On Tuesday 19th August, Australia for UNHCR hosted its first Melbourne fundraising luncheon. Representatives from the finance sector including many superannuation funds raised funds to respond to key humanitarian crises in Syria, South Sudan and the Central African Republic.
One of the highlights of the luncheon was the chance to hear the story of Garang M. Dut, a Sudanese refugee who was born in Southern Sudan in 1987. Garang ultimately spent most of his childhood in refugee camps including the Kakuma Refugee camp in remote Kenya.
Garang learnt to write in dirt in an open field in 40°C temperatures. His intellectual capacity shone through even in this harsh environment as he topped his classes, being rewarded with additional pencils and writing materials. In 2005, Garang arrived in Australia and went to school at Sunshine Secondary College where he finished second in Year 12, narrowly missing out on his ambition to study medicine. Not to be daunted, Garang studied Biomedical Science at Monash University, recently transferring to Melbourne University where he will soon graduate as a doctor of medicine.
Garang’s story is one that has been repeated by migrants to Australia, who through competence and persistence have achieved incredible outcomes against incredible odds. One of the questions from talking to Garang is what role the finance sector can play supporting refugees?
One of the things that we know is that when refugees leave their home country they do not extinguish their links. We also know that countries that are impacted by conflict can achieve peace.
A great case study is Rwanda, a country that was racked by genocide exactly 20 years ago. Today the country is climbing up indexes that measure development and social progress. Yes, the country undoubtedly still has problems, but it is developing economically, including an emerging finance sector. An example is that this week Rwanda raised a 5 year local currency bond worth $21.87 million that will help to build the nation’s infrastructure.
The interesting thing is how Rwanda’s Diaspora is supporting the economic development of the country. The year before the Rwandan genocide remittances to the country amounted to around $12M. The country is now receiving on an annual basis around $76M a year. The flow of capital is consistent and likely to continue to grow over time.
The question is what can be done to support the remittances for refugees? There are a couple of things that can be done.
The first is to make refugee remittances tax effective by allowing tax deductions. This seems an obvious thing to do. The sacrifice that refugees make to send home is significant and should be recognised as part of a nation’s aid budget.
The second thing that can be done is to make remittances efficient by supporting the development of financial institutions that operate on a not for profit basis. There are financial institutions that do a good job of getting money to people in remote areas but their fees are expensive, and this is ultimately a transaction cost that is an impediment to economic development. The World Bank has established an international database of remittance prices that is aiming to provide disclosure of remittance fees. This is a good initiative but it does seem that the finance sector could intervene through its community investment programs to establish an impact investment that cut the cost of transacting. There are a number of exciting initiatives developing including using Facebook to facilitate transfers. With US $414 billion of remittances to developing countries on an annual basis, reducing transaction costs can make a material impact on economic development.
A third area where the finance sector can make a material contribution is by supporting greater linkages between Less Developed Countries (LDC) and the finance sector. Academic research has demonstrated that there is a clear link between the development of a nation’s finance sector and poverty alleviation. And yet little is done from an aid perspective to support the development of finance skills in LDCs.
A lot of work has been done in LDCs to develop market structures including stock exchanges. There are for instance around 34 separate stock exchanges in Africa. One thing that the finance sector could do is to support the development of finance sector skills by providing education for market regulators. This in turn would build confidence of investors to enter LDC capital markets.
The Australian Government is currently seeking to establish a new Colombo Plan that would provide education as a way of contributing to aid. It would make sense if the revised Colombo Plan had a focus on building finance skills to enable nations to develop their own capital markets.
Superannuation is a long term investment and therefore thinking long term should be something we are comfortable doing. Just as Rwanda is emerging from chaos, so ultimately with the right support could Sudan. In another twenty years it could well be that Australian superannuation funds are investing in Sudan, developing the country’s rich environmental and mineral resources.
But to make that happen, we need to be prepared to broaden our horizon today.
To donate to UNHCR go to: http://www.unrefugees.org.au/