Mobilizing the Middle East and North Africa Diaspora for Economic Integration and Entrepreneurship Mariem Mezghenni Malouche Sonia Plaza Fanny Salsac DECEMBER 2016 Mobilizing the Middle East and North Africa Diaspora for Economic Integration and Entrepreneurship Mariem Mezghenni Malouche Sonia Plaza Fanny Salsac DECEMBER 2016 © 2016. The World Bank Group 1818 H Street NW Washington, DC 20433 Telephone: +1 (202) 473 1000 Internet: www.worldbank.org All rights reserved. This volume is a product of the staff of the World Bank Group. The World Bank Group refers to the member institutions of the World Bank Group: The World Bank (International Bank for Reconstruction and Development); International Finance Corporation (IFC); and Multilateral Investment Guarantee Agency (MIGA), which are separate and distinct legal entities each organized under its respective Articles of Agreement. We encourage use for educational and non-commercial purposes. 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Contents Acknowledgments .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v Author Biographies .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Abbreviations and Acronyms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Rationale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi Diaspora, Trade, Investment, and Knowledge Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 MENA Diaspora Survey and Outreach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 MENA Diaspora Engagement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 MENA Diaspora and Investment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 MENA Diaspora and Trade Integration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Institutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Conclusion and Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Annex: Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49  iii iv MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP Acknowledgments T he team would like to extend its gratitude to colleagues from the Center for Mediterranean Integration for their partnership, Nuno Macarena and Amel Chevreau from the “Institut de Prospective Économique du Monde Méditerranéen” for their help with the focus groups conducted in France, and all those who participated in the focus groups and took the online survey. The paper was conducted under supervision of Najy Benhassine, Practice Manager, Middle East and North Africa (MENA), Trade & Competitiveness Global Practice, World Bank Group, and was produced under the “Integrating MENA” project, a MENA regional activity.  v vi MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP Author Biographies Mariem Mezghenni Malouche, Senior Economist, World Bank Group Mariem Mezghenni Malouche is a Senior Economist at the World Bank Group in Washington, DC. Her professional areas of interest include trade and competitiveness, economic integration, trade policy, non-tariff measures, export diversification, trade finance, and diaspora. She joined the World Bank in 2004 as an economist in the MENA region then in the World Bank International Trade Department. Before joining the Bank, Malouche earned a PhD in international economics from Université Paris- Dauphine, France, and a master degree in business from University of Tunis III with the highest honors. She is a co-author of Towards New Sources of Competitiveness in Bangladesh, Bangladesh Diagnostic Trade Integration Study (2016, three volumes); Streamlining Non-Tariff Measures: a Toolkit for Policy Makers (World Bank 2012); co-editor of Non-Tariff Measures - A Fresh Look at Trade Policy’s New Frontier ; and co-editor of Trade Finance during the Great Trade Collapse (World Bank 2011). She also participated in and contributed to a number of country level policy dialogue, development policy loans and reports in MENA, South Asia and Africa Regions, notably in Morocco, Libya, Tunisia, Bangladesh, Kazakhstan, Mauritius, and Lao DPR. Sonia Plaza, Senior Economist, World Bank Group Sonia Plaza is a Senior Economist at the World Bank Group. She led a flagship on integration policies for migrants, diaspora, migration and remittances issues. She is currently the co-chair of the “thematic working group on diaspora” of the KNOMAD initiative (Global Knowledge Partnership on Migration and Development). Sonia has also worked on Science and Technology and private sector development projects in Latin America. She has worked in the Africa Region in the Chief Economist Office as well as in the Regional Integration team. She was a core member of the Africa’s Silk Road: China and India’s New Economic Frontier and wrote Chapter 5 on market information through ethnic networks and migration, skills transfer, regional trade agreements and bilateral agreements dealing with labor mobility. She is a co-editor of the book Diaspora for Development in Africa and lead author of the book Leveraging Migration for Africa: Remittances, Skills,  vii and Investments. She advises many governments and universities on transfer of skills and tapping into their diaspora. She acts as a focal point at the working level for the Bank’s activities and international partnerships on migration and development (Global Forum on Migration and Development, Global Migration Group, Global Remittances Working Group). Her expertise includes trade, private sector development, diaspora, technology, migration and remittances policies with a strong emphasis on policy design and implementation. Sonia attended the University of Lima and earned a degree in Economics, after which she joined Chase Manhattan Bank, and was then invited to join the Peruvian Ministry of Trade as a manager responsible for counter trade and debt swap agreements. She negotiated Peruvian external debt and trade agreements. She taught International Economics at the Foreign Service School and at the University of Lima in Peru. She was also adjunct faculty (Microeconomics, Macroeconomics) at the American University, Washington D.C. She also has a dual degree from Yale University and the University of Pennsylvania in International Economics and Development. She is a research fellow of the IZA-Institute for the Study of Labor. Fanny Salsac, Consultant Fanny Salsac joined the World Bank Group in 2014 as a consultant in the Trade & Competitiveness Global Practice. She has a master degree in Economics from the École Normale Supérieure, France. She now works at Banque de France. viii MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP Abbreviations and Acronyms CONECT Confederation of Citizen Enterprises of Tunisia FDI Foreign Direct Investment GCC Gulf Cooperation Council GDP Gross Domestic Product IT Information Technology MENA Middle East and North Africa OECD Organization for Economic Cooperation and Development WBG World Bank Group  ix x MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP Rationale Why should governments and development partners mobilize the Middle East and North Africa (MENA) diaspora? T he MENA diaspora can be an important catalyst and partner for governments and development institutions to foster cooperation, development, globalization, regional integration, and entrepreneurship in the MENA region. Diaspora members, in particular professionals and skilled individuals, are a critical human capital asset for their home countries and the MENA region as a whole. According to official United Nations data, approximately 20 million MENA citizens live abroad, representing 5 percent of the population of the region, a much larger proportion than the world average (see annex for definition of diaspora). If only 1 percent of the MENA diaspora were mobilized, that would mean tapping into the expertise and network of 200,000 professionals, which is significant. The actions of a few could make a difference. The MENA region is one of the least-integrated regions in the world and has lackluster private sector investment and entrepreneurship and high unemployment (including among young graduates). MENA also has very low intraregional trade and attracts less foreign direct investment (FDI) than other regions. Few MENA countries have considered tapping into their professional and skilled diasporas, and few mechanisms are in place to facilitate the broad role the diaspora can play. This paper aims to bring attention to this potential and advocates for the need to strengthen the connection with the diaspora of countries in the MENA region. This paper does not discuss the benefits of diaspora returnees or incentives offered to diaspora members to return to their home countries to invest, create jobs, or work in the government. It is rather about how to tap into members who live abroad and can help their countries of origin in ways other than sending remittances.  xi The MENA diaspora can transfer money and skills; enhance trade, investment, and business opportunities; improve the social contract; and help alleviate the refugee crisis. Traditionally, governments have considered emigration as a positive resource for home countries’ economies for three main reasons: (1) they reduce pressure on the domestic labor market in times of high unemployment; (2) they reduce poverty through money transfer, in some countries, financing infrastructure, hospitals, and the like; and (3) they facilitate transfer of knowledge and know-how from abroad. There is also empirical evidence of and historical examples that show the importance of diasporas in fostering entrepreneurship and helping develop export industries in home countries (Ghatak et al. 2009; Felbermayr and Toubal 2008; Morgenroth and O’Brien 2008; Dolman 2008; Tadesse and White 2011). Diaspora members are more likely than foreign investors to invest in home countries with weak business enforcement and poor governance because they tend to have more information on the business environment and local practices. In countries where the rule of law is uncertain—which includes most emerging markets—it may be harder to do business with foreigners. Personal ties make this easier. Diaspora members can also help create bridges to ease access to foreign markets and create business connections abroad. Knowledge moves when people do. Beyond the visible financial flows that have been discussed in the media, the economic relevance of diasporas builds on the flow of knowledge. Diasporas are an important source of knowledge transfer. Ricardo Hausmann elaborates on this idea of know-how residing in people’s brains and advises developing countries to focus on attracting them, instead of erecting barriers to skilled immigration (Hausmann 2015). The speed of industrialization in East Asia has relied to a large extent on economically active Chinese communities abroad, likewise for India, whose high-tech industry has boomed thanks to sustained ties with Indian migrants and even people returning from diaspora. Moreover, diaspora members can be a powerful engine of change and promotion of a new social contract because they often advocate for openness, competition, and better-quality democracy. Those living in democracies and in countries where the rule of law prevails tend to have higher standards and aspirations for their compatriots and family members at home. Under dictatorships, diasporas, like many other groups in civil society, are kept at arm’s length to avoid interference. Many members of the diaspora also turn their backs on their home countries, with many leaving to escape the lack of freedom at home and not particularly eager to remain engaged with their home countries, but the wave of freedom that has reached the xii MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP MENA countries since 2011 has encouraged many diaspora members to play an active role in this change process. The current transition in the region provides an opportunity for governments and development partners to engage with people in diaspora on the economic development agenda of their countries of origin. The MENA diaspora surveyed in the context of this activity expresses a relatively high level of mistrust toward institutions at home and calls for a new social contract between governments and their citizens living abroad. Finally, the MENA diaspora is a gold mine because it can be an important catalyst for alleviating the refugee crisis that has recently intensified in the region. In his speech at the Global Diaspora Week Launch Event, U.S. Secretary of State Kerry mentioned instances in which the diaspora has been critical to responding to urgent humanitarian crises. For example, Syrian-American doctors from the Syrian American Medical Society have lent their time and talent to supporting clinics in the Za’atari camp in Jordan and are providing counseling and social services for women and children wherever possible in Syria. After the outbreak of Ebola, the Sierra Leone, Liberia, and Guinea diaspora community responded quickly by sending urgently needed medical supplies, food, and money and often by communicating with people directly to institute best practices and avoid spreading the disease (U.S. Department of State, October 9, 2015). This paper advocates for the need to rally the MENA professional and skilled diaspora. It discusses the findings of a unique outreach exercise to the MENA diaspora and provides policy recommendations. First, the paper highlights the linkages between the diaspora and trade, investment, and knowledge transfer based on the literature and concrete examples. Second, it describes the outreach and the profile of the diaspora members surveyed. Third, it presents the main findings of the survey of the MENA diaspora in four areas: (i) overall engagement, (ii) appetite for investment, (iii) trade, and (iv) the role of institutions. The paper concludes with policy recommendations. R ATIONALE xiii xiv MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP DIASPORA, TRADE, INVESTMENT, AND KNOWLEDGE TRANSFER T he MENA region can tap into a large In examining the effect of diaspora, the pool of MENA citizens living abroad. spotlight has been placed on emigrant The largest stock of emigrants in absolute remittances, which reached US$436 billion terms, with well over a million, originates from in 2014. The MENA diaspora sent home Palestine, Egypt, Morocco, and Iraq in 2015 some US$53 billion of remittances in 2014, (figure 1A). In some countries, they represent and countries such as Lebanon and Jordan a significant share of their population (e.g., had remittances of more than 10 percent of Lebanon, Palestine). A broader definition of gross domestic product (GDP) (figure 1B), well diaspora including second- and third-generation in excess of what those countries spend on individuals would expand this number, especially education, health care, and defense combined. in countries such as Lebanon, which reports a The diaspora has been an important source of diaspora of 5 million. foreign exchange in developing countries and of sustenance for tens of millions of poor families. FIGURE 1A: A large number of MENA diaspora members in the world International Migrant Stock 2015 1,810,315 1,587,234 1,501,477 1,320,273 905,365 629,524 615,517 505,729 453,522 311,562 106,451 80,563 74,803 78,979 12,489 12,107 N R A S IT A N IA N IC N IA T AQ O E E YP IN A BY BI A A O A CC A IS ER BL AT AT RD M IR W IR RA N ST EG N LI PU LG RO O BA IR KU Q TU F LE JO IA O EM RE A O LE PA D IC M B U B BL F RA SA RA O PU A A E AT RE N ED A ST IC RI IT M N SY U LA IS Source: United Nations Population Division database DIASPORA, TRADE, INVESTMENT, AND KNOWLEDGE TRANSFER 1 FIGURE 1B: MENA countries depend on remittances (US$ billion, 2015e) (Percentage of GDP, 2014) 19.7 17.1 16.2 10.4 9.3 7.2 6.8 6.5 6.4 5.0 3.8 3.4 2.3 2.2 2.3 2.0 1.6 0.9 1.3 0.3 T N O N EN IA ZA IA IC N ZA N N EN RO T TU O IA TI A N YP YP RI O A A O A A CC CC U IS ER IS BL A A M M RD RD IR IR O E N N EG EG N N G G PU LG BL LG RO YE YE IB BA BA TU F F JO JO D D O O J RE A A O O LE LE F F D N N O O IC IC M M A A B BL IC IC RA K K N N BL BL PU PU A BA BA PU PU RE RE N T T A RE RE ES ES IC IC RI M M SY W W LA LA IS IS Overall, it has been expected that remittances depreciation of the euro against the U.S. dollar to the MENA region would grow over the will continue to slow remittance growth to next 3 years, albeit at a slower pace (World Maghreb countries in the short term. Falling oil Bank 2015), although it is estimated that prices and nationalization policies in Saudi remittances declined by 0.9 percent in 2015. Arabia pose downside risks in the medium to This downward revision is mainly because of a long term to inward remittances to Mashreq decline in the growth of remittances to Egypt, countries (Yemen, Egypt, Jordan), who receive which receives the largest remittance inflows large remittance inflows from Gulf Cooperation in the region; remittances to Saudi Arabia Council (GCC) countries (Migration and continued to grow by 7 percent until the third Development Brief 26). quarter of 2015. The estimated rise in remittances to Lebanon might partly be due to remittances Important as they are, remittances are far routed to Syrian refugees in Lebanon, as well too narrow a prism through which to view as positive economic developments in the effect of diaspora on development and destination countries such as the United States. alleviation of poverty in the countries of origin. Inward remittances accounted for at least Recent attention has shifted from analyzing the 5  percent of GDP in oil-importing MENA effect of skilled migration on labor markets in countries and Yemen in 2013. It is expected that the country of origin to a broader agenda that remittances to the MENA region will grow only also considers the channels by which diasporas modestly in 2016 and 2017 and significantly promote trade, investment, innovation, and more slowly than remittances to all other regions. technological acquisition. Several developed Economic developments in the euro area and and developing countries are increasing their 2 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP ties with their diaspora to take advantage of (Cuaresma et al. 2013), demonstrating the these transfers. Unlike a country that has a importance of networks in migration and their small, disconnected diaspora, a country that cumulative effect. interacts closely with a large diaspora not only can rely on members’ help when times at home Numerous anecdotes that illustrate the are hard (remittances, for example, tend to be importance of diaspora in helping develop a stable source of foreign exchange), but also export industries support the results of may benefit from a multiplier effect in the form systematic empirical studies. The most of increased trade and investment links when important diaspora links in terms of their reforms succeed or times are good. effect on international trade can be seen in the case of China, with its large expatriate The recent and growing literature on diaspora communities throughout East Asia, the United provides considerable evidence that it plays States, and increasingly Africa and large parts an important role in international integration of the developing world (Rauch and Trindade and fostering entrepreneurship (Ghatak et al. 2002). The Economist reports on a number of 2009; Felbermayr and Toubal 2008; Morgenroth similar ventures (The Economist 2011, 2013, and O’Brien 2008; Dolman 2008; Tadesse and 2015). Nigerian expats buy many goods made at White 2011). Diaspora members are more likely home. For example, they enjoy films produced than foreign investors to invest in home countries in Nollywood and familiar packaged foods, with weak business enforcement and poor including Maggi condiment cubes. The ones governance because they tend to have more made in Nigeria contain fermented soya, which information on the business environment and is reminiscent of Hausa cooking in the country’s local practices. One study showed that a large north and are sold in British supermarkets diaspora is significantly associated with higher (The Economist 2015). intensity of bilateral trade between the countries of origin and destination (figure 1C) and that the effect is much more pronounced in the case FIGURE 1C: Migration and trade go hand in hand of trade in heterogeneous or differentiated 20 products than in homogenous products such 16 as primary commodities (Rauch and Trindade Log of total trade 2002). This suggests that links to the diaspora 12 can help overcome the information asymmetries 8 and nontariff barriers that are known to play a 4 large role in inhibiting trade. Along similar lines, diaspora members are found to be significantly 0 associated with more-intense international 0 2 4 6 8 10 12 14 Log of migrant stock investment flows, especially bilateral FDI flows, than with portfolio flows (Leblang 2010). Bilateral trade (2007) and migrant population (2010) Moreover, numerous studies have identified between OECD and Africa. Each dot represents a migrant corridor (kenya-UK, Morocco-France, etc.) a large diaspora as the single most important determinant of bilateral migration flows Source: Ratha and al (2011) and Hirschman and al (2009) DIASPORA, TRADE, INVESTMENT, AND KNOWLEDGE TRANSFER 3 Diaspora members also serve as a bridge Chang, a returning expatriate executive from for foreigners who wish to do business in the United States, is widely credited for the selected countries. A study by William Kerr and creation of the country’s semiconductor industry Fritz Foley (2012) showed that U.S. firms that with systematic government support. Other employ many Chinese Americans find it much examples in which the government played an easier to set up operations in China without active role include the development of the the need for a joint venture with a local firm. Korean wig industry, which owes much to the Hong Kong and Singapore, with their large links of expatriate Koreans in the United States concentrations of overseas Chinese, are the that government interventions encouraged. largest sources of FDI in China. Although most of these connections have arisen spontaneously, Noland and Pack (2007) have analyzed the Chinese government and state-owned whether Arab communities in North America enterprises have been playing an increasingly and Europe can play a role similar to that active role in recent years in building links to of Asian diasporas in revitalizing the Middle countries with large natural resources of interest East. They conclude that it will be difficult for to China. Whether the Chinese diaspora plays Arab countries to compete with India, the a significant role in forging these new links is Philippines, or China in terms of highly skilled unclear, but it is likely that the establishment labor with English language skills. The North of new concentrations of Chinese around the American Arab community is small, mostly made developing world will give rise to more trade up of Egyptians and Lebanese. Those in Western and two-way FDI. Europe have an edge given their proximity to countries of origin, but they tend to be less There are documented examples of the role skilled. The MENA diaspora can still contribute that diasporas play in the development of ‘by providing market opportunities, establishing particular industries in their country of origin, collaboration between US, European companies with or without the help of the government. and Middle East and Arab companies, providing The most often cited example is the development mentoring opportunities, helping with strategic of the Indian information technology (IT) management and supplying information about industry, now employing some 3.5 million and standards, technology and quality that will representing a large share of India’s exports, help firms to compete in the global market’ which has relied greatly on the two-way flow (Plaza 2011). There are some examples in the of talent, money, ideas, and contacts between MENA region that should be emulated. A recent Bangalore and the Indian diaspora in Silicon large investment by Bombardier of Canada to Valley and other technology corridors in the produce aircraft parts in Morocco, which the United States. A notable feature of the Indian IT government facilitated and encouraged, is said industry’s development and of its diaspora links to owe much to the contacts that an expatriate is the absence of any significant government Moroccan holding a job high in the hierarchy involvement except for the public funding of of Boeing established (Wall Street Journal prominent educational institutions such as the 2012). Personal ties can make global business Indian Institute of Technology. In Taiwan, Morris easier (box 1a). 4 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP Box 1A: Personal Ties Can Make Global Business Easier Chike Obidigbo runs a factory in Enugu, Nigeria, He trusts them partly because they are his ethnic making soap and other household goods. He kin but mostly because an Igbo middleman in needs machines to churn palm oil and chemicals Guangdong needs to maintain a good reputation. into soap, stamp it into bars, and package it in If a middleman cheats one Igbo, all the others plastic. He buys Chinese equipment, he says, who buy machinery in Guangdong will soon because although it is not as good as European know about it. News travels fast on the diaspora equipment, it is much cheaper, but it is difficult grapevine. for a Nigerian firm to do business in China. Mr. Thanks in part to Mr. Obidigbo’s diaspora Obidigbo does not speak Chinese, and he cannot connections, Hardis and Dromedas is thriving. fly halfway around the world every time he wants It employs 300 workers and sells approximately to buy a new soap machine. Worse, if something 300 million naira (US$2 million) worth of products goes wrong, neither the Chinese nor the Nigerian each year, and it is just one of many African firms government is likely to be much help. that use migrants as their eyes and ears in distant Nevertheless, Mr. Obidigbo’s firm, Hardis and lands. The number of Africans living in China has Dromedas, manages quite well with the help exploded from hardly any two decades ago to of middlemen in the African diaspora. When he tens of thousands today. One area of Guangzhou wants to inspect a machine he has seen on the is now home to so many African traders that the internet, he asks an agent from his tribe, the Igbo, locals call it Qiao-ke-li Cheng (Chocolate City). who lives in China to go and look at it. He has met several such people at trade fairs. “When you hear people speaking Igbo outside Nigeria, you must go and greet them.” he laughs. Source: The Economist, 2011 The diaspora is an important source of of origin with access to technology and skills knowledge transfer. Ricardo Hausmann through professional associations, temporary elaborates on this idea of know-how residing assignments of skilled expatriates in countries in brains and advises developing countries to of origin, distance teaching, and the return focus on attracting them instead of erecting of emigrants with enhanced skills. Moreover, barriers to skilled immigration. Knowledge emigration raises the domestic skill level because moves when people do (Hausmann 2015). the hope of getting a well-paying job with good The rapid industrialization of East Asia has working conditions abroad encourages citizens relied to a large extent on economically active to enroll in professional schools. Chinese communities abroad. Likewise for India, whose high-tech industry has boomed The diaspora’s brainpower can also be thanks to sustained ties with Indian migrants measured through an indicator that compares and even returning diaspora members. Diaspora the number of scientific and technical patents members may also provide firms in their country that emigrants and residents register. DIASPORA, TRADE, INVESTMENT, AND KNOWLEDGE TRANSFER 5 According to this measure, Britain, Canada, the 844 patents recorded between 2001 and China, Germany, and India have the most- 2010, compared with 80 percent in Tunisia talented diaspora, although migrants from (out of a total of 743 patents) and 77 percent African countries such as Ghana and Nigeria in Romania (out of a total 3,360 of patents) are the most accomplished in relation to their (figure 1D). Turkish nationals residing at home home populations. Between 2007 and 2012, were responsible for two-thirds of the patents expatriates registered more than nine-tenths registered during the same period, attesting of patents that people born in those countries to greater human capacity at home. Oil-rich filed. In MENA, emigrants are responsible MENA countries attract many immigrants, low for most patents that MENA citizens file. For skilled and highly educated, which results in example, in Morocco, the diaspora was at immigrants registering a large proportion of the origin of approximately three-quarters of patents in these countries. FIGURE 1D: Proportion of patents registered by emigrants, immigrants, and nationals TURKEY ROMANIA REPUBLIC OF YEMEN UNITED ARAB EMIRATES TUNISIA SYRIAN ARAB REPUBLIC SAUDI ARABIA QATAR OMAN MOROCCO LIBYA LEBANON KUWAIT JORDAN IRAQ ISLAMIC REPUBLIC OF IRAN EGYPT BAHRAIN ALGERIA 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Emigrants Immigrants Nationals Source: Authors using World Intellectual Property Organization data 6 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP Diaspora ties help businesses and scientists partners. Moreover, a study by the Royal collaborate. Analyzing U.S. firms’ data on Society (2011) found that cross-border scientific patent applications, Foley and Kerr (2012) collaboration is becoming more common, found that increases in the share of firms’ that it disproportionately involves scientists innovation that inventors of a particular ethnicity with diaspora ties, and that it appears to lead developed were associated with increases in to better science (using the frequency with that firm’s affiliate activity in countries related which research is cited as a rough measure). to that ethnicity. In addition, ethnic innovators A Chinese paper co-written with a scientist in allow U.S. firms to form new affiliates abroad the United States is cited three times as often without the support of local joint venture as one produced solely in China. DIASPORA, TRADE, INVESTMENT, AND KNOWLEDGE TRANSFER 7 8 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP MENA DIASPORA SURVEY AND OUTREACH T his analysis draws mainly on information universities (e.g., Lebanon University of New and data gathered from 827 valid York); and associations such as the Algerian responses (out of approximately International Diaspora Association. Based on 1,000  responses overall) to an online this experience, two channels were the most survey and focus group discussions with effective: personal contacts, because people are selected diaspora groups (see annex for more likely to respond to questionnaires when methodology). This is the largest survey that has they relate somehow to the author or sender, been undertaken of the MENA diaspora. It was and selected consulates reached through their available online for 11 months, from May 2014 central governments. to March 2015. The objective of the survey was to reach out to a diverse set of MENA diaspora This study is also different from other diaspora members (geography, age, gender, profession, studies in its scope. Most diaspora studies are income). More-structured face-to-face focus focused on the feedback of the diaspora on a group discussions with more than 150 diaspora particular area, such as a specific investment members and insights from individual one-on- instrument, whereas this analysis was designed one interviews with 40 business and opinion to explore the nature of economic engagement leaders from MENA countries living mostly in in which the MENA diaspora is interested. the United States and France supported the The study adopted a broader viewpoint and analysis. asked people in diaspora about their interest in contributing to the globalization of their The online survey was widely distributed home countries through three main channels: through popular online tools such as investment, trade, and skill transfers. It also Facebook, twitter, LinkedIn; professional (e.g., collected information on their perceptions of World Bank accounts, Center of Mediterranean the key constraints in the business environment, of Integration) and personal accounts (team on free trade agreements, and on the role of members, colleagues, friends and family); and governments and development institutions targeted mailing lists of diaspora newsletters vis-à-vis the diaspora. and associations and various institutions such as embassies and development partners working on The findings of this broad consultation shed diaspora issues. For instance, the team contacted light on MENA diaspora engagement at a the Lebanese and Tunisian embassies in the critical time—in post-Arab Spring MENA, United States; the International Organization when a new sociopolitical situation was for Migration in Rabat, Cairo, and Tunis; some emerging in many MENA countries. With MENA DIASPORA SURVEY AND OUTREACH 9 some countries transitioning from dictatorships the survey were likely to have been engaged to democracies, space has opened for more and interested in the economic development involvement of different stakeholders, including of their country of origin, which might have the diaspora. Therefore, this focus captures the introduced a bias toward more engagement perception of the home countries’ economies and more trade and investment behaviors. and the role that the diasporas can play. At the same time, these people are the very target of the development of the diaspora. Some caveats inherent to the study should They can help to understand how to tap into be considered before interpretation of the their resources, time, and skill. In the case of the results is presented. The technicality of the question on engagement, which makes clear questions may have been a barrier for certain the importance of being engaged financially respondents who did not have the background and in terms of time and knowledge with the to understand fully the economic development country of origin, it is hard to say whether or investment instruments and may have led respondents overstated their desire to invest, to some not completing the survey. Likewise, the importance of giving back to their country, the length of the survey may have limited the and so on, so as to adhere to social norms sample. Finally, people who responded to (social desirability bias). FIGURE 2A: MENA survey respondents were mostly from Maghreb TUNISIA LEBANON MOROCCO ALGERIA EGYPT JORDAN ISLAMIC REPUBLIC OF IRAN LIBYA OTHERS 0% 10% 20% 30% 40% 50% 10 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP MENA Diaspora Survey respondents each. Fifteen percent lived in Respondents Profile the MENA region outside of their countries of origin and three percent in the Maghreb (figure Seventy percent of the respondents were 2B). They were mostly Tunisian (41 percent), and from the Maghreb, with a large proportion Moroccan (17 percent). The sample in general of Tunisians living abroad (figure 2A). The rest consisted of young professionals (63 percent were mostly from Lebanon and Egypt. Only aged 25-44 years), with the ‘next-generation a few were from GCC countries and Yemen. diaspora’ (25-34 years) accounting for one-third Tunisians were particularly eager to participate of the respondents (figure 2C). Two-thirds of in the focus group discussions. This overall respondents were male (figure 2D); women active participation could also be attributed are overrepresented in most surveys, tending to the democratic transition in Tunisia and to be more willing to answer questionnaires the greater freedom of speech, a major gain than men. from the Arab Spring. Under President Ben Ali, some diaspora members preferred to remain Most respondents were well educated, with discreet to avoid being associated with or 72 percent having at least a master’s degree captured by the regime. This was specifically or equivalent (figure 2E). They worked mentioned in the focus group discussion, when predominantly in the private sector (32 percent) most participants expressed their eagerness to and in international development institutions contribute actively to the social, economic, and (29 percent) (figure 2F). Results were similar to political transition in Tunisia. those of the study by DIAMED (DIAMED 2014), in which more than 66 percent of the sample The respondents resided mostly in France was highly qualified (possessed at minimum a or the United States, with one-third of master’s degree). FIGURE 2B: MENA survey respondents resided mostly in France and the United States USA FRANCE 32% 31% MAGHREB 3% REST OF EUROPE 13% OTHERS OTHER MENA 9% 12% MENA DIASPORA SURVEY AND OUTREACH 11 FIGURE 2C AND 2D: MENA diaspora profile, age and gender 2C: Mostly young professionals 2D: Mostly male 35% 28% FEMALE 15% 32% 11% 8% MALE 68% 4% Under 25 to 34 35 to 44 45 to 54 55 to 64 65 & 25 older N=822 N=812 FIGURE 2E AND 2F: MENA diaspora respondent profile: education and jobs 2E: Mostly educated 2F: Working in the private sector and development institutions Employee in Ph.D 17% 32% private sector Employee in an int’l 29% Master’s development institution Degree 55% Employee in public sector 9% Bachelor’s Degree/ Community College 20% Self-employed 8% Owner of a High school company 8% diploma 5% Retired 6% Less than high school diploma 1% Student 5% other certificate 1% Unemployed 2% 0% 10% 20% 30% 40% 50% 60% 0% 10% 20% 30% 40% N=819 N=800 12 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP MENA DIASPORA ENGAGEMENT T he overwhelming message was that the joined the focus group meetings expressed MENA diaspora wanted to help and to the same feeling, with much enthusiasm and remain engaged with their country of determination. The question was not whether origin, especially their hometown; 85 percent but how to engage. Of survey respondents, men of those surveyed responded positively to the tended to be more involved, integrated, and statement “giving back to my country of origin willing to give, and women felt more connected is important to me” (figure 3A). Those who to their home country. During the focus group FIGURE 3A: MENA diaspora feels strongly connected to home country Do you agree with the following statements? How do you engage with your community? I share my knowledge and skills I am willing to invest with individual institutions in 43% capital and trade in my 68% my country of origin country of origin I send money to family 42% and/or friends I am willing to invest time in I mentor individuals 34% mentoring individuals back 87% in my country of origin I donate money to charities and non-profit organizations 34% Giving back to my I volunteer my time 26% country of origin is 85% important to me I invest in property 24% I am not engaged with the community in my 16% I consider my country of country of origin origin more of a “home” 44% I sometimes teach at an than where I live now education institution in my 9% country of origin I work on business(es) 6% I would like to be more that I own back home connected to my 77% country of origin I invest in companies/ businesses 6% I trade 5% I feel connected to my country of origin 86% I invest in the stock market in my country of origin 3% N=738 0% 20% 40% 60% 80% 100% N=734 0% 10% 20% 30% 40% 50% MENA DIASPORA ENGAGEMENT 13 discussions, connection with the hometown volunteering time (26 percent). Investment was clear. The urge to give and help was clearly options were much lower in ranking, be they associated with the urge to help family and for property or business. friends in the hometown rather than helping the country of origin, which is more abstract Aspirations are not completely reflective of and reflects a patriotic sentiment. The diaspora actual behaviors. Only one-third of respondents calls for a decentralization of policies. Local declared themselves to be involved in a skill governments should target diaspora members transfer activity (figure 3B). Of these, 61 percent originating from their respective cities. were involved in mentoring, 57 percent in joint research, and 30 percent in training. In addition The MENA diaspora is mostly ready to invest to the desire to adhere to social norms or to look in time to share knowledge and build soft good (social desirability bias), some obstacles skills at home and to send remittances. They can explain this half-hearted engagement. Lack feel there is an important gap in ethics and of time stands as the main obstacle, invoked in entrepreneurial culture between the diaspora 45 percent of cases, whereas only 27 percent and local professionals and entrepreneurs. They of respondents mentioned the other choices also have trouble adjusting to the business presented for the question (lack of information, practices and cultural norms in the home regulatory requirements). country, although this sentiment translated into a stronger desire to engage by sharing their The desire to engage is strong despite worries knowledge and expertise with compatriots at about the weak legal framework, political and home to develop soft skills, self-confidence, and macroeconomic instability, and lack of trust team building. When asked to rank the three in governments and institutions in MENA ways they engage, MENA diaspora members countries (figure 3C). Diaspora members have mentioned mentoring individuals (34 percent), often chosen to live abroad to escape bad donating money to charities (34 percent), and governance, lack of economic opportunities, and FIGURE 3B: Skill transfer activities MENTORING TRAINING TEACHING (VIRTUALLY OR 30% 15% RETURNING) 9.3% JOINT RESEARCH/COLLABORATION TECHNICAL PROJECTS ASSISTANCE INTERNSHIPS 28% 13% 4.4% TWINNING ARRANGEMENTS 14 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP FIGURE 3C: Lack of trust in government policies and institutions I worry about the weak legal 48% framework and enforcement Political instability and/or 38% lack of political freedom I worry about macroeconomic instability 34% I am too geographically distant 28% I am not ready to get involved 25% now, but would like to later I am already as involved as I want to be 18% I don't have access to information 17% I do not feel a connection to my country 6% I have no friends there 3% I have no family there 1% 0% 10% 20% 30% 40% 50% autocratic regimes and to seek entrepreneurial that would increase their involvement with their freedom and transparency. They tend to be critical country of origin, participants in the focus groups of the governments in their home countries, almost unanimously mentioned the wish for although they also feel they have a role to play their respective governments to make them feel to mitigate the failure of the state. They have the like partners and actors who could contribute responsibility to inspire and to continue to bring to the development of the local economy in new ideas and opportunities to compatriots at ways other than remittances. The most striking home. The lack of trust in institutions will affect example comes from members of the Lebanese the nature of their engagement. diaspora, who said that giving the right to Lebanese mothers married to non-Lebanese The single most important factor that to pass Lebanese citizenship to their children caused diaspora members to engage was would make a difference. Others mentioned the sentiment of belonging to the home the right to vote as an important way to engage country. When asked about the one reform with the diaspora. MENA DIASPORA ENGAGEMENT 15 Arab Spring Effect Only one-quarter of respondents agreed that after Arab Spring events (figure 3D). In general, the Arab Spring events have triggered a opening a business or direct investing (218 and rise in interest to play a larger role in the 148 cases in the four offered choices) were the development of their home countries. The main motivations, as opposed to finding a job, premise was that autocratic regimes have left which is natural given the high unemployment limited space for civil society, including limiting prevalent in most MENA countries (figure 3E). the diaspora’s role in society. In addition, many diaspora members sought to grow professionally The Arab Spring events have had a greater outside and maintained limited links with their effect on the Tunisian diaspora than on others, home country to avoid being exposed to corrupt although most respondents declared that practices and bureaucracy or being captured the events decreased their interest in their by the regime. The majority of respondents home country. These results contradict the declared that the Arab Spring had no effect sentiment that the Tunisian diaspora expressed on their interest, and 15 percent expressed a during the focus group meetings, as well as decrease in their interest. their eagerness to participate in these meetings (figure 3F). For example, the results do not reflect Approximately half of survey respondents the number of new diaspora-related initiatives considered going back to their country of origin that have emerged since 2011. Members of to take advantage of a business opportunity the Tunisian diaspora also declared that they FIGURE 3D AND 3E: Effect of Arab Spring events on willingness to go back to country of origin 3D: Half are willing to go back after Arab 3E: Opening a business is the opportunity Spring events most likely to be considered Opening a business Investment YES NO 49% 51% Job offer Volunteering 0 10 20 30 40 50 60 70 N=702 N=702 16 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP FIGURE 3F: Paradoxical effect of Arab Spring events on Tunisians Impact of Arab Spring Events on Interest 60% Tunisians 51% (N=361) Non-Tunisians 34% (N=352) 26% 14% 15% Decrease in interest Increase in interest No effect on my interest increased remittances significantly after the Arab initiatives. A number of diaspora members have Spring events. Large national and multinational also returned to Tunisia and are leading large firms based in Tunisia are greatly interested in companies such as Ooredoo, IBM Corp., Cisco, attracting Tunisians with skills who are abroad Orange, and ST Microelectronics. back home and have established prodiaspora Role of Diaspora Associations Only 28 percent of respondents said that community ties, as well as collectively helping they belonged to a diaspora association. the country of origin. Some of these diaspora The desire for engagement of the MENA associations work closely with the government, diaspora is not reflected at the association but many do not, and their contacts are directly level because lack of trust is also prevalent. with local communities or schools and hospitals. This stands in sharp contrast to the study of the For example, a U.S.-based organization of Caribbean diaspora, 61 percent of whom declare some 380 Lebanese in the high-tech area themselves active with community organizations. works to transfer Silicon Valley know-how to Still, a large share of respondents (79 percent) Lebanon, promote start-ups there, and facilitate keep themselves informed about what happens the circular migration of Lebanese high-tech in their countries of origin, mainly through the experts with the United States. An association internet (60 percent). Trust in these networks is of U.S.-based Tunisians, Tunisian American low; interviewees often criticize them as being Young Professionals, established after 2011, politically corrupt. has worked to support the country during its transition, aiming to promote tourism in Tunisia Nevertheless, a large number of diaspora and export of its handicrafts. It is supported associations intend to foster expatriate by a U.S. embassy program and is working MENA DIASPORA ENGAGEMENT 17 with the Tunisian government. Although these and are, according to respondents, effective organizations demonstrate the depth of goodwill in developing professional contacts with the and concern in the diaspora and may at some country of origin. These networks have some point provide the platform for a break-through 167,000 members. Ten Maghrebian networks investment, more-systematic cooperation with focusing on a cross-border North African governments and drawing more support from approach have been identified. Most of them aid agencies and international institutions such are located in Europe, and the majority comprise as the International Organization for Migration business or finance executives (e.g., the London or the World Bank could significantly enhance Maghreb Network Society). There is a noticeable their effect. sense of rivalry in Maghreb, so those regional associations are less numerous than country- The Maghreb-3 (Algeria, Morocco, Tunisia) specifc associations. have a network of approximately 100 associations with more than 200,000 Some associations are involved in knowledge members,1 including country- and regional- transfer and fostering entrepreneruship level associations 2. More than half of the in home countries. Tunisian expatriates identified diaspora professional networks are have launched several initiatives related business networks or consist of students, former to entrepreneurship in Tunisia, such as the students, and graduates of elite schools. Unlike “Impact” initiative. In Algeria, a network of the Moroccan and Tunisian networks, Algerian high-profile researchers and executives in the diaspora professional networks seem to be healthcare sector (including Elias Zerhouni, less organized because the Algerian diaspora former director of the U.S. National Institutes is more fragmented. Moreover, Algerians in of Health) has launched the Algerian American France are more integrated and less likely Foundation in the United States to provide to identify themselves as Algerian diaspora training and technical assistance to emerging than as dual Algerian-French citizens. As a medical and research centers in Algeria. In consequence, the associations they form are Morocco, networks such as the National Center not necessarily nationality based. There are for Scientific and Technical Research, the also 33 virtual social networks (e.g., LinkedIn, International Forum of Moroccan Competencies Facebook) that create interpersonal bonds Abroad, the Morocco Incubation and Spin-Off Network, and L’Association Marocaine pour 1 Ninety-four diaspora professional networks were identified as follows: 28 Algerian, 26 Moroccan, 30 Tunisian, and 10 for the Maghreb la Recherche Développement are active in region as a whole. mobilizing academic expatriate researchers and 2 At the country level, large, active, sustainable networks have been identified in France, such as L’Association des Marocains aux Grandes engineers. Knowledge transfer after coming Ecoles and the Association Maroc Entrepreneurs (Morocco), Algerian Talents & Leaders Association and Algerian International Diaspora back from abroad is also important. Diaspora Association (Algeria), and Association des Tunisiens des Grandes Ecoles (Tunisia), and in North America, such as American Moroccan professionals returning from Europe or the Competencies Network, Association of Moroccan Professionals United States have launched several recent in America, FMRC (Moroccans in Canada), Fondation Club Avenir (Algerians in Canada), and Tunisian American Young Professionals. initiatives in Morocco, such as the Moroccan German networks such as the Moroccan German Business Club and the German-Moroccan Competency Network are also very active. The Foundation for Advanced Science, Innovation new International Federation of the Algerian Diaspora, whose founding members live in France, Canada, the United Kingdom, and Switzerland, and Research and the International University. was established in January 2015. 18 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP In Tunisia, home-based business unions Professional Lebanese associations are young are also reaching out to the Tunisian and focus more on Lebanese emigrants than diaspora. The main Tunisia-based business giving back to Lebanon. The main focus of union, the Tunisian Union of Industry, Trade prominent associations such as LebNet and and Handicrafts, has set up a business advice Lebanese International Finance Executives service with members of the diaspora. The is solidifying the network abroad, financing newly established Confederation of Citizen their activities, and then turning to the home Enterprises of Tunisia (CONECT) has organized country for concrete projects. One such project is several prodiaspora seminars in Tunisia and Instabeat, a firm that Hind Hobeika created with abroad since 2011 and helps potential investors the help of LebNet. Even if diaspora members find appropriate intermediaries, drawing from a confirm that giving back to their country of pool of diaspora members from organizations origin is rewarding and is a source of pleasure such as France CONECT. and pride, this happens later in their career, when they have achieved success. MENA DIASPORA ENGAGEMENT 19 20 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP MENA DIASPORA AND INVESTMENT Background Diasporas can increase investment flows regarding the market. Foreign investors can between sending and receiving countries. improve their profitability by tapping into the Diasporas may use the knowledge they have expertise of the diaspora. In these cases, some of their countries to invest directly. They key players are diaspora members who have possess important information that can become senior managers and executives in help them identify investment opportunities multinational firms (box 4A). These expatriates and facilitate compliance with regulatory can build awareness in corporations of their requirements. Language skills and similar native countries by sharing information on cultural backgrounds can greatly contribute to laws, regulations, institutions, and knowledge the profitability of investment. Transnational regarding how to conduct business in their companies make investments based on home countries. They can facilitate FDI flows their ethnic ties (Aykut and Ratha 2003). For into their countries. Immigration of skilled example, some ethnic Korean companies workers is associated with an increase in FDI invest in Kazakhstan, and some ethnic Chinese inflows into the destination country. companies invest in the East Asia and Pacific Region. Members of a diaspora may be more Many international migrants save a significant willing than other investors to take on risks part of their income in destination countries in their country of origin because they can and can invest in bonds. New estimates better evaluate investment opportunities suggest that the annual savings of diasporas and have contacts to facilitate this process (approximated using data on international (Lucas 2001). According to Nielsen and Riddle migrants) from developing countries was (2007), emotion, sense of duty, social networks, US$497 billion in 2013 (table 3A). MENA savings strength of diaspora organizations, and visits to are estimated at US$55 billion. A large part the home country are important determinants of these savings is held in bank deposits. A of diaspora investment. diaspora bond—a low-denomination security with a face value of US$1,000, for example, with Diaspora members encourage investment a 3 percent to 4 percent interest rate and 5-year by foreigners in their country of origin. A maturity—issued by a country of origin could major barrier for a multinational or foreign be attractive to migrant workers who currently firm setting up a production facility in another earn near-zero interest on deposits held in country is uncertainty and lack of information host-country banks. Diaspora bonds could be MENA DIASPORA AND INVESTMENT 21 Box 4A: Diaspora Senior Executives in Multinational Firms Can Draw Business to Their Home Country: The Case of the Aeronautics Industry in Morocco There are several examples of diaspora members Boeing executives into interest and a first-mover who have played a successful role in promoting investment in Morocco. In 2001, Boeing, the sectors and businesses in their home countries. Moroccan airline, and French electrical wiring Executives in multinational firms can influence company Labinal SA opened a small operation the choice of locations abroad in increasingly preparing cables for Boeing 737 jetliners called defragmented supply chains. In Morocco, the Matis, which prepared wire bundles and shipped emergence of the aeronautics sector is associated them to Boeing plants in the United States for with the positive role that a diaspora member who installation. Today, the industry employs almost was a vice-president at Boeing, in Seattle, played. 10,000 Moroccans, who earn some 15 percent Seddik Belyamani, originally from Morocco, above the country’s average monthly wage of was Boeing’s top airplane salesman and was roughly US$320. instrumental in converting initial pushback from Sourced from the Wall Street Journal, 2012 http://www.wsj.com/articles/SB10001424052970204059804577226763868263758 TABLE 3A: Estimated diaspora income and savings for developing regions, 2013 Diaspora stock Disapora income Diaspora savings (millions) (US$ billions) (US$ billions) East Asia and Pacific 31 579 116 Europe and Central Asia 32 402 80 Latin America and Caribbean 34 645 129 Middle East and North Africa 24 275 55 South Asia 38 402 80 Sub-Saharan Africa 23 181 36 All developing countries 182 2,484 497 Source: World Bank Staff calculations using the latest bilateral migration matrix data on skill level from the Database on Immigration in Organization for Economic Cooperation and Development countries and World Development Indicators database used to mobilize a fraction—for example, one- have lower potential for success. Chances of tenth—of annual diaspora savings, that is, more success are greater when the issuing country than US$50 billion, for financing development has a strong economic program and a portfolio projects (The Economist 2015). of attractive projects for the diaspora bond to finance. The diaspora’s trust in the government Countries with a large diaspora stock in richer is critical for successful launching of a diaspora destination countries have a greater potential bond. The governments of India and Israel have for successful issuance of diaspora bonds, raised more than US$40 billion, often during whereas a country with weak governance may liquidity crises, by tapping into the wealth of 22 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP their diaspora communities to support balance- credit ratings, but given data difficulties, there is of-payments needs and (in the case of Israel) room for further improvement. Remittances are to finance infrastructure, housing, health, and a key source of funds for developing countries, education projects. Several other countries— far exceeding official development assistance including the Philippines, Sri Lanka, Kenya, and even FDI (excluding China). They have Ghana, Nepal, and Ethiopia—have issued proved to be more stable than private debt diaspora bonds with varying degrees of success and portfolio equity flows. A recent analysis (World Bank 2015). reported in the World Bank’s Global Economic Prospects 2015 shows that remittances are Because remittances are large and more also less volatile than official aid flows. Annual stable than many other types of capital remittances are also larger than or equal to flows, they can greatly enhance the recipient foreign exchange reserves in many small country’s sovereign credit rating, lowering countries. Even in large emerging markets borrowing costs and lengthening debt such as India, remittances are equivalent to maturity. The rating agencies have recently at least one-quarter of total foreign exchange started accounting for remittances in country reserves. Survey Results The MENA diaspora has limited desire to invest origin. Portfolio investment in a government or in financial instruments. Direct investment corporate bond or even in diaspora bonds and and real estate are the preferred investment the stock market are the lowest in their ranking. instruments (figure 4A). Their choice reflects Migrants make a clear distinction between help a desire to leverage contacts in the country of they might give to friends and relatives or their FIGURE 4A: Investment instruments in order of preference N=560 Real estate 71% Direct investment (existing or new firm) 58% Acquisition of shares in your country’s private companies 24% Angel investor, venture capital (an angel investor is an affluent individual who provides capital for a business start-up, 24% usually in exchange for convertible debt or ownership equity) Stock market 15% Diaspora investment funds 15% Government bonds 13% Certificate of deposit in foreign currency 13% Diaspora bonds 12% 0% 10% 20% 30% 40% 50% 60% 70% 80% MENA DIASPORA AND INVESTMENT 23 local communities and investments, on which One-third of survey respondents said that they are looking for a good rate of return, not they had the financial capacity to invest, and greatly different from what they would look for another third had already invested in their anywhere else. The interviewees were generally country of origin. Approximately half of the skeptical that the local private sector would respondents could invest more than US$10,000, be willing and able to invest with them. They and more than 8 percent could invest in excess also would like to avail themselves of the same of US$250,000 (figure 4B). Twenty-four percent preferential treatment accorded to foreign of respondents said that they would be able to investors but had low expectations of what the invest in the range of US$10,000 to US$50,000. government could or would be willing to do to Approximately half of those who declared they help them invest. were willing to invest more US$100,000 were FIGURE 4B AND 4C: Half of the respondents could invest more than US$10,000 4B: Size of Projected Investment 4C: Origin of Investors N=626 LIBYA WEST BANK & GAZA JORDAN More than US$250,000 8% 1% 1% 2% ISLAMIC SAUDI ARABIA 11% REPUBLIC 2% US$100,001–250,000 OF IRAN 1% EGYPT TUNISIA US$50,001–100,000 15% 2% 51% ALGERIA US$10,001–50,000 24% 7% MOROCCO US$1,001–10,000 18% 13% Less than US$1,000 4% LEBANON Not planning to invest 21% 20% 0% 5% 10% 15% 20% 25% N=58 FIGURE 4D: Investment interests according to size of company Microenterprises (1–9 employees) SMEs (Small & Medium Enterprises -10–199 employees) Start-ups/Early stage companies Established large private companies ve g 0 00 00 00 00 ,0 a n N=453 00 i n ni n st 00 50 t h ,0 0 ,0 ,0 , 0, $1 to lan 10 00 50 $2 ore –5 US 1– –1 –2 p 01 US M 00 01 01 ot an 0 N , 0 0 0, $1 th 0, 0, $1 US $5 0 ss US $1 Le US US 24 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP Tunisians, 20 percent were Lebanese, and MENA diaspora members are not interested 13 percent were Moroccans (figure 4C). Older in becoming angel investors despite diaspora members had the greatest capacity their capacity to invest (figure 4E). Only to invest, whereas those aged 25 to 34 had less 87 respondents, or approximately 10 percent financial capability and expressed less capacity of respondents, indicated that they were angel to invest, all other things being equal. Of the investors, with 61 percent being from Tunisia, 16 sectors presented in the survey, 32 percent of 13 percent from Lebanon, and 12 percent from respondents preferred to invest in educational Algeria. This reflects the demographic structure services, 24 percent in agriculture and forestry, of our sample, with a representation of Algeria and 21 percent in construction. that is above the mean, which probably reflects the lack of business opportunities at home and In terms of size of investment, respondents the more-lucrative alternatives offered in the targeted small to medium companies to invest country of residence or on the world market. in (figure 4D). Some very high amounts stand out, such as 114 respondents investing more than US$100,000 a year. FIGURE 4E: Fewer than 10 percent of respondents were angel investors—mostly from Tunisia JORDAN ISLAMIC REPUBLIC OF IRAN 2% 1% SAUDI ARABIA EGYPT 1% 2% WEST BANK & GAZA 1% MOROCCO 7% ALGERIA 12% LEBANON TUNISIA 13% 61% N=87 Constraints to Investments The MENA diaspora expressed deep concerns main constraints on investments that survey about the quality of the investment climate respondents indicated (figure 4F). Lack of in their countries of origin, which the current information was also mentioned often (33 percent turmoil and political instability presumably for business opportunities, 29  percent for aggravated. The weak business environment, regulations). Fewer than 10 percent mentioned political instability, and lack of information lack of human capital, the tax regime, or high on business opportunities were the three cost of living. The parallel system (black market, MENA DIASPORA AND INVESTMENT 25 FIGURE 4F: Obstacles to investing Weak business environment (incl. complex administrative procedures) 54% Political instability 47% Lack of information on business opportunities 33% Lack of information on regulations 29% Unfavorable macroeconomic environment 23% Lack of good infrastructure 22% (energy constraints, internet connectivity, etc.) Lack of financing instruments and options 21% Crime/violence 12% Low return on investment 9% Lack of human capital 9% Tax regime 7% High cost of living 4% N=556 0% 10% 20% 30% 40% 50% 60% noncompliance with the tax system), corruption, When thinking about investment at home, and privileges are also cited as barriers to trust diaspora members consider returns, as for any in local structures and thus to investment. Most other investment decision, but also outcomes. interviewees indicated that they lacked personal Diaspora members often have several investment contacts, which are vital to accessing markets. options to choose from, especially if they are They also faced difficulties learning business based in advanced economies. Although they practices and cultural norms in their home are willing to consider investing at home, they countries. There is a mismatch between the consider the opportunity cost of their decision. expectations of diaspora professionals and the Some may forgo potential higher returns if the reality in their country of origin. For example, development outcome is important to them. the first barrier to investment that Algerian Investing is a rational decision in which emotion diaspora professionals cited was the 51/49 law, is set aside, even if the investment is in the which regulates foreign investment and puts investor’s country of origin. The motivational the Algerian diaspora on the same footing as aspect of developing opportunities in the foreigners. They cannot be 100 percent owners home country is not enough by itself to turn of an LLC and must partner with an Algerian financial flows into investments; the business living in Algeria to start a business. opportunities must be profitable. 26 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP FIGURE 4G AND H: MENA diaspora remittances sender’s profile 4G: Yearly amount sent by the 4H: Remittances according to gender 39 percent who send remittances 110 65 No Yes N=290 219 82 N(Female) = 263 N(Male) = 549 31 27 174 265 5 4 d 0 9 9 00 0 50 99 99 00 se 00 lo 0– –4 10 an -1 sc 50 00 th an 00 di 20 th ss 50 ot Le e N or Female Male M Similarly, it is unlikely that emigrants invest in October 2011. The premise is that, although instead of sending remittances, because remittances are of a private nature, they should they fulfill different objectives. Remittances be directed toward profitable investments. are sent to help family members financially. Proper channels and financial frameworks are Approximately one-third of survey respondents vital to fostering investments. Some countries who send remittances send less than US$500 lack adequate frameworks to channel these annually, a much smaller amount than they financial flows. Individuals face complicated invest (figure 4G). Men tend to send more banking processes for small investments. For big remittances than women, most likely reflecting investments, infrastructure might be challenging patriarchal family structures in the MENA region (transportation, legal). The Forum makes several (figure 4H), although migrants draw a clear recommendations, among which are easing the separation between help they might give to private banking process, increasing productivity friends and relatives or their local communities infrastructures, and improving the visibility of and investments, for which they are looking for business opportunities. Examining remittances a good rate of return, not greatly different from in the Mediterranean region, Torres Ruiz & Lorca what they would look for anywhere else. Corrons observe that investments in Tunisia were only 2.7 percent of the total amount of UN Economic Commission for Africa’s Ninth remittances sent to the country from 1993 to African Development Forum delegates 1999, indicating that there is enormous potential discussed how to convert short-term for migrant investors if the proper structures are remittance flows into long-term investments in place to channel this money. MENA DIASPORA AND INVESTMENT 27 28 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP MENA DIASPORA AND TRADE INTEGRATION Background T he MENA diaspora can help foster trade Historically, an important share of world trade integration between their countries of took place through tight-knit networks of origin and of residence. Migrants have ethnic communities, now called diasporas. a preference for their native country’s goods This is the thesis of Phillip Curtain in Cross- and services, which supports “nostalgic trade” Cultural Trade in World History (1984)4. Well- in ethnic products. Ethnic networks play a role known examples are the Phoenicians, Greeks, in overcoming inadequate information about trans-Saharan traders, Hanseatic League, Jews, international trading opportunities, driving down Armenians, overseas Chinese, and the Dutch trade costs.3 Gould (1994) and Rauch and Casella and British East India Companies (Hausmann (1998) found that ethnic networks promote 2015). Avner Greif documented the economic bilateral trade by providing market information relevance of these communities in early times. and by supplying matching and referral services. He argues that the ethnic networks that they More importantly, migrants facilitate bilateral created built mutual trust and reciprocal trade and investment flows between their guaranties against default of payment from countries of residence and their home countries unscrupulous clients. Thus, reputation and trust by matching producers of consumer goods went far beyond geography, contributing to in one country with appropriate distributors the creation of a global trade network. From a in the other country and assemblers with the historical perspective, diaspora has thus always right component suppliers. Sharing the same been at the core of trade, channeling exchanges language or a similar cultural background eases and establishing a powerful source of benefits. communication and facilitates understanding of transport documents, procedures, and A number of empirical models have found that regulations. Empirical studies of Australia, trade and migration are complementary. Foad Canada, Spain, the United Kingdom, the United (2008) found that the link between migration and States, and the Organization for Economic trade is stronger for emigration to Europe than Cooperation and Development (OECD) to North America, with the strongest effects for countries generally find that immigration imports and differentiated goods. He examines increases bilateral trade flows. 4 Phoenician trading cities such as Tyre and Sidon embodied this relevance of the key role of diaspora. Philip D. Curtain’s thesis suggests that they were diaspora settlements that had strong sentimental ties to the home countries or the “mother cities.” The same was true for the Greek merchants, who transformed trading settlements into 3 See Rauch (2001) for a review on Business Networks. independent city-states. MENA DIASPORA AND TRADE INTEGRATION 29 how differing destinations of the same migrant of total world exports of nonoil goods has group affect the link between migration and remained flat at approximately 2 percent to trade using data for MENA migrants to the 3 percent for longer than 30 years. Despite United States and Europe. Ghatak et al. (2009) doubling its services exports, MENA’s share in analyzed trade between the United Kingdom total services trade stagnated at approximately and Central and Eastern Europe and found 2.8 percent from 1990 through 2006. Moreover, that migration is positively related to exports intraregional trade in MENA has not grown. For to the United Kingdom but that there is not as many Arab countries, regional trade accounts significant an effect on imports. Felbermayr and for less than 10 percent of total trade. At Toubal (2008) used a cross-sectional sample of less than 5 percent, the Maghreb countries OECD countries for 2000 and showed that the had the lowest share of intraregional nonoil additional demand for goods from migrants’ merchandise trade, and this share has increased source countries drove the total protrade effects. only marginally since 2000. The MENA region They also found that the trade cost channel has missed opportunities to integrate into the effects are stronger for differentiated goods world economy, increase growth, and create and when highly skilled migrants are involved. new productive jobs. Although these outcomes Morgenroth and O’Brien (2008) used a nonlinear reveal serious problems with competitiveness model between trade and migration. Their in the countries of origin, the diaspora can help results support the complementarity between improve building capacity and facilitate market migration and trade flows. Dolman (2008) access in destination markets. studied the linkages between migration, trade, and FDI in 28 OECD countries and found a At the policy level, some government similar positive correlation. Tadesse and White agencies and private firms in African countries (2011) examined the link between migration are tapping into their diaspora to provide and trade from the perspective of the home market information about the countries in and host countries. The authors found pro- which emigrants now live. Activities include export emigrant effects in 100 of the 131 home the establishment of diaspora trade councils countries in their study and pro-import effects and participation in trade missions and business in 96 home countries. networks. Several embassies support business and trade forums to attract diaspora investors The role of the diaspora could be critical in and to match suppliers with exporters. fostering MENA trade. The region’s share Survey Results The MENA diaspora supports trade and regional integration. Most of the survey integration. A large majority of MENA diaspora respondents agree with the statements that members support free trade agreements with these agreements will have a positive effect on the European Union and the United States local firms and employment in home countries 30 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP FIGURE 5A: Diaspora is supportive of trade agreements Do you think that a Free Trade Agreement with the US/EU/MENA will increase business opportunities in your country of origin? Trade Agreement with USA 73% Trade Agreement with European Union 85% Free Movement of Good, Person, and Capital in MENA 90% FIGURE 5B: Diaspora is supportive of trade agreements Do you think that a Free Trade Agreement with the US/EU/MENA will have a positive impact on local firms and employment in your country of origin? Trade Agreement with USA 61% Trade Agreement with European Union 74% MENA has a potential to play a larger role in global value chains 92% MENA DIASPORA AND TRADE INTEGRATION 31 and will increase business opportunities at home Few diaspora members trade with their (figure 5A and 5B). MENA diaspora members country of origin (8 percent), although half also have high expectations for their countries of the respondents declare having a strong of origin to integrate into global value chains desire to trade with the home country in the (92 percent) and support the need for greater future. Cumbersome border procedures, lack flows of goods, services, capital, and people in of information, and high import tariffs in their the MENA region (90 percent). MENA region countries of origin are mentioned as the top integration is a priority for the diaspora members three reasons that MENA diaspora members do surveyed. not engage more in trade activities with their home countries (figure 5C). Lack of interest from entrepreneurs and regional integration are less of a problem. FIGURE 5C: Obstacles to trade more in MENA countries N=131 Cumbersome customs procedures 50% Lack of market information 44% High import tariffs in country of origin 32% Quality/standards 30% Distance/shipping costs 24% Market size of country of origin 21% Lack of interest from the country in which you reside 18% Lack of interest from local entrepreneurs in the home country 14% Lack of regional trade 12% Language barriers 3% 0 0.1 0.2 0.3 0.4 0.5 Note: Survey question was about whether they trade. (In answers to previous questions, 63 declared that they trade with country of origin. In answers to another question, 458 declared that they would be interested.) 32 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP INSTITUTIONS MENA Diaspora Expectations G overnments and international what government could or would be willing to institutions can play an important do to engage them, in particular, in investment role in mobilizing the diaspora. at home. They lament that the administration Governments may recognize the importance treats them as “foreign investors” when they of the diaspora at different levels and in different express interest in investing at home. They do ways. Their actions vary from simple recognition not feel welcomed as foreign investors in their in public speeches to implementing programs respective embassies or by the institutions and sometimes founding institutions to maintain dedicated to FDI at home. Only approximately and strengthen the identity link with the home half of the survey respondents replied to the country, attract investment from the diaspora, request to choose the top three roles they or reduce the cost of transferring remittances. expect governments to play, which probably Several studies have investigated how embassies reflects this low level of trust and expectations. can encourage diasporas to play an economic role in their countries (Ionescu 2006), although The MENA diaspora welcomes dedicated as with other public policies and institutions, public institutions despite the lack of trust in this agenda often suffers from lack of vision, governments. This paradox was also reflected lack of coordination among departments, lack in discussions with diaspora members. They of accurate information about the diaspora, indicated that they would be skeptical about inadequate staff, and need for capacity building. government-led initiatives out of fear of At the same time, many governments have yet inefficiency, capture, and corruption, with some to consider emigrants as development partners saying that they would not have participated in beyond providers of remittances. Moreover, a the focus groups if the invitations came from number of international development institutions their governments. Nevertheless, they see a have active programs to engage with diasporas role for government. What they ask for is a and assist governments with their policies. strong sign of recognition of their role. This call for dedicated institutions may actually be Their respective governments are asking interpreted as a call for government recognition the MENA diasporas to recognize their role. of the importance of the diaspora in their Most survey respondents and interviewees had development plans. As we will see in the next a low level of trust in government institutions in section, few MENA countries have a dedicated their country of origin and low expectations of ministry for their diaspora, although there is a INSTITUTIONS 33 6A: A Trend Toward More Dedicated Institutions Worldwide In the early 1980s, barely a dozen countries had a ministry, a government department, or some other official institution dedicated to their diasporas, and a few countries, including the United States, ignore those who have left—except perhaps to send them tax demands, but these are a shrinking minority. Last year, Ireland appointed its first minister for the Irish diaspora; this spring it unveiled a diaspora strategy: Ireland Reaching Out. The government also supports hundreds of groups that serve needy Irish emigrants or court successful ones. One of them, ConnectIreland, uses the diaspora to encourage inward investment, paying for tips that lead to foreign companies creating jobs in the country. Many countries have come to believe that their serious intent. India sees its diaspora, which the diasporas can advance their geopolitical interests. government thinks is some 25 million strong, as The Turkish government counts on its diaspora a means of projecting soft power and burnishing in Europe, especially Germany, to push for the country’s image. “No country has had such a closer relations with the European Union, and large brain drain and been so proud of it,” says the Mexican government knows that Mexican Devesh Kapur of the University of Pennsylvania. Americans will campaign against attempts to Diasporas are increasingly seen as talent pools crack down on illegal immigrants. In exchange that can be pumped. When its economy crashed for their help, and to bind them to the politics of in 2009, Ireland summoned some of its most their homeland, a growing number of countries successful overseas citizens to an economic forum offer diaspora members long-term visas (as India that continues to meet every 2 years. Mexico has done), dual citizenship, or some voting rights. used to think of its diaspora in the United States In 2010, France’s parliament created 11 new mostly as working-class remittance senders. It constituencies for the French abroad. now encourages its young citizens to study in U.S. universities—and then bring their skills home. A few months after his victory in India’s elections Ghana, which has a particularly talented diaspora, last year, Narendra Modi addressed a cheering has set up a support unit to cultivate them. crowd of some 20,000 Indian Americans in Madison Square Garden in New York. Thanks to No country is hungrier than China. Emulating them, the new prime minister said, India was no Taiwan, which built a technology industry with longer seen as a land of snake charmers but as a the help of Taiwanese Stanford graduates, it is technology powerhouse. This was flattery, but with trying to woo its most-talented foreign-educated 34 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP citizens back. Provincial cities offer tax breaks to the sorts of things that governments ought to returning entrepreneurs and create industrial be trying to provide anyway. parks for them. Under the “thousand talents” India reformed its antiquated venture capital scheme (which is even more ambitious than it regulations at the prompting of Indian Americans sounds), academics who have built careers abroad in Silicon Valley. China is now cutting some of the are offered far more money than is usually paid red tape that is required to start a business, partly to Chinese professors. The wooing is broad and because of pressure from returnees, says Wang constant; one Chinese-British academic contacted Huiyao of the Centre for China and Globalisation, for this article had been approached that very a think-tank in Beijing, and China is no longer just morning. trying to bring back its diaspora; it also wants The difficult things that expats tend to demand Western talent. of their governments—representation, good business climate, decent investment returns—are Source: The Economist, June 27, 2015 (print edition) worldwide trend toward more of such institutions on the expected role of governments, the top or departments (box 6A). three preferred government actions were having an institution dedicated to the diaspora issues; More specifically, the MENA diaspora would matching investors, traders, and entrepreneurs welcome more services to disseminate with the diaspora; and more services in terms of information about business opportunities. trade and investment promotion from consulates Among those who responded to the questions (figure 6A). Tax incentives are ranked lower on FIGURE 6A: The MENA diaspora’s expectations of governments N=393 Having an institution dedicated to the diaspora issues 49% Matching investors, traders and entrepreneurs with the diaspora 45% More services (trade and investment promotion) 45% provided by embassies and consulates Tax incentives offered to diaspora 41% Single window (the single-window system is a trade facilitation idea. As such, the implementation of a single window system enables international traders 36% to submit regulatory documents at a single location and/or single entity) Creation of a national framework for business angels 23% Special programs such as matching grants 23% Provide resource support to diaspora associations 20% 0% 10% 20% 30% 40% 50% INSTITUTIONS 35 the list, as is the need for matching grants or a Eighty-four percent of survey respondents framework for business angels. This corroborates agreed with the statement that the World earlier findings about the lack of information Bank Group (WBG) can play a critical role in regarding investment opportunities and trade supporting the MENA diaspora. The top three potential. The diaspora declared that their main actions asked of international development sources of information to learn about investment institutions are establishing matching grant opportunities are friends and families, whereas programs; technical assistance for pilot only a few are aware of specific official services programs; and capacity building for associations, dedicated to the diaspora. They would like diaspora members, and networking (figure embassies in particular to play a greater 6C). Here also the diaspora does not see a role in bringing together entrepreneurs and need for help with diaspora bonds, confirming professionals at home and to create networking earlier results that the MENA diaspora is not opportunities (figure 6B). These events should ready to invest in the region, in particular using be well organized and prepared in advance to rather sophisticated instruments. The World maximize the benefits and the implementation Bank’s convening power and sharing of global of projects and business deals. Information knowledge were particularly appreciated. Focus on regulatory requirements and creation of a group participants unanimously welcomed the business directory are also among the top three WBG initiative to reach out to the diaspora. choices for embassies’ role. The MENA diaspora believes that the WBG can bridge the gap between the diasporas and their respective governments. FIGURE 6B: Embassy services desired for trade facilitation N=331 Links to business contacts 50% Information on regulatory requirements 50% Business directory 48% Import/export services 46% Trade shows/business expos 44% Marketing services 43% 38% 40% 42% 44% 46% 48% 50% 36 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP FIGURE 6C: Services in demand from institutions—such as the World Bank N=360 Matching grants programs 44% Technical assistance for pilot programs 43% Capacity building for diaspora associations, 42% diaspora members and networks Consult with the diaspora for country strategies 38% Collecting data on diasporas (e.g., conducting 36% diaspora surveys to know diaspora profiles) Technical assistance on diaspora bonds, financial instruments targeted to the diaspora 27% 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 6B: Major Initiatives in Morocco The Ministry in Charge of Moroccans Living At the regional level, the Regional Investment Abroad, which was founded in 1990 with the Center works to bring attention to project leaders objective of maintaining and strengthening links from the diaspora. The Houses of Moroccans between the Moroccan diaspora and Morocco. Living Abroad, a program to provide information (Ministère Chargé de la Communauté Marocaine for returning diaspora members, was being tested Résidant à l’Étranger). in 2015 in the Beni Mellal region. The Ministry of Moroccans Living Abroad and Financial tools such as the dedicated fund "MDM the Ministry of Migration Affairs have identified Invest" launched by the Caisse Centrale de 11 strategic areas of investment for the diaspora: Garantie jointly with the banks Attijariwafa and offshoring, automotive, aeronautics, electronics, Banque Populaire were created in Morocco. textiles, food processing, tourism, information MDM provides specific financing instruments and communication technology, franchising, the to diaspora investors (grants, loans). environment, energy. To promote the transfer of expertise in education, The Council of the Moroccan Community Abroad, research, and innovation support, the Ministry an organization that helps the government to in Charge of Moroccans Living Abroad, in reflect on and consult with the diaspora abroad, partnership with the Ministry of Higher Education was established in 2007 and L’Association Marocaine pour la Recherche Développement, established in 2006 the To facilitate information dissemination, the International Forum of Moroccan Competencies Ministry has set up a Web platform, "Moroccans Abroad, which the National Center for Scientific of the World" (maghribcom.gov.ma), targeting and Technical Research manages. skilled Moroccan professionals INSTITUTIONS 37 MENA Governments’ Policies Toward Their Diaspora Some countries in the MENA region make a with strong Algerian communities, such as systematic effort to engage their diaspora. France; and facilitating access to the public Morocco, for example, has a ministry dedicated markets in Algeria. (Know-how and financial to Moroccans overseas, a royal foundation transfers will be favored.) dedicated to enhancing engagement with the diaspora, and bilateral treaties with France and These efforts seem meager and shallower other countries of destination covering circular than with the more-ambitious, more-effective migration, including border controls (box 6b). The programs of other areas of the world. The website Marocains du Monde, or Bladi (http:// Philippines stands out in particular in adopting www.bladi.net/), is intended as a one-stop shop a systematic approach to its emigrants and to cultivate the relationship with the diaspora. dedicating significant resources to the effort, Dedicated agencies aim to promote knowledge whereas most MENA countries do relatively and technology transfer and investments by little, and their efforts often appear to lack overseas Moroccans. Tunisia has a Secretary of vision and visibility (box 6c). For example, State in its Ministry of Social Affairs dedicated communications with the diaspora are often to diaspora engagement. Both countries allow focused on pleas to the diaspora for help instead dual nationality and overseas voting. of on the diaspora’s needs and the broader opportunities for cooperation. In Algeria, the Ministry of Foreign Affairs and Ministry of Post, Information Technology and The pressing policy question is why, given Communications take the lead in diaspora the considerable benefits derived from a relations. In 2013, the Ministry of Post, large diaspora, more is not being done to Information Technology and Communication engage with them. A number of obstacles and the State Secretary for National Community appear to stand in the way of more-systematic Abroad launched an electronic portal dedicated engagement. In most MENA countries, the to national skills abroad (algeriecompetences. diaspora has little voice or representation, dz). This portal offers a large inventory of projects reflecting the nature of the political regime, that engage diaspora professionals and provides lack of organization, or both. Depending on a space for exchange, information sharing, and the nature of the regime, the government may a range of collaborative tools for all of its users. be fearful of the influence of the diaspora and It has unfortunately not been updated since of its relative freedom of expression. Limited its creation. In 2014, the Algerian government resources and lack of coordination among the made 14 commitments to serve the Algerian many parts of the government (e.g., Ministry of community abroad. Key components of the Finance, Central Bank, Ministry of Foreign Affairs, program included setting up the National Ministry of Social Affairs, Ministry of Internal Agency for the Support of Youth Employment to Affairs, Ministry of Regional Development) are provide financial assistance to young emigrants also an important part of the problem. There who have professional ties with Algeria; opening has to be clear ownership of the migration and branches of Algerian public banks in countries diaspora agenda. In the diaspora, there is also a 38 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP 6C: The Government of Philippines’ Approach to Diaspora Perhaps the best way to illustrate what is possible The Philippines manages its relations with the in government response is to examine the case diaspora through a cabinet-level Secretary of State, of the Philippines, which has what is probably the and the engagement is systematic. It is articulated most-elaborate and -sophisticated approach to in 10 areas, which can be roughly separated into diaspora relations of any country. A precondition two main groups, areas in which the Philippines of good “diaspora management” is to know mainly “receives” from the diaspora and those where they are and who they are – which is in which it mainly “gives” to the diaspora. The itself a significant challenge. Of a population first group includes diaspora philanthropy (which of approximately 98 million, the Philippine includes person-to-person remittances and government estimates that a little more than local-level community development); tourism 10 million Filipinos reside overseas, of whom initiatives; diaspora investment and business some 1.1 million are irregular migrants. Of the advisory circles; technology sharing; and “brain documented migrants, some 4.8 million reside gain,” the encouragement of return migration or abroad permanently, whereas 4.2 million are exchange by the highly skilled. The second group, overseas temporarily for work. These migrants of greatest interest to the migrants, includes remit US$28 billion a year to the Philippines (third return and reintegration, global legal assistance after China and India), equal to approximately 10 and advocacy, medical missions and coordination, percent of their GDP. The current government’s and cultural exchange. Within these general position vis-à-vis the Filipino diaspora is set out as areas of engagement, many different instruments Point 10 of its election manifesto: “a government are deployed, from global diaspora summits to that creates jobs at home so that working abroad promote cultural ties and development initiatives will be a choice rather than a necessity, and when to local community programs in specific provinces its citizens decide to [migrate] their welfare and designed to prepare workers for migration protection will still be the government’s priority.” (including education and training) and securing The message that overseas residents and their continued links with local communities. The workers from the Philippines are recognized and Philippines allows dual citizenship and makes appreciated as part of the nation, as contributors provisions for overseas voting. Perhaps most to its development, and as its ambassadors is important, to promote the circular migration of an important base on which engagement can its citizens, ensure their safety and fair treatment be built. abroad, and facilitate the portability of pensions, the Philippines has worker mobility agreements with some 80 countries. Source: Dadush 2015 great deal of mistrust of the government and its destination, the government of the country capacity and willingness to help; in particular, any of origin must tread a fine diplomatic line in effort to encourage, channel, or tax remittances assisting its diaspora overseas. Finally, there is is viewed with suspicion. Given the political a serious lack of information about the diaspora sensitivity of immigration in the countries of and great difficulties in finding out who is part INSTITUTIONS 39 of the diaspora, where they are, what they are Little attention has been paid in this paper doing, and how best to reach them. Mapping and more generally in the public debate of the diaspora is a crucial starting point5. to the role that governments in countries of destination can play in supporting links Some of the obstacles to more-systematic between the diaspora and the country of engagement are structural and difficult to origin, yet the role of the country of destination change. For example, a small country such as is also crucial, for example, in ensuring that Lebanon has fewer resources and less influence the rights of immigrants are observed and in on the countries of destination of its emigrants facilitating circular migration by allowing dual than does the Philippines or Egypt, and an citizenship, permitting portability of pensions, authoritarian and repressive regime fearful of its and adopting appropriate labor permit and tax diaspora’s independence is less likely to reach out regimes. Insofar as tighter diaspora links with the than a regime that its citizens perceive as having country of origin can enhance its development, high legitimacy. Nevertheless, most obstacles the country of destination benefits from growth to more-active diaspora engagement are not and stability and, by encouraging return and structural, but organizational or managerial, circular migration, can avoid some of the political and can be overcome. What is needed is much complications and tensions associated with greater awareness of the diaspora’s important large permanent immigration. In this context, role in development and of its needs and the too, there are clear win–win opportunities for political will to build bridges. the governments in the countries of origin and destination and the diaspora to arrive at cooperative solutions (Dadush 2015). 5 If your surname is McNamara and you live outside Ireland, expect a letter. Ireland Reaching Out, a non-profit organization financed largely by the Irish government, has pioneered what it calls “reverse genealogy.” Rather than waiting for people to trace their Irish ancestry, it constructs family trees from root to branch, tracking down the descendants of those who left for the United States, Australia, and other countries. Volunteers then invite them to visit the homeland. It is a mighty task: Mike Feerick, the outfit’s founder, wants to build a database of the Irish diaspora containing 30 million to 40 million names (The Economist 2015). 40 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP CONCLUSION AND RECOMMENDATIONS T he analysis presented in this report indicates the need to harness MENA citizens living abroad to foster trade, investment, and technology transfer in the MENA region. It is not necessary for the diaspora to come back home to help; many can provide valuable support while residing abroad. Main Findings ■■ The MENA diaspora is generally motivated in economies with better governance and and committed to supporting the economic stronger institutions, tend to be demanding development of and giving back to their and conscious of quality gaps and efficient home country. This is true regardless of services that governments provide. As such, the country of residence, the number of the diaspora can be a source of change years spent abroad, the income level, or the and a channel to introduce new and better diaspora generation. Diaspora members practices. are more attached to their cities of origin, ■■ The preferred form of intervention of the where families and friends reside, than to MENA diaspora is currently mostly knowledge their countries of origin. transfer, mentoring, and capacity building. ■■ The MENA governments generally do not Although a number of diaspora members formally recognize the contribution of their have invested at home, or have tried to, citizens living abroad beyond remittances. they believe that the priority should be to Nonetheless, citizens residing abroad help young professionals and entrepreneurs can attract foreign investment, promote become more organized, to define their trade and entrepreneurship, and facilitate ideas and projects better, to market their technology and knowledge transfer. The products and services better, and to help effect can be particularly great when outreach them access markets. They think that the and policies are decentralized and come economic situation and the lack of maturity from the local level. of the local markets are not conducive to investment at home and will come at a later ■■ The MENA diaspora expresses a high level stage. of mistrust toward institutions at home, calling for a new social contract between ■■ When investment is considered, direct governments and citizens living abroad. investment at home is the preferred Diaspora members, especially those living investment instrument because alternative CONCLUSION AND RECOMMENDATIONS 41 financial instruments such as government ■■ Development institutions can a play a major and diaspora bonds do not seem to be role in bringing together the diaspora across appealing given the general lack of countries to share experiences, facilitating transparency and accountability in the dialogue between governments and diaspora implementation of projects. In addition, members, and providing information on the diaspora lacks credible information on international practices. This is particularly business opportunities, particularly at the important while the level of mistrust is still local level, in the cities and regions they high and there is a need to put in place are from. mechanisms to build trust. Recommendations ■■ MENA governments should formally skills and interests. Moreover, it will allow recognize the important contribution governments to mobilize the diaspora that their professionals and experts living more quickly. Outreach and targets may abroad, a large human capital asset, be differentiated according to whether could make in terms of trade, business, governments need to mobilize their economic development, regional and diasporas to subscribe to government global cooperation, and knowledge and or diaspora bonds, help refugees in the skill transfer. Needs and policies should be country where the diaspora members differentiated according to type of country. reside, or tap into their expertise and Country engagement and programs with professional networks. Governments the diaspora ought to be differentiated should also consider decentralizing the depending on the situation and needs of outreach and mobilization of the diaspora the MENA economies and of the diaspora. members, who tend to maintain strong The approach will be different for different ties with their city and region of origin. groups of MENA countries: (i) relatively stable b. The elite diaspora is particularly economies such as Maghreb countries, sensitive to formal recognition from their Egypt, and Jordan; (ii) countries in crisis respective governments. Governments or reconstruction such as Iraq, Libya, Syria, could engage strategically with a small and Yemen; and (iii) GCC countries that are group of diaspora overachievers in an home to many MENA diaspora members elite program to benefit the country. ■■ Governments can achieve this objective in Examples of such managed networks a number of ways. include Global Scot and Chile Global, which have enlisted some 600 and 100 a. Mapping of the diaspora is a crucial members, respectively. In the MENA endeavor that governments should region, Tunisia recently established the undertake. This will help elaborate specific “ambassador” program, targeted toward outreach programs and those targeted to diaspora professionals with managerial various diaspora members with different 42 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP positions in the IT industry, to promote programs in certain sectors or industries, Smart Tunisia abroad6. The action of a joint research projects, peer reviewer few in support of specific programs could mechanisms, virtual return (through make a difference. distance teaching and e-learning), and short-term visits and assignments. To c. Governments can proactively facilitate increase the benefits of these activities, connections between the diaspora and countries will have to survey the human locally based entrepreneurs by improving resources available in their diasporas, the flow of information about business create active networks, and develop opportunities and diaspora availability specific activities and programs. around the globe. Country-specific online platforms connecting diaspora f. Government and private sector–led professionals with concrete projects would entrepreneurship initiatives should be helpful and would require mapping systematically call on the professional projects in home countries. Development diaspora and business angels to provide partners supporting local entrepreneurs seed financing and mentorship to high- could help populate these platforms growth entrepreneurs, in particular in because their projects are screened and early-stage seed deals. A US$50 million vetted in a careful selection process. Morocco Seed and Early Stage Equity Financing project that aims to mobilize d. Governments can also encourage private equity capital and increase venture diaspora contributions to competitive capital offerings to small and medium research and innovation in their home enterprises with high growth potential countries. The diaspora can help build the will involve the Moroccan diaspora at all local innovation and research ecosystem. stages of the process. Notable examples include research excellence contests pioneered in Croatia ■■ Development partners can also play a in 2008, Mexico in 2009, and Russia in significant role at several levels. 2010 that provided matching funds to a. They can play a convening role in organizations in the home country that set particular between the diaspora and up a joint project with diaspora members policymakers and among diaspora at (Kapil et al. 2013). the country, regional, and global levels. e. Governments, with the help of bilateral Development partners should organize and global development partners, can a recurring conference to bring together also help establish knowledge exchange the main players, foster exchanges, track networks so that the skills of diaspora progress, and follow up on projects and members can be tapped into more easily. commitments. These partners could Some initiatives include mentor-sponsored include the World Bank, in particular through the multidonor trust fund Global 6 Smart Tunisia is a government investment initiative that aims to Knowledge Partnership on Migration and facilitate the employment of young graduates and to develop IT and IT-enabled services. The goal is to make Tunisia a highly reputed “digital Development; the International Centre hub” and in particular to attract foreign investors. CONCLUSION AND RECOMMENDATIONS 43 for Migration Policy Development; the economy of their country of origin, International Organization of Migration; with the assurance that they can easily the International Trade Center; the emigrate again. United Nations Economic and Social c. Reducing the cost of transferring Commission for Western Asia; the remittances, which can amount to European Union; and the U.S. Agency several percentage points of the value for International Development, which of smaller remittances, is another obvious are active in this area. opportunity for government action. By b. Development partners should also enhancing competition in funds transfers continue to advocate for easier migration and supporting the adoption of new flow, in particular for professionals and fund-transfer technologies, such as experts, to encourage the transfer of through cell phones, credit cards, and knowledge and skill between diaspora web-based systems, governments can and home country. 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The Irish government thinks that everybody of Irish descent—perhaps 60 million or 70 million people—is part of the Irish diaspora. Israel claims all Jews as diaspora members. The standard typology of diaspora is as follows. ■■ Lived diaspora – individuals born in the with the homeland. According to the International home country who now live permanently or Organization for Migration, a broad definition temporally in a host country. of diaspora is “members of ethnic and national communities, who have left, but maintain links ■■ Ancestral diaspora – individuals with with, their homelands.” Therefore assessing ancestral links to the home country (e.g., the size of a diaspora and defining criteria of second- and third-generation diaspora appurtenance can be challenging. Ionesco (2006) members). Later generations become even recalls that the diaspora encompasses different more committed to the land of their ancestry factors, which can include place of birth, time than their parents or grandparents. of emigration, citizenship, and even identity. ■■ Next-generation diaspora – younger members of the diaspora, typically under the For the purpose of this analysis, the team age of 35, who are fundamental to engage to adopted a definition that not only relies on ensure the sustainability of current diaspora citizenship, but is also based on self-claimed strategies. belonging to the diaspora. This approach is similar to one adopted in the paper “Diaspora The diaspora has two dimensions: first, having investing in the Caribbean,” published by migrated, and second, maintaining a connection Infodev and The World Bank. ANNEX: METHODOLOGY 49 Data Collection The project used a two-way approach to The focus groups and survey each had their own collecting data on the MENA diaspora. strengths and weaknesses, but improving the linkages between these data sources and the Online survey of MENA diaspora abroad: available data enabled us to gain a preliminary The goal of the survey was to provide a broad understanding of the attitudes of the MENA description of the characteristics and attitudes diaspora regarding economic integration and of the MENA diaspora, including trade, cooperation. investment, and integration in the region. Thus, the questionnaire needed to cover a wide range There were several fundamental challenges of topics but be short enough that respondents with the online survey. would be willing to complete the interview. ■■ Representativeness: Because diaspora are rare populations, it is very difficult to locate The survey was designed with a combination of them. They also tend to be mobile. questions tested previously in similar surveys. At the beginning, a small convenience sample ■■ Our survey focused on a subset of the total population, and that subset was a small of the population to be studied was accessed. proportion of the total. We conducted a pilot test of the questionnaire among the Tunisian diaspora. Additional changes ■■ Inexistence of a sample framework: The were made to the questionnaire based on the survey was not nationally representative of results of the pretest. The questionnaires were the countries where it was administered. distributed in English and French. Individuals ■■ Costs to conduct a nationally representative mostly from Tunisia, Morocco, Algeria, Egypt, survey were high. Lebanon, and Jordan responded to the survey. ■■ Survey bias: from nonresponse and lack of The team also conducted focus groups to identification. deepen their knowledge of the issues of ■■ The team had to compromise between interest to the study and reach out to more scientific rigor and practicability. We combined diaspora members and networks. The same set quantitative and qualitative methods to assess of questions was asked across groups, and a the MENA diaspora. Focus groups provided professional facilitator moderated the meetings. information on a subset of the diaspora. 50 MOBILIZING THE MIDDLE EAST AND NORTH AFRICA DIASPORA FOR ECONOMIC INTEGRATION AND ENTREPRENEURSHIP ‘Diasporas have been a part of the world for millennia. Today two changes are making them matter much more. First, they are far bigger than they were... If migrants were a nation, they would be the world’s fifth-largest, a bit more numerous than Brazilians, a little less so than Indonesians.... Second, thanks to cheap flights and communications, people can now stay in touch with the places they came from. The diaspora networks have three lucrative virtues. First, they speed the flow of information across borders... Second, they foster trust... Third, and most important, diasporas create connections that help people with good ideas collaborate with each other, both within and across ethnicities’. THE ECONOMIST. November 19, 2011