Remittances are a lifeline that can always improve

The labour mobility conference in Abu Dhabi has raised some interesting questions about remittances from the Arabian Gulf states.

Expatriates living in the Arabian Gulf send home $80 billion (Dh294 billion) a year to their home countries, with the UAE providing a sizeable $12 billion. The UAE should be justly proud of providing people with such an opportunity to better their lives through work, a point made clear during atwo-day labour mobility conference that concluded in the capital yesterday.

One participant, Michael Clemens of the Centre for Global Development in Washington, pointed out a startling statistical observation - expatriate workers in the GCC send more money back to one country, India, than the US government provides in aid to the entire world. This is the value of remittances, that they allow workers to achieve economic goals - the education of their children or medical care for their family - that, for various reasons, they'd be unable to achieve working in their home countries.

And yet, as Mr Clemens said, some aspects of remittances are understudied. For Gulf economies, one question about remittances is this: are there ways to ensure that the $80 billion works as hard as it possibly can while it is in the region? After all, that $80 billion represents an enormous sum that leaves the economies of the Arabian Gulf states annually. Those working for that money have certainly earned it, but there is one small change that could be made which could have a wider beneficial effect.

At the moment, workers are paid end-of-service benefits equivalent to a twelfth of their annual salary for every year they have worked. These benefits are paid in one lump sum, which means companies need to find that money suddenly. In some cases, when a number of workers leave at once, that can be a significant amount for businesses to find.

There is a possible solution already employed in Hong Kong, Singapore and Malaysia. Called provident funds but essentially retirement accounts, they work like this: each month, companies contribute money to an account in the employee's name. These funds, if placed in local investment vehicles, would then improve liquidity.

This means that companies can forward plan, knowing they will not suddenly be hit by a need to pay out large amounts of money. And it benefits workers, especially in those cases where a company goes bust and there is no money left to pay end of service bonuses.

End of service benefits are just one type of remittance. And in general, this system of global capital flow is hugely beneficial to the nations it floods into. As experts at this week's labour mobility conference rightly pointed out, money sent home has the power to do immense good in millions of lives.

Looking ahead it is important to have conversations about the best way to extract maximum value created from the hard work of so many individuals.