Pacific hurt by drop in money being sent home
A new report shows Pacific countries left with no tourism income under Covid-19 will also face a reduction in important remittance payments. Teuila Fuatai reports.
While Pacific nations such as Tonga and the Cook Islands have made headlines around the world for their Covid-19-free status, the absence of foreign tourists presents a significant challenge in the entire region.
In Fiji – one of the biggest Pacific Island economies – tourism contributes an estimated 30 percent of GDP. Having been closed to international travellers for a month, thousands have had their livelihoods affected.
Now, a report from the World Bank is warning remittance payments to the Pacific – another important source of regional income from overseas workers sending money home – is expected to decline because of Covid-19.
Released last week, the report estimates remittance flows to the Pacific and East Asia region would drop by 13 percent this year. This is at a time when that income would be even more important to offset the overall global economic impacts of Covid-19.
“Several remittance-dependent countries such as those in the Pacific Islands could see households at risk as remittance incomes decline over this period,” the report says.
Furthermore, foreign investment into low and middle-income countries such as those in the Pacific is expected to drop by more than 35 percent because of travel bans, disruption to international trade and declines in the value of multinational companies.
The report also highlights how the impact of Covid-19 on remittance payments would vary significantly between countries – both for those receiving payments and those sending them.
Tonga is one of the more exposed Pacific nations, with remittance payments making up 37.6 percent of GDP in 2019 according to World Bank data. In Sāmoa, remittances accounted for 16.2 percent of GDP last year, and 14.3 percent in the Marshall Islands. Fiji registered five percent of its GDP to remittance payments in 2019.
In New Zealand, nearly 10,000 workers from Pacific nations who are part of the Recognised Seasonal Employer (RSE) scheme remained in the country throughout the Level 4 lockdown. Hired to work in the horticulture and viticulture industries, they were eligible for the Covid-19 wage subsidy.
The RSE scheme has been identified as a significant contributor to remittance payments to the Pacific. In the 2014/15 season, a study of incomes and remittance payments of 640 RSE workers showed participants earned $11.96 million in combined income. From that, $3.21 million was remitted and $1.4 million was paid in income tax.
Pacific Covid-19 cases
Papua New Guinea: 8
Covid-19 free: Cook Islands, Sāmoa, Tonga, Vanuatu.
World Bank Group President David Malpass says the reliance of developing nations on remittance payments is a reminder of the ongoing responsibility of larger economies, particularly in economic downturns.
“Remittances are a vital source of income for developing countries,” he says. “The ongoing economic recession caused by Covid-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies.”
This reflects the report’s highlighting the challenges faced by migrant workers in Australia and other parts of the Asia Pacific.
“A recent survey of migrant workers in New South Wales, Australia, found that half had lost their jobs and one-fifth had seen their work hours reduced while none would be eligible for government assistance,” the report states.
Many migrant workers have been left without any financial support by “host governments” during Covid-19 and have at times been told to “simply return home” despite travel bans and flight cancellations, according to the report.
Overall, a 20 percent drop in global remittance payments to low and middle-income countries is expected this year. “This is not so much due to a decline in the stock of international migrants, but largely due to a fall in wages and the employment of migrants workers in host nations due to Covid-19,” the report says. Countries in Europe and Central Asia are expected to be worst affected.
* Made with the support of NZ on Air *
Help us create a sustainable future for independent local journalism
As New Zealand moves from crisis to recovery mode the need to support local industry has been brought into sharp relief.
As our journalists work to ask the hard questions about our recovery, we also look to you, our readers for support. Reader donations are critical to what we do. If you can help us, please click the button to ensure we can continue to provide quality independent journalism you can trust.