Diane Abbott is the British Labour Party's spokeswoman on public health
Bonds are a bad idea that refuses to die. They reflect the idea that members of the diaspora are just so many walking dollar bills. For too many Jamaicans the diaspora is a financial resource to be harvested. Instead of mutual respect, the relationship between Jamaica and its diaspora can seem almost predatory.
Jamaica has the largest diaspora, relative to local population, in the world. It sends home billions of dollars a year. In net terms the diaspora is Jamaica's largest single source of foreign exchange. Furthermore remittance flows are constant. In good times and in bad loyal Jamaican's find the money to send home. Jamaican policymakers have long eyed those billions greedily. They lament the idea that these billions are going into mere "consumption" ie school fees instead of "investment" ie government projects.
More recently, the World Bank has taken up the idea. It is not suggesting the renegotiation of the unfair trade agreements that the Caribbean and others have been forced to sign nor has it any interest in further relieving poor and middle-income countries of the dead weight of foreign debt. Instead, the international financial institutions want poor countries diaspora to be corralled into making good their countries lack of foreign investment. Yet it is IMF insistence on cuts in public expenditure and opening up local markets to foreign investors (to the detriment of local business) that have made jobs in Jamaica for trained professional so hard to come by. Accordingly, millions migrate. Now international financial institutions want those same migrants to compensate for the catastrophic failure of IMF policies by investing in diaspora bonds.
Banks, financial institutions and bond salesmen are also keen on diaspora bonds. They know that they will make millions in profits by merely handling the schemes, whether or not the bonds make any serious money for the countries involved. What people forget about financial institutions is that they are not interested in whether the latest scheme they are peddling is actually a good idea. All they want to know is whether, in the short term, they can make money from it. These are the people, after all, who devised the financial instruments based on sub-prime mortgages which nearly crashed the world economy. Yet Caribbean politicians continue to pay heed to the siren call of the World Bank and foreign financiers to promote diaspora bonds.
The state of Israel is often cited as an example of a country that has raised significant sums of money through diaspora bonds. But Israel is not a relevant example for the Caribbean. It has an exceptionally wealthy diaspora and a tradition of involvement in financial instruments that goes back to the Middle Ages. Caribbean policymakers would be better advised to look at the experience of African countries in trying to raise money through diaspora bonds. Ethiopia's first attempt was unsuccessful. Now it's trying again and Nigeria and Kenya are also talking about these bonds.
It is important to stress that the Jamaican Diaspora is exceptionally loyal to Jamaica. Nobody who saw the thousands who queued to get into the Independence Day celebrations in London could doubt that. And they do send billions home. But they are not fools. They work extremely hard for their money. Often they are holding down two jobs. Many remember the implosion of Jamaican financial institutions in the '90s. They feel entitled to be sceptical about being invited to give their money to government rather than family. Too many financial experts look at the billions in remittances flowing into Jamaica and assume that the diaspora doesn't care about risk and reward. They do. But they care about their family more.
World Bank experts, for instance, claim the diaspora is less worried about local instability and currency depreciation than the normal investor. On the contrary, the diaspora is very aware of instability and currency depreciation. That is exactly why they send their hard-earned money home to put food on the table and pay school fees for their relatives. But sending money home to people you have an emotional connection to and for entirely transparent purposes (eg new shoes) is very different from giving to faceless bond salesmen. The diaspora knows exactly where their remittances go. And even in the worst-case scenario (eg money sent for new shoes spent in the rum bar) they know it is being spent in a community they care about. Remittances offer the diaspora transparency and accountability. Diaspora bonds offer neither.
At the very least, Jamaican politicians should wait and see how successful African efforts to promote diaspora bonds are before wasting time and money on such a scheme.