* Says developing countries could generate $50 bln a year
* Previous bonds have met with mixed success
* Some economists sceptical
By Andrea Shalal and Tom Arnold
WASHINGTON/LONDON, April 24 (Reuters) - The coronavirus
pandemic and its devastating economic impact on developing
countries could fuel fresh interest in so-called diaspora bonds
that allow migrants to support their countries of origin,
experts from the World Bank and other groups say.
Dilip Ratha, the World Bank's lead economist on migration
and remittances, told Reuters that diaspora bonds could generate
about $50 billion a year in total for developing countries,
potentially helping to offset a sharp drop in foreign direct
investment that is slated to fall by 37% this year.
However, such claims have met with scepticism in some
quarters, given the plight of many migrants who have lost jobs
and income during the crisis and as direct transfers of wages to
their home countries - known as global remittances - decline
sharply. For an interactive version of a chart on remittance flows to
low and middle-income nations, click here: https://reut.rs/3asg9qh
World Bank officials on Friday warned that developing
economies could suffer close to a 3% decline in economic output
if consumption and investment do not rebound quickly after the
coronavirus pandemic. Ratha said the World Bank has previously worked with Nigeria
and India on diaspora bond issues and that other countries have
expressed interest in recent months as they scramble for
resources to fight the virus and mitigate its impact.
Jay Benson, a senior researcher with the One Earth Future
Foundation in Denver, Colorado, said potential issuers with
large diasporan populations included Ethiopia, Somalia, Kenya,
Liberia and the Democratic Republic of Congo.
Ratha said diasporan investors were typically less skittish
than outside investors.
"They have a connection to a country and have a vested
interest, as they might return," he said, noting that migrants
also often had greater access to land and assets.
"Then there's the 'feel-good factor' of what you've done for
your home country."
Israel, which has raised more than $40 billion through such
bonds, saw uptake soar during its 1967 war.
Benson said Nigeria's first diaspora bond was oversubscribed
by 130% and raised $300 million, though Ethiopia had less
convincing results with its 2008 and 2011 bonds.
Such bonds work best if structured carefully and allow early
withdrawal if investors want to back other projects in the
country concerned, Benson says.
'MOTIVATED'
"It's a tool that could work for any country with a
significant pool of potential diaspora investors," he said.
"People are strongly motivated by seeing this kind of
investment go toward healthcare and education, and seeing that
their families, their friends ... back home are benefiting."
For all the mooted benefits, however, doubts remain over the
potential of diaspora bonds in the current environment.
Farouk Soussa, senior Middle East and North Africa economist
with Goldman Sachs, said such bonds were most successful during
a crisis in the home country, when better-off migrants were able
to help, but the coronavirus crisis has hit everyone, everywhere
“We have heard the World Bank and others warn of sharp fall
in remittances and it would seem bizarre for migrants to be
sending less money home but to still have an appetite to invest
in diaspora bonds," he said.
Scott Morris, senior fellow at the Center for Global
Development, was also sceptical, noting that many migrants that
sent wages to their home countries had also lost their jobs as a
result of sweeping shutdowns in richer countries.
"It's a gimmick," he said of diaspora bonds.
"I think people expect too much of an initiative like that.
A lot of people in the diaspora are basically living hand to
mouth."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Remittance flows to low-and-middle-income nations png https://reut.rs/3cEdD1z
Migrant wages sent home set to drop $142 bln in 2020 - World
Bank ID:nL8N2C93IA
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(
Editing by David Goodman)