Lowering remittance costs for migrant workers: How Australia and the G20 can lead the post 2015 Sustainable Economic Development Agenda

Nicholas attended the 2013 Y20 Summit in Saint Petersburg where he represented The University of Melbourne as Melbourne National Scholar. Nicholas is reading for a Bachelor of Arts (Literature and History), alongside an Advanced Diploma of Theology at the MCD University of Divinity. He is Founder and Editor-in-chief of a new quarterly intercollegiate foreign affairs magazine, The Melbourne Globalist, and Founder and President of 180 Degrees Consulting at The University of Melbourne. 


The G20 is having an identity crisis with regards to its efforts on fighting extreme poverty, representing the developing world and Africa in particular, and in reaching the goals of economic growth and job creation as laid out by the Framework for Strong Sustainable and Balanced Growth (FSSBG) introduced at the Pittsburgh Summit in 2009. This paper therefore proposes that Australia, in assuming the presidency of the G20 in 2014, should seek to achieve tangible economic results by strongly advocating that the G20 develop a renewed international consensus regarding the lowering of international remittance costs for migrant workers in preparation for the 2015 post Millennium Development Goals agenda. Given that the G20 nations are responsible for half of all global remittance flows, and when considering the universal failure to meet the G8’s 2009 5x5 Objective to lower the Global Average of remittance transfer costs from 10 percent to 5 percent by 2015 with the Global Average currently at 9.05 percent, Australia and the G20 are in unique position to refocus this important development issue post 2014 and ultimately have a substantial impact on the lives of the world’s poorest. This would allow the G20 to return to a strong focus on economic growth, job creation, and market-based approaches to sustainable economic development. If successful, the G20 could then point to measurable, tangible and impactful improvements to the global economy. Rather than expanding the definition of what it could be doing as an institution beyond the province of global economic governance as some have called for, this paper urges the G20 and an Australian presidency in particular to focus upon what it must be doing to make global economic infrastructure more efficient and fair for the world’s poorest.


  1. Given its 2011 Cannes commitment, the G20 must advocate for a renewed multilateral consensus and efforts to lower remittance costs on international monetary transactions below USD 500 in conjunction with the respective efforts of the World Bank, the International Monetary Fund and the United Nations.

  2. The G20 must also commit to a perpetuation of the measures of the 5x5 Objective pledged at the 2009 G8 Summit in L’Aquila, Italy12 beyond the 2014 deadline to reduce average global costs to 5 percent in the interests of designing and leading the post 2015 Millennium Development Goals agenda.

  3. Refocus its mission and improve its efficacy by actively trimming its agenda to reflect a greater focus on economic growth and job creation, rather than actively expanding its agenda to include subordinate issues outside of this province, as mandated per the FSSBG.

  4. Not yield to pressure and international calls to expand the list of participating member countries, lest the G20 trade off effectiveness for inclusiveness.

  5. Instead, Australia, in assuming the Presidency of the G20 and remaining on the Troika until 2015, must encourage the G20 to address criticism about its representative status by adopting policies that are directly relevant and concerned with the non-participating member countries and the developing world.

Contextualising the G20: History and Current Relevance

The Group of Twenty (G20) is a forum of finance ministers and central bank governors from 20 major economies.3 The purpose of the G20 has gradually shifted away from the role of a “crisis response” institution in the wake of the Global Financial Crisis.4 The G20 is now also focused on the medium to longer term governance of the global economy and has changed its format to also facilitate “leaders’ summits”, ensuring an annual cross-fertilization of ideas, policies and people across the important industrialised and developing economies.5

The explicit objectives of the G20 are:

1. Policy coordination between its members in order to achieve global economic stability, sustainable growth;

2. Promoting financial regulations that reduce risks and prevent future financial crises;

3. Modernising international financial architecture.6

It is in the spirit of the above objectives that this research report provides a brief examination of the state of remittance costs globally, with regard to the effect it has on the 215 million migrant workers around the globe in terms of sustainable economic development, financial and social inclusion, as well as access to basic healthcare and education. 7 All of the aforementioned issues are core points on the G20 agenda of the Russian presidency in 2013, and the G20 Development Working Group (DWG) is able to address many of these issues by providing guidance for countries and other international organisations to successfully implement the General Principles8 of the Global Remittances Working Group of the World Bank.

The G20 should be doing more to frame the issue of remittance costs on international transactions as a high priority agenda item come the G20 meeting in St Petersburg in September 2013. This paper also advocates that Australia in particular should take a leading role in the promotion of a tabling of the subject of remittance costs on the 2014 and 2015 agenda, ensuring the G20 continues to advocate for a multilateral effort9 to address this global challenge post 2015 and that it continues to protect the voice of the poorest nations on the international stage.10 This is something for which the G20 deserves praise, in that its creation recognised and responded to “the new realities of the distribution of economic power by bringing a diverse range of economic powers into the mechanisms of international economic governance.”11 It is this egalitarian legacy that should be embraced and further pursued through policy formulation.

The Current State of Remittance Costs

Remittances, defined as the “cross border person-to person payments of relatively low value”12, represent the second largest financial inflow to many developing countries and exceed foreign aid in scope and impact.13 14 15 In 2012, the World Bank Migration and Development Brief noted that migrant workers had remitted $401 billion to developing countries, up 5.3 per cent from 2011. When we include remittances between from developed nations, the figure totals a staggering $514 billion.16 While the amount of monies being remitted is significant in terms of the economic, social and financial benefits felt by the recipients, there remains a great deal more to be done in terms of making a significant reduction in the costs of remittance services.

Below is a table from the World Bank’s Remittance Prices database which provides a quantitative illustration of the extreme costs of remittance transfers. The database aims to make remittance markets more transparent for migrant workers in the hope that this will increase competition, drive prices down and secure the best deal for the remitter. The most costly remittance corridors – predominantly between African nations - are just below an astounding 20% of the principal sum transferred.

Source: http://remittanceprices.worldbank.org/17
Below is a graph outlining the trends of average percentage cost of remittance transfers from G8 countries from the end of 2008 to March 2013. It should be noted that Russia is the cheapest country in the G20 from which a migrant worker is able to send money home. This leaves it in a unique position to spearhead the remittance costs issue and disseminate best practice methodologies at the 2013 G20 Summit in St Petersburg.


Source: Remittance Prices Worldwide, Issue No.5, March 2013, the World Bank18

The main findings of the latest Remittance Prices Worldwide (RPW) database include:

  1. The average global average total cost for sending remittances was 9.05 percent, which

    represents a slight regression on previous progress (8.96 percent in Q3, 2012 and 2011)

  2. The average cost of sending remittances from G20 countries has followed the same pattern

    as the global average, and in Q1 2013 was 9.12 percent.

  3. The Global Weighted Average fell to an all time low of 6.92 percent, suggesting higher

    incidences of aggregate transfers occurring as a method of minimising costs.19

It is also worth spending a moment reflecting on the Q3 2012 average cost of sending money from G20 countries. The graph below highlights that the G20 Average has overall been keeping in step with the Global Average, if not outperforming it in specific cases.

Source: Remittance Prices Worldwide, Issue No.5, March 2013, the World Bank

Although progress has been made in bringing down the exorbitant costs of transferring monies, it is clear that the Global Average and G20 Average cost of remittances will not meet the 5x5 Objective as articulated by the G8 in L’Aquila, Italy in 2009. The Global Average will not fall to 5% in 2014 from 10% in 2009. Given that half of global remittance flows are sent from or received by G20 countries, the G20 is in a unique position to refocus this development issue post 2014 and ultimately have a substantial impact on the lives of the world’s poorest.


The above table provides a quantitative illustration of the projected growth in remittances to developing nations between 2012 and 2014.20 The ever growing pace of remittance flows, including those sent to developed countries is expected to top $593 billion by 2014.21

Minimising Systemic Waste: Fixing a Hole Where the Rain Gets In

The G20 can help to unlock the monies lost in international transaction fees by “fixing the leaks”22 in the system. This would involve greater collaboration, best practice sharing and dialogues with multilateral bodies like the World Bank and the UN. It is imperative that a global strategy is agreed upon for lowering remittance costs post the culmination of the 5x5 Objective in 2014. The consensus should outline strategy for developing greater market and service transparency and consumer protection, the development of payment system infrastructure in developing nations, the facilitation of educational programs for financial literacy, and ensuring competitive market conditions to keep prices low.23 This would see a net increase of $15 billion in disposable income for migrants and their families in the developing world.24

Remittance costs are therefore an attractive and comparatively unchartered point of policy discussion for the G20. Such a dialogue would:

  1. Reinforce the G20’s commitment to market-based sustainable development and particularly the Framework for Strong, Sustainable, and Balanced Growth (FSSBG) in “supporting investment in small-and-medium enterprises”, “increasing the lending capacity of the MDBs”.25 26

  2. Strengthen the goals of financial and social inclusion for migrants, youth and women.27 28

  3. Demonstrate the G20’s commitment to achieving shared objectives on the broader global


  4. Alleviate the perception that the G20 is an insular institution with little outreach and

    representation to and of developing nations.

  5. Facilitate global liquidity and encourage demand-driven growth from the developing world

    with a net $15 billion increase in disposable income for migrant workers and their families.

According to the World Bank Working Paper of 2008, more than 215 million people (equivalent to 3per cent of the world’s population) can be considered migrants, living in nations in which they were not born. 29 30

Remittances flow directly into the pockets of impoverished people in developing nations, and therefore it is imperative that global governance bodies such as the G20 work to bring attention to this under-represented issues and advocate policy recommendations for nation states to increase the efficiency of remittance corridors.

Since September 11, 2001 and the 9/11 terrorist attacks, which shocked the United States and forever changed the course of history, the banking sector has been operating in a highly regulated and cautious environment with regards to international monetary transactions.31 An example of such regulations are the Anti-Terrorist Financing (ATF) and the Anti Money Laundering (AML) reforms, which have worked to push terrorists and in particular al-Qaeda away from formal monetary transfer channels due to asset seizures (140 million dollars post 9/11 till 2006), and surveillance impositions.32 While this has been a positive outcome of regulation in combating the spread of global terrorism, the regulation of the international monetary transfer system has negatively impacted upon remittance channels and the ease with which money can flow from migrants working in developed nations to their home and families in developing nations. In some cases, transaction costs from advanced to developing nations can be up to 12-15per cent of the principle transferred, and consequently recipients are not getting as much money as they could be.33 Given that the sums of money transferred tend to be small, i.e. $200 or $500, these unjustifiably high costs to transfer money disproportionately affect the parties concerned, in this case migrant workers.

The now excessively stringent regulations are having a disproportionate impact on women migrants and those who are from rural areas34, which represent low-financial-access areas with the most concentrated poverty levels.35 This has dire consequences for the levels of overall access to formal channels of remittance transfers, when we consider that the money not reaching said families could otherwise be spent on health, food, access to clean water, and education, investments which further help to break the cycle of poverty.

Smarter Policy: Achieving a More Inclusive and Representative G20

Such an affirmative-action, inclusive consensus of outreach through the championing of lowering remittance costs into the post 2015 development agenda is seriously needed if the G20 is able to retain its “international legitimacy”36 as an organisation in the face of widespread criticism that it has “no mandate” and “no clear idea which functions it has”.37 It is essential that the G20 adopt policy and discussion topics directly related to the non-member nations. As David Skilling notes, there is a direct trade off between inclusiveness and effectiveness38, meaning that the more countries included officially as member nations, the less effective the G20 becomes due to things like agenda creep and a lack of an ordered and functional hierarchy. Therefore in order to preserve the efficacy of the economic forum, the membership of the G20 should not be opened up in light of the G20 critics, who cite the exclusion of 173 countries as a fact which undercuts the G20’s claim to representational legitimacy.39 Instead, the G20 as led by Australia should focus on developing communiqués and agenda items directly related to non-member countries. The issue of remittance costs and a commitment to lowering them into the post 2015 era would be an excellent way to ensure this inclusiveness without opening up membership to an unworkable amount of member countries. Indeed, if the members of the G20 are serious about fostering an inclusive and transparent global economic body, which is committed to generating jobs and growth, they must realise that the advancement of developing economies will provide a wellspring of growth for the global economy, further working to reduce income inequality and development gaps between nations.40 41

Looking Ahead as a Rising Middle Power: Australia at the helm of the G20 and opportunities for growth

Given that Australia will chair the G20 in 2014 and is at present a member of the Troika along with Russia and Turkey, the country is in a favourable position to substantively influence and positively reform the international economic agenda now and up until 2015.42 As Melissa Conley-Tyler points out along with Mike Callaghan, one of the greatest risks to the efficacy of the G20 is “mission creep and a failure to deliver.”43 44 Indeed, what is needed is for Australia to advocate the G20 to “return to its core business of economic issues” and an oversight of the international economic agenda.45 Conley specifically urges Australia to focus on “niche issues where it is well placed to make a contribution” and goes on to suggest “the issue of remittances from migrant workers, an issue that Australia and Indonesia have expressed interest in tackling”.46 In taking on the great issue of transaction costs through international economic cooperation, the G20 will have a significant and long-lasting positive impact on the poor. While human rights, the promotion of democracy and broader topics of social justice are extremely important points for consideration at the international level, Australia must use its influence as part of the Troika and as future Chair in 2014 to focus the agenda to key economic issues, such as remittance costs, which will allow the fledgling organisation to function well and remain true to its raison d’être.47

Importantly, improvements in the more lofty areas of social justice, democracy and human rights will emerge as “natural by-products and outcomes of a well functioning G20” and a focus on the processes of good international economic reform. 48 Furthermore, Mike Callaghan notes in his commentary regarding the April 18-19 meeting in Washington DC that there were many negative omissions from that particular communiqué in conflict with the promises of Putin’s inaugural address,49 including a distinct “lack of emphasis on the importance of advancing structural reforms to boost competition, demand and growth.”50

Coupled with this surprising exclusion was the absence of substantive discussion regarding job growth and job creation, which is a “bellwether issue” for emerging markets and developing economies.51 Australia should also be a steadfast supporter of the maintenance of accountability mechanisms to monitor the progress of G20 commitments regarding remittance costs as per the G20 Research Group’s 2011 Cannes Final Compliance Report.52 These directly address issues of over- regulation, lack of competition, and boost global aggregate demand for various goods and services by putting more money in the hands of the 215 million migrant workers globally. As a non- threatening, rising middle power Australia has a proven track record of “bridging the gap between very different groups of countries”.53 As Robert Zoellick (then President of the World Bank) noted, Australia’s presence at the G20 helped “bring together three networks of leaders in the US, Europe and the developing world.”54 This is a tradition Australia can be proud of; not only in helping to facilitate cohesion within the G20 members, but also in its ability to represent a unifying force as “ally” to the “traditional powers” and “neighbour” to the “emerging powers”, of which twenty-two of its twenty-four closest neighbours are developing countries and emerging democracies.55


Should Australia take full advantage of the unique position it holds as President of the G20 in 2014 and as part of the Troika until 2015, it will commit to further developing the efficacy of the G20 and its core mission of growth and steering the international economic agenda. Australia can achieve this by pushing for a strong commitment to lowering remittance costs for migrant workers as part the laying of the foundations for a post 2015 development agenda in order to increase financial inclusion, create global liquidity and increase demand for goods and services, while facilitating greater access to health, education and food for those in the developing world.56


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