, whose efforts at attracting its nationals back and reverse the brain drain in high-technology are centralized and state driven, in India it is Indian diaspora rather than the government which has played a leading role. In education this has translated itself into efforts at raising endowments and financially bolstering some of India’s higher education institutions as well as an effort currently underway to establish five global institutes of science and technology with a corpus of $1 billion. But it is in IT that the decentralized technology transfer arrangements are most notable.
The emerging model is firms with operations in both U.S. and India, with the former acting as the “front” office and the latter the “manufacturing facility”.
At a time, when IT talent has been scarce, the competitive advantage of Indian launched IT-related firms in the US stems from an unusual factor: they were up and running in a shorter time than their rivals simply because they could hire technical people faster drawing from the large pool of trans-national networks. This created a rapidly growing demand for IT personnel from India, and in turn led to a rapid expansion of IT training, increasingly by the private sector.
Indian engineers who had started moving to the US in the 1960s and 1970s, as a result of the liberalization of the US visas had by the 1990s acquired considerable influence in the IT industry. Many of them had become entrepreneurs, venture capitalists, or senior executives in large and medium-size companies and some had started their own companies in India, while others were instrumental in the hiring of Indian IT professionals abroad. By 1999, the peak of tech boom in the US, the Indian IT talent pool had surged to 24 per cent of the IT professional population of Silicon Valley, according to a report by Evalueserve and World Bank Institute.
India’s diaspora is expected to provide more organised platforms for the sharing of knowledge and best practices. It is also expected to increase the brand equity of the Indian industry but without giving a semblance of bias for their home country over other low-wage destinations. Many venture capitalists in the US, especially those of Indian origin, are actively funding Indian companies that have back-end operations in India, so that they can save on the high R & D costs in US. It is estimated that as on March 2004, over 150 start-up ventures in the US already have some form of back-end support in India, and the number is likely to double in the next two years.
Indian offshore vendors and various captive centres of global corporations are already moving up the value chain and performing more complex and value-added activities for their clients.
(This is the concluding part of the article on trends in international migration published in EBR issue of September 26).
THE preoccupation with remittances has prevented a broader understanding of the dynamic effects of migration which may often be more important. Two such effects that need consideration in the context of our study are: the role of the diaspora and the transfer of technology. This article concentrates largely on the first and discuss the role of diasporas in three major countries, China, India and Pakistan.
