How can they afford this? Remittances, really. (Part 2 of 3 of the Remittance Series)

Village sign sponsored by Western Union

By Agnes Chu

In 2007, out of all the countries in the world, Samoa received the 7th highest amount of remittances as a percentage of GDP (22.8%).  The following is a look at remittances in Samoa, part two of a three part series on remittances in developing countries.  Part one,  which is Rob’s excellent post on remittances in Kyrgyzstan, was posted earlier today.

Samoa could be sponsored by Western Union. At least, the Western Union logo is everywhere. Even some of the name signs for villages are produced by Western Union. Nearly every Samoan family uses Western Union—most travel for hours to the capital, Apia, weekly to receive money from family members overseas. Out of all the countries in the world, Samoa receives the 8th highest amount of remittances per capita.1 During my two months in Samoa, I have been astounded by the large role that remittances play in the Samoan economy. Why are Samoans so dependent on remittances? What does this spell for life in Samoa? And is this healthy?? The following is my attempt to answer those questions. Please be aware that it is based off my observations and conversations with the select Samoans and is not scientific in any way.

Paradise is expensive. Though it promises a simple, slow life, once it is touched by modernization, an island must import most of the manufactured goods it consumes: food, toiletries, electricity, everything. Samoa has a large trade deficit. It imports cheaper goods (junk food, fatty mutton flaps from New Zealand, and 99-cents-mart quality goods from China—the ones that break or would perhaps give you lead poisoning) that are sold expensively at US prices. In turn, Samoa exports little, but mostly agricultural products such as coconut oil or taro. There are few factories or commercial ventures that offer wage jobs. For this reason, many Samoans migrate to New Zealand, Australia, or the United States to work in blue-collar jobs. In fact, New Zealand has a program where Samoans can work temporarily in New Zealand’s orchard farms for 7 months out of the year. I have yet to meet a family in Samoa, poor or wealthy, who do not have a close relative or a few working abroad. It is not uncommon for some Samoan families to be unemployed and waiting for their relatives abroad to send money back.

Recently, the global recession and increased cost of oil have significantly raised the cost of living in Samoa, because Samoa is hit by the double-whammy of higher good prices and a higher cost of transportation—imagine the cost of shipping goods to a remote island. It has gotten so bad that my landlord complains, “Nowadays in Samoa, it is expected to pay even your relatives for any help or work. Everybody needs money. People have no shame in asking.” (This explains why Samoa’s culture excludes volunteering.) However, most Samoans do not live in extreme poverty. In fact, the UN changed its classification of Samoa from a Least Developing Country to a Medium Developing Country this year. Most Samoans are housed (they do not need to pay rent, because the land is owned by the village and they live in family compounds) and natural food is in abundance (papayas grow wild here. Oh!) For a more detailed discussion on poverty in Samoa, Athan Makansi, the past Kiva Fellow, has a very good Kiva Fellows blog post on the topic.

So what are remittances or free spending money being spent on, if not for the most basic needs? In normal times, a large chunk of a typical Samoan’s budget goes to family obligations or ceremonies, such as weddings or funerals. But since the tsunami, which hit Samoa on Sept. 29, 2009 and devastated over 600 homes, remittances have proven to be an indispensable shock cushion. Most Samoans affected by the tsunami are scraping by now, because each has relatives abroad sending money—sometimes, it’s very little, but even so, it helps. Some Samoans have relatives who have come back for a couple of months to help out. Wellie, a Samoan from Utah, flew back to Samoa and paid his relatives to rebuild part of a seawall to protect them from the cyclone season. I have met a man who quit his job in New Zealand to be with his family and help rebuild their house.

Though remittances have benefited Samoa by bringing in additional outside money (balancing some of the trade deficit and expanding the pie, per Rob’s analogy) and they are certainly more reliable than foreign aid, I cannot help but worry if this dependency of remittances is healthy for Samoa. Remittances cannot remove the structural constraints to economic growth. 1 The structural constraints in Samoa are a lack of good jobs, financial infrastructure, healthcare (many Samoans have diabetes and heart disease from their habits of eating junk food), and college-level education. Interestingly enough, Samoa has one of the lowest percentages of college-level educated emigrants out of all countries, developed or developing. Around 20% of most developing countries’ emigrants are college-educated, but only 9% of Samoa’s emigrants have a tertiary-level of education. This is confounding, because 99% of Samoa is literate. Almost all of SPBD’s clients’ children under 18 attend school, but they’re not attending university. I have asked around and gotten different answers. Some clients say that it is too expensive to send their children to university (It costs 1,200 talas, equivalent to the purchasing power of $960 US1, per semester, a mite expensive, but not unaffordable considering that the average salary in Samoa is ~8,000 talas per year); some say that it’s hard to get their grades high enough to qualify; others say that Samoans are simply not motivated to study and go to college—they or their parents would rather them work to earn money immediately.

It is sometimes tough being Samoan. Samoan culture is based upon family, and as we all know, this can be both a blessing and a headache. Fa’a Samoa, or the Samoan way, dictates that most of ones’ income should be given to the family and family events, along with church donations, are probably the main expenditure of most Samoans. Remittances help generate this additional income for families. It helps bring in money from outside of Samoa to pay for their imports from New Zealand and China. Though some people in America may look at Western Union as an evil corporate giant, Western Union has done some good things in Samoa, such as encouraging clean villages by sponsoring an annual “Prettiest Village in Samoa” contest, which is very competitive in Samoa. They provide permanent trashcans to store trash in. Remittances have benefited Samoans in many ways.

1. Klugman, Jenny. 2009. “Overcoming Barriers: Human mobility and development.” Human Development Report, 2009. New York City, United Nations Development Programme.

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