THE BRAIN DRAIN Economics & Management in Developing Countries

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THE BRAIN DRAIN

Economics & Management in Developing Countries

December 2001

Pankaj Chugh

Wendy McMillan-Turner

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Introduction

Each year, thousands of highly skilled citizens of developing countries migrate to the US and other OECD countries. This phenomenon, commonly referred to as the ‘brain drain’, has been the subject of much debate in both the academic and public arena. The emigration of skilled labour is of great concern to most Less-Developed Countries as well as to some developed countries. Armed with ambitious economic development plans, many Less-Developed Countries are short of the professional, technical and managerial personnel they need to implement their objectives. They must pay exceptional salaries to hire foreign managers and consultants. At the same time, hundreds or even thousands of the highly trained indigenous elite leave the country every year for employment abroad.

As this migration of highly skilled people becomes increasingly important to the world’s economy, it becomes all the more imperative to understand its effects. Unfortunately, these effects have not been well studied or measured and are likely to be more complex than acknowledged in most policy discussions.

In this paper, we give a brief overview of the evidence that exists as to the extent of the brain drain in developing countries across the world and the various drivers and consequences of this movement. To illustrate the issues in context, we consider three specific cases: India, South Africa and Columbia. Finally, we present a discussion of the policy implications of the brain drain for both emerging markets and OECD countries.

Empirical Evidence of the Brain Drain

Researchers attempting to determine the extent of the brain drain and its impact on the economy of the source country have been faced with significant difficulty in obtaining accurate data on migration rates. This is partly a consequence of the tendency for those that leave emerging markets to avoid going through the official emigration process that frequently entails a significant time commitment and substantially delays emigration. The most accurate data on migration levels is thus obtained through census data collected by the OECD countries. This data source does not normally take account of illegal immigrants and, with the exception of the US, provides little in the way of information concerning the education status of the immigrants.

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Notwithstanding these caveats, the migration data provided by the US census and other OECD countries gives a reasonable indication of the extent emigration from developing countries across the globe.

The international migration of professional people and people with special skills is not a new phenomenon. What is, however, new, is the extent of the migration of tertiary educated people – the large numbers involved and their proportion relative to other migrants. During the nineteenth and early twentieth centuries, much larger numbers of people migrated but the characteristics of this migration were different. Today, the proportion of migrants who are highly skilled professionals or employed in other occupations involving a high degree of training is high. Figure 1 illustrates this substantial change in the US over time:

Figure 1:

Education-Level of Migrants - Time Series

Source: US Department of Commerce & Labour; US Department of Justice: Immigration & Naturalisation Service; US Census data

Other Tertiary Education Other Tertiary Education Other Tertiary Education 1907 1967 1990 0% 20% 40% 60% 80% 100% % of U S I m m igr an ts

The proportion of US immigrants with a tertiary education has been increasing steadily over time.

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The most comprehensive data source currently available highlights the significant levels of outward migration of tertiary educated people from developing countries.

At a regional level, a number of trends emerge1_:

- On average, migration rates are highest in Central America, and lowest in Africa

(Figure 2)

- The majority of migrants are highly educated and migration rates within the

tertiary-educated portion of the population are substantially higher in all regions. (Figure 3 & 4)

- On average, migration rates among tertiary-educated people are highest in

Asia-Pacific and lowest in Africa. (Figure 4) The proportion of all migrants from the region who are tertiary-educated is, however, highest in Africa. (Figure 3)

- In aggregate, the US is the dominant recipient country, hosting more than half of all

emigrants to OECD countries. (Figure 5)

Figure 2:

Average Migration Rates

Source: US Census data, OECD Note: 1990 data

Central

America AmericaSouth PacificAsia- Africa World 7.6% 2.1% 1.6% 0.8% 2.4% 0% 2% 4% 6% 8% A ve rag e T o ta l Mi g ra tio n R at e A cr o ss C o unt rie s

On average, Central America has the highest migration rate; Africa has the lowest.

1_{Migration rates are defined as the percentage of people from a particular country who are no longer}

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Figure 3:

Education Level of Migrants

Source: US Census data, OECD Note: 1990 data Tertiary Secondary Primary or Less Tertiary Secondary Primary or Less Tertiary Secondary Primary or Less Tertiary Secondary Primary or Less Tertiary Secondary Primary or Less

Asia & Pacific Africa Central

America AmericaSouth Total

2376K 128K 3761K 616K 6881K 0% 20% 40% 60% 80% 100% % of M igr an ts

Almost 40% of migrants to the US have a tertiary education.

This is substantially higher than the proportion of the population in developing countries with this level of education.

Figure 4:

Migration Rates by Level of Education

Source: US Census data, OECD

Note: 1990 data; calculated using simple arithmetic average, not weighted by population size Central

America AmericaSouth PacificAsia- Africa World

0. 1% 3. 3% 12 .2 % 2. 5% 14. 9% 0. 6% 26 .0 % 26 .0 % 0. 1% 5. 0% 10 .2 % 0. 2% 9. 3% 15. 9% 0% 5% 10% 15% 20% 25% 30% A ve rag e M ig rat io n R at e A cr o ss C o un tr ie s Primary or Less Secondary Tertiary

Without exception, migration rates are highest within the tertiary-educated portion of the population

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Figure 5:

Destination Countries

Source: US Census data, OECD Note: 1990 data US Other OECD Countries US Other OECD Countries

Other OECD Countries

US Other OECD Countries US Other OECD Countries US

Asia & Pacific Africa Central

America AmericaSouth Total

6.76M 1.21M 3.87M 0.76M 12.60M 0% 20% 40% 60% 80% 100% % of M igr an ts

The US receives more than 50% of all migrants from developing countries to OECD countries.

At a regional level, the destination of migration is linked to geographic and historically ties between regions.

Although regional data gives some indication of the extent of the brain drain, its effects are largely limited to political boundaries. Consideration must thus be given to the extent of brain drain from individual countries. Emerging from the country-specific data are the following conclusions:

- There is a significant level of disparity between countries in terms of migration rate,

even at a regional level. Migration rates for specific countries can be considerably higher than regional and global averages. Figure 6 illustrates the extent of migration from the 10 countries with the highest rates.

- In a survey of 59 countries (that does not include most of those shown in Figure 6)

conducted for the World Competitiveness Report, The US and Japan were revealed to have the least issues with brain drain, whereas South Africa, Venezuela and Bulgaria were revealed to have the biggest issue (Figure 7)

- The migration of tertiary-educated people is even more significant for specific

countries. Figure 8 illustrates the migration rate among different education groups for the same group of 10 countries.

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Figure 6:

Migration Rates – Top 10 Countries

Source: US Census data, OECD Note: 1990 data Other OECD US US US Other OECD US US Other OECD US Other OECD US _US Other OECD US _OECDOther

Jamaica Guyana El Salvador Trinidad

and Tobago Tunisia Turkey Mexico Panama DominicanRepublic Algeria

20.3% 14.5% 11.4% 9.5% 8.6% 8.5% 7.7% 6.7% 6.5% 6.3% 0% 5% 10% 15% 20% 25% Mi gr a tio n R a te

Individual countries can have considerably high migration rates.

The bulk of migration is towards OECD countries with geographic proximity or political and economic links with the source country.

Figure 7:

Brain Drain - International Competitiveness Report 2000

Source: International Cometitiveness Report 2000; Survey of 59 countries.

US Japan Finland Germany Iceland Columbia Zimbabwe South

Africa Venezuela Bulgaria

6.4 5.6 5.3 5.1 5.1 2.6 2.6 2.6 _2.5 2.1 0 1 2 3 4 5 6 7 Sc o re

“The Most Talented Workers Remain in the Country” (1= strongly disagree; 7 = strongly agree)

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Figure 8:

Migration Rates among Tertiary Educated –Top 10 Countries

Source: US Census data, OECD Note: 1990 data

Jamaica Guyana El Salvador Trinidad

and Tobago Tunisia Turkey Mexico Panama DominicanRepublic Algeria

77.4% 77.5% 26.1% 57.8% 63.3% 46.2% 10.3% 19.6% 14.7% 55.0% 0% 20% 40% 60% 80% 100% Mi g rat io n R at e A m o ng T e rt ia ry E d uc at e d

In many countries more than half of their tertiary-educated people migrate.

- Some of the countries where the brain drain is reputed to have been a serious issue

do not actually have a particularly high migration rate (even among those with tertiary education) when compared with other countries around the world. India provides an example: its total migration rate is only 0.2% and even among those with tertiary education, it is only 2.6%. The data does not, however, reveal the extent to which individual sectors and professions are impacted.

Drivers of the Brain Drain

Evidence from a range of developing countries indicates that there is no single factor that can explain the magnitude or existence of the brain drain effect. Most academics that have explored this phenomenon have focused on the attractive factors present in developed markets that draw emerging market professionals towards them.

Enrique Oteiza, in discussing the case of Latin American engineers, suggests several reasons why professionals migrate readily2_:

1. Advanced training is readily usable across countries and regions without adaptation

2_Oteiza,_{“Emigration of Engineers from Argentina: A Case of Latin American ‘brain drain’”,}

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2. Professionals usually know at least one language in addition to their mother tongue, making integration into economies of other regions easier

3. Communication between professionals in different countries is good because professionals often travel for business, thus professionals are far more aware of opportunities in other countries

4. Demand for professionals is great in most countries, and usually exceeds supply, thus providing the incentive to look for professionals from beyond the borders

5. Cost of transportation is minor in relation to salary, and moving professionals is cheap relative to the value they add. The same cannot be said for less skilled workers

These reasons explain only why professionals find it relatively simple to migrate, and apply equally well to emigrants from developed countries as they do to those from emerging markets. Walter Adams3_{considered factors more specific to the brain drain phenomenon.} These include:

1. Significant salary differentials exist across similarly skilled professionals of developed and developing countries, even if the function they are performing is the same. This is generally true on both on a nominal and a purchasing power parity basis.

2. Professional opportunities, especially in research, arising from amongst other things, the technology gap.

3. The relevance of foreign training to the source economy – students studying abroad may find that their skills are less applicable to the developing country of origin, and they are encouraged to remain where they can add more value through their education.

4. Monopolistic restrictions in developed countries that limit the supply of qualified professionals and consequently create the skill-shortage that prompts immigration. For example, the restrictions on the number of medical school places at US schools result in a shortage of doctors and the need for immigration

5. Discrimination in the country of origin, especially where hierarchies are weighted against the young

6. Discrimination on non-economic grounds in developing countries

In this analysis, Adams focuses primarily on the ‘pull factors’ that drive the brain drain. What Adams’ analysis lacks, however, is any consideration of the ‘push’ factors that prompt

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emigration from many developing nations. Although there has been little in the way of academic research on the topic, the journalists frequently bring their readers’ attention to the impact of crime, poverty, lack of political and economic freedom and a range of social issues on the migration of skilled professionals from developing countries. The case studies of South Africa and Columbia discussed later in this paper provide illustration of the significance of these factors when considering the drivers of the brain drain in some areas.

Consequences of the Emigration of Highly-Skilled Professionals

Historically, economists agreed that the effect of the ‘brain drain’ on talent and skills, and by further deduction, on growth, welfare and competitiveness in emerging markets was unconditionally negative. This negative effect can be proved using a two-sector endogenous model, such as that developed by Wong & Yip (1999) to examine the relationship between economic growth and brain drain4_{. The engine of growth in their model is the accumulation} of human capital through education. After proving the existence, stability and uniqueness of the equilibrium of a closed economy, they examine several properties of the brain drain. Their results suggest that:

1. The brain drain has an averse effect on the wage rate of unskilled workers but it improves the wage rate of the skilled workers (Empirically, we note that this is indeed the case in many countries such as, for example, India)

2. The brain drain has a negative impact on the growth of the source country

Today, economists are increasingly realising that this view is potentially overly simplistic and that the relationship between the ‘brain drain’ and growth is far more complex, with positive effects that go at least some way towards offsetting the negative effect of the brain drain itself.

Regets (2001) presents a summary of the range of potential global and national effects of high-skilled international migration, highlighting both the positive and negative effects to the sending and receiving countries:

From the perspective of the ‘sending country’, possible negative effects include:

- ‘Brain Drain’; lost productive capacity due to at least temporary absence of higher

skilled workers and students

- Less support for public funds for higher education

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These negative effects may be offset by a number of positive effects:

- Increased incentive for natives to seek higher skills

- Possibility of exporting skills reduces risks/raises expected return of public education

investments

- May increase domestic return to skills - Knowledge flows and collaboration

- Increased ties to foreign research institutions - Export opportunities for technology

- Return of natives with foreign education and human capital - Remittances and other support from Diaspora networks

From the perspective of the ‘receiving country’, possible negative effects include:

- Decreased incentive of natives to seek higher skills - May crowd out native students from best schools

- Language and cultural barriers between native and immigrant high-skilled workers - Technology transfers to possibly hostile countries, as the information flows

mentioned above take place.

These negative effects may be offset by a number of positive effects to the ‘receiving country’:

- Increased R&D and economic activity due to availability of additional high-skilled

workers

- Knowledge flows and collaboration

- Increased ties to foreign research institutions - Export opportunities for technology

- Increased enrolment in graduate programs/keeping smaller programs alive.

In addition to these country-specific effects, migration of highly skilled professionals has a number of potential global effects:

- Better international flow of knowledge - Better job matches

- Greater employment options for workers/researchers - Greater ability of employers to find rare/unique skills

- Formation of international research/technology clusters (Silicon Valley, CERN)

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The existence of some of the positive effects of this migration on the source economy has led some economists to question the previously accepted policy-initiatives of developing countries seeking to restrict emigration. Stark et. al. believe that prospective migration favourably alters the incentives of a poor country’s workforce to invest in human capital formation and that, as a consequence, policymakers may wish to reconsider before embarking on measures that hinder migration. Mountford’s theoretical analysis provides further support for this line of debate. He reaches the conclusion that

“When human capital accumulation is endogenous and when successful emigration is not a certainty, the interaction between human capital accumulation decisions, growth and income distribution can lead to the result that a brain drain, either temporary or permanent, may increase the long run income level and income equality in a small open economy, and, in certain circumstances, may even be preferable to a non-selective ‘general’ migration”5

Although, in theory, the argument that an ex-ante brain gain may be greater than the ex-post brain drain is valid, it is necessary to test the empirical validity using actual cross-sectional and time-series data. Given the lack of reliable data, no researchers have yet been able to conduct empirical econometric analysis for a single country over a period of time. Beine, Docquier and Rapoport (2001) have, however, used cross-sectional data from 37 developing countries6_{to explore the empirical relationship between the brain drain, brain gain and} growth.

Using OLS multi-variate regression they derive the following results:

484 . 0 ) ln( 144 . 0 ) ln( 554 . 0 ) ln( 336 . 0 ) ln( 2 ) 489 . 0 ( ) 158 . 4 ( ) 804 . 1 ( = − − = − − R epub pop diff mig_i _i _i _i 5 Mountford (1997)

6_{Countries included in their sample: Algeria, Bangladesh, Brazil, China, Columbia, Cuba, Cyprus,}

Dominican Republic, Ecuador, Salvador, Fiji, Ghana, Guatemala, Guyana, Haiti, Honduras, Hong Kong, India, Iraq, Iran, Jamaica, Kenya, Lebanon, Malaysia, Mexico, Morocco, Nigeria, Pakistan, Philippines, South Africa, South Korea, Sri Lanka, Surinam, Thailand, Trinidad & Tobago, Tunisia, Turkey

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355 . 0 ) ln( 161 . 0 ) ln( 075 . 0 ) ln( 016 . 0 444 . 0 ) ln( * 2 ) 207 . 2 ( ) 495 . 2 ( ) 502 . 0 ( ) 868 . 3 ( = + + − − = − − R epub plev mig mig hum_i _i _i _i _i 108 . 0 134 . 0 084 . 0 004 . 0 050 . 0 2 ) 784 . 0 ( ) 855 . 1 ( ) 184 . 0 ( ) 539 . 1 ( = + + − − = − − R rem hum mig grw_i _i _i _i where: trap' opment underdevel ' in being for threshold involves that variable Dummy (1990) size Population (1990) countries OECD with al differenti head per GDP 1990) GDP, (% s remittance Workers' 94) -1992 Average GDP, (% education public in es Expenditur 94) -1988 (Average rate Migration PPP) at 94 -1988 (Average capita per GDP of rate Growth (1994) indicator level education UN = = = = = = = = i i i i i i i i plev pop diff rem epub mig grw hum

As a whole, the signs of the estimates are in accordance with theoretical predictions:

- There is a positive and significant correlation between migration and wage

differentials

- There is a strong and significant negative correlation between migration rate and

population size, suggesting that immigration constraints such as quotas are, indeed, binding

- Although poorly estimated, human capital accumulation appears to be positively

correlated with growth

Given the significance of the results, Beine et. al. contend that “the incentive effects of migration prospects cannot be easily dismissed on empirical grounds, especially when controlling for non-linearity” and conclude that:

“Even though the estimations are not fully controlled for heterogeneity across countries and should therefore be read with caution, the results suggest that the empirical evidence from a large set of countries does not allow to reject the theoretical analysis”

In other words, there is some evidence that the ex-ante brain gain may offset the negative impact of the ex-post brain drain. Further research with improved quality cross-sectional and time-series data will be needed to resolve this debate over the consequences of the brain drain.

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Case Studies

South Africa

South Africa is a country that, despite historically achieving reasonable rates of economic growth and a being at a moderate level of development, faces an economic predicament blamed partly on a severe imbalance in skills and education, and partly on the legacy of its political past. On the whole, international journalists are balanced in their criticism of the country, holding the view that:

“Government deserves high marks for economic policy, but seriously flawed areas – the labour market, lack of skills, inability to control crime – inhibit South Africa’s growth potential in the longer term” 7_.

This has not, however, always been the prevailing view. South Africa provides an interesting case study of a country that has gone through a cycle of being a net-importer of talent to a net-exporter during a relatively short space of time.

Up to the 1960’s South Africa was considered to be one of the ‘developed country’ members of the British Commonwealth, alongside Australia, New Zealand and Canada8_{. At this time, it} was Britain that was becoming seriously worried about the impact of the outward migration of its scientists, physicians and other professionals – many of whom were attracted by favourable living conditions and economic prospects in South Africa.

By the 1980’s, however, the situation had reversed. A new generation of South Africans, many of whom were entitled to British citizenship as a consequence of their ancestral origin, were choosing to leave the country and take their skills elsewhere. Coinciding with this reversal in migration pattern was a population boom within the least educated members of the population. Compounding this, political policies of the “freedom fighters” including “liberation before education,” and inflows of less-educated migrants from regions of political and economic instability in the surrounding region exacerbated the skills imbalance and shortage. Despite moderate GDP growth, GDP per capita declined steadily and income polarity increased sharply. No longer considered a developed country, South Africa moved into the same set of countries as Brazil and many other Latin American states.

7

Innocenti, Nicol Degli; “Feeding off the fruits of austerity”, Financial Times, London (November 2001)

8_{Fortney, Judith; “International Migration of Professionals”, Population Studies, Volume 24, Issue 2,}

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Some consider the brain drain problem to be exaggerated, citing official statistics of 10,000 people emigrating from South Africa in 2000. This data does not, however, take account of those who leave the country without making an official declaration: those wishing to avoid the pile of paperwork that formal emigration entails, to avoid payment of tax, or simply to keep their options open by retaining their South African passports. Unofficial estimates put the number of migrating professionals at three times that stated by the government. A study by the Paris-based Institute for Development Research of emigration to the UK, US, New Zealand, Canada and Australia, who estimated that 233,609 people left the country for these destinations between 1987 and 1997. Of these migrants, 41,000 were professionals.

The precise effect of this loss of skills is difficult to quantify. The impact is both direct, in terms of lost economic production from the migrants themselves, and indirect through lost spillovers, lost employment, and lost tax revenues. Conservative estimates suggest that the brain drain has cost South Africa R67.8B ($8.9B) in lost human capital since 1997, and further retarded economic growth over the same period9_.

The main reasons for migration include crime, low salaries, limited prospects for career advancement and a deteriorating medical infrastructure10_.

The significance of crime as a ‘push’ factor for migration is clear. Despite not having a civil war during its political change, South Africa’s crime statistics showed a higher murder rate (per 100,000 persons) than many countries at war and statistics suggest that Johannesburg has the highest incidence of murder and rape in the world11_{. A recent survey by market} research group FSA/Contact12_{found that 96% of South African emigrants cite fear of} criminal violence as a reason for packing their bags.

While crime is irrefutably the primary driver of South Africa’s brain drain, other factors also contribute. One such factor is the lack of career opportunities for the demographic group who are emigrating. As new labour laws and legislation act to redress the imbalances created by the previous political system, many qualified candidates of European origin are overlooked as employers seek to meet the legal “employment equity” requirements. This results not only in less opportunities and slower promotion, but distorts the job market, resulting in significant wage disparity among similarly skilled workers based purely on race.

9_{Anonymous; “Brain Drain ‘hits growth’”, Financial Times, London (August 2001)} 10

Anonymous; “Brain Drain ‘hits growth’”, Financial Times, London (August 2001)

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Since most emigrants are Caucasian, some South Africans bid them good riddance, imagining that “every departing Caucasian leaves a vacancy for a formerly oppressed black13_{”. The government, however, believes that this exodus of skills is hurting the} economy, and that it is making it increasingly difficult for the country to meet the growth projections of international economists and governments. However, despite these apparent concerns of the South African Government, no policies are being actively implemented to try and stem this tide.

The sectors with the greatest skills shortages are IT and Financial Services. An estimated 350,000 to 500,000 skilled workers are required by these sectors in South Africa, making them particularly vulnerable to the effects of the brain drain14_{. A Price-Waterhouse Coopers} survey revealed that South African banks identify skills shortages as the biggest threat facing their industry. But here pull factors serve as an additional factor, since international organisations are able to offer much higher salaries to skilled workers than the South African banks. As a result, South African banks lose their trained people to international organisations, thereby not only training their competitors’ workforces, but also slowing their growth and expansion projects, as they are unable to staff their ventures appropriately. Other professionals, including doctors, nurses, engineers, teachers and journalists are all seeking to sell their skills for a higher wage and a safer life outside the volatile and crime-ridden country15_.

Although the causes of the brain drain are largely internal, OECD countries’ selective entry criteria that target educated professionals compound the problem. Canada welcomes millionaire entrepreneurs, American hospitals offer vast packages to good doctors, and Australia operates a points system to separate the more productive visa applicants from the less so. A simple, yet effective filter is the requirement that all applicants can afford air tickets to their destination. According to FSA/Contact, 11% of the top managers and 6% of the middle managers that resigned last year did so in order to emigrate16_{. These selective} criteria result in only the best skilled people being lost. This is further confirmed through

13

Anonymous; “White Flight”, The Economist, London (9 Jun 1998)

14

Anonymous; “Lawyer resists South Africa’s brain drain”, Euromoney, London (June 2000)

15_{op. cit.}

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publications such as “The Global Competitiveness Report” who rank South Africa 57th_{out of} 59 countries on the comment “The most talented workers remain in the country.”17

Simple changes and incentives from the Government of South Africa could help to attract South African students abroad to return at the end of their studies. Financial considerations for students who studied abroad are a significant push factor keeping them there. Since South Africa does not have tax incentives for tertiary education, nor salaries that are comparable to international levels, any South African with international debt obligations to cover their studies will only be able to service these through working internationally. The continued depreciation of the Rand versus international currencies adds further difficulties to this challenge. For students who work internationally, after commencing a career and settling in a new country for a number of years the pull back to South Africa dwindles, and they are lost forever, returning only as tourists. Rather than students wanting to stay abroad, they are forced to in order to earn salaries sufficient to cover debt obligations for their studies.

This brain drain effect is not only limited to South Africa. Every year, 23,000 graduates leave Africa for opportunities overseas, mainly in Europe. The emigration of technically skilled people has left 20,000 scientists and engineers in Africa, servicing a population of about 600m. One of the worst examples of the brain drain is Zambia. A few years ago the country had 1,600 doctors, but there are now only 400 in practice. Zambian doctors have migrated to Europe, the US, and neighbouring Botswana, lured by higher salaries. The consequences of the brain drain for development of the continent are discouraging. As Karin Cowan-Louw of the IOM points out:

“There are more African scientists and engineers working in the US than there are in Africa. Long term economic growth cannot be achieved by primarily exporting natural resources:”

Karin Cowan-Louw, IOM

Columbia

Colombia, like South Africa has crime as the major push factor forcing educated and professional Colombians to leave the country. However, as opposed to indiscriminate crime, the major cause of flight is the threat of frequent kidnappings. In the first 6 months of 2000 an estimated 1,559 people were kidnapped and held for ransom in Colombia. The targets of the kidnappings are typically wealthy individuals, who are able to pay the ransom money. As a result, the business leaders of the country have added incentive to leave.

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The threat of kidnapping has been used to further effect by the Armed Revolutionary Forces of Colombia, the country’s largest guerrilla group, who have imposed a tax of 10% on all individuals with a net worth of $1 million or more. Although labelled as a tax, it is really a bribe to prevent kidnapping. Should you not pay, you will be kidnapped, and only released on the payment of a ransom.

The result has been that an estimated 800,000 Colombians, have officially immigrated between 1996 and 1999. In 1999 an estimated 366,000 Colombians applied for non-immigrant visas to the US. Many of them use this opportunity to look for jobs before making their final move. Further undisclosed numbers are from the younger generation leave Colombia on study visas to become educated in the US, and never return.

The population of successful, educated, professional Colombians in the countries of USA, Canada, Spain, Costa Rica, and Australia is growing, as citizens flee for safer locations to live. Part of the evidence that it is the crime, rather than the economy that is forcing these people to move lies in the number of South American companies now being operated from Miami. The increasing flow of knowledgeable South Americans to Miami is making this city an ever more attractive location for the head offices for many Latin American companies. Similarly to South Africa, Colombia ranks 55th_{on the same question regarding the retention} of the most talented professionals.18

India

According to a UNDP report released in 2001 India 100,000 skilled computer professionals to the US alone. It estimates the average cost of providing education to each professional to be $15,000-$20,000, resulting in a total loss of around $2 billion per year.

The Indian Minister of Information Technology estimates that of the 100,000 engineers churned out by Indian institutions each year, 60,000 emigrate – and the problem could be greater than these numbers reflect since the quality of engineers who emigrate is far superior to those who are left behind.

While the UNDP has calculated the direct impact of the brain drain on India, the indirect impact could be much larger. The shortage of skilled labour has been detrimental to the competitiveness of Indian industry. The professional staff turnover in the IT industry is

18

Porter et al, “The Global Competitiveness Report 2000”, Oxford University Press, New York (2000), p280 table 7.03

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reputed to be more than 20%. On average, the cost of replacing an employee runs at about 120% of his or her salary, a devastating sum for a company with such high turnover.

The impact of the brain drain is not, however, limited to high-tech and service industries such as IT, finance and pharmaceuticals. Ripple effects are beginning to emerge in traditional manufacturing industries that are losing quality people to the high-tech industry. The soaring local salary for skilled workers is a reflection of the growing shortage.

‘Pull’ factors making developed countries more attractive appear to be the primary drivers of Indian emigration. For years many ambitious Indian Managers, bankers and high-tech specialists have been heading to the West to build their careers and seek their fortunes. Those who stayed at home had to get by on a fraction of what their compatriots could earn in world’s major financial and technology centres.

Traditionally, the US has been the most sought after destination for the Indian engineers and doctors. More recently, European countries, faced with the negative impact of an aging population and severe shortages of skilled labour have started attracting the Indian Engineers. Germany, through German Academic Exchange Service (DAAD) and the UK, through the British Education Fair have been particularly active in their efforts to market themselves to Indians as destinations for higher education and job-opportunities. Germany has set a target of 20,000 immigrants for high-skilled job-openings. This year, the US increased the H1-B work visa quota from 115,000 to 200,000 in order to woo the Indian IT professionals. Other recent contenders for Indian students include France and Canada, which have been hosting education fairs in different parts of India. Recently New Zealand introduced an annual four-city tour in attempt to beat the others with citizenship opportunities for successful students.

The government of India seems to be encouraging the brain drain as a source of much-needed foreign currency. Their assumption is that emigrants will remain in contact with others back home, facilitate technology transfers and provide a stock of skilled labour to be drawn on if need be. The government has therefore been providing incentives for emigration in anticipation of an eventual reverse migration back to India. Although no official study has been done on this reverse brain drain effect, the unofficial numbers indicate that the effect is insignificant: For every 1000 professionals who leave India every year, only 1 or 2 return.

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Technology (IITs) for providing world-class tertiary education to the best Indian brains. This has resulted in limited education budget being spent on a select few people. Consequently a small percentage of the Indian population is highly educated, while the majority remains illiterate. With increasing globalisation, those with education are being attracted to developed markets, while those with little or no education remain behind working in local companies. It is estimated that more than 75% of graduating class at the IITs were working outside India 5 years after graduation.

Finally, the brain drain in India is exacerbated by distortions in the labour market. It is not uncommon to hear of individuals with a Masters degree earning in excess of $1000 a month, compared with those holding a Ph.D. earning less than $500 a month. These distortions stem from the governments’ archaic Human Resource policies and the result in the inability of the Indian companies to invest in capital-intensive research.

India is in a similar position to South Africa: It too ranks at the bottom of the table in their ability to retain the most talented workers, placing 47th_{out of the 59 countries}19_.

Policy Implications

The is no clear agreement among governments of developing countries concerning the impact of the brain drain on their economic growth. As a result, the range of policy initiatives aimed at addressing the issue is particularly broad.

Kwok and Leland suggest that the problem is one of market failure and as such, cannot be effectively dealt with by the private sector. They believe that appropriate government policies may help and highlight four potential initiatives aimed at dealing with the specific aspect of the problem which concerns students from developing countries getting training abroad and failing to return:

1. Government information of the structure of foreign education

- A potential means of alleviating the informational asymmetry which may result

in students returning to developing countries being ‘under-employed’ as their skills are not accurately assessed

2. Scholarships with return guarantees 3. Subsidies for return

19_{Porter et al, “The Global Competitiveness Report 2000”, Oxford University Press, New York (2000),}

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4. Development of elite educational programs

- A higher quality of tertiary education in the developing country would deter at

least some of the students from going abroad to obtain their education

As highlighted in our discussion of India, there are governments which largely support the view that there is no significant negative effect of a brain drain and may even encourage it by creating elite learning institutes and encouraging foreign companies and countries to actively recruit within their borders. At the opposite extreme, countries have adopted a policy that prevents any emigration from taking place at all. In most cases, governments of developing countries appear to have some concerns regarding the exodus of their skilled professionals and, although they realise that preventing emigration entirely would not be to their advantage, they do take measures to control the flow.

There are both positive and negative issues for recipient countries. On the one hand, their citizens may be opposed to immigration that could be seen to add to any existing unemployment. On the other hand, facing the problem of an aging population and significant skills shortages, many developed countries rely on highly skilled immigrants to assist in driving economic growth. The combination of these issues has resulted in movement towards a policy that encourages immigration of skilled professionals but makes it increasingly difficult for those without education to migrate. These policies tend to exacerbate the problems for developing countries.

Conclusion

The phenomenon of the Brain Drain is neither well understood, nor well researched. The offsetting positive and negative effects for both developing and developed nations add to the confusion in judging whether to promote or try to prevent this migration.

Empirical evidence and research that has been conducted highlights the possibility that positive effects of the ante brain gain are significant but reinforces the theory that the ex-post brain drain has a negative impact on growth in the source country. As illustrated by the three case studies (South Africa, Columbia and India) both push and pull factors are important when considering the drivers of the brain drain.

The lack of understanding of this phenomenon, and debate concerning its effect on developing economies has resulted in a broad range of policies aimed at tackling the

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drain will continue into the immediate future as long as the driving forces remain significant. What remains to be seen is whether or not this drain turns into a gain at some time in the future, and whether people ever begin to return to the developing countries they once left.

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