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Pakistan’s diaspora bond

A comment on recent diaspora bond interest.

The article by Farhan Bokhari on the diaspora bonds by Pakistan, while bringing much needed attention to the potential of national diasporas, cites $21bln in remittances sent by Pakistanis abroad to their families back home. Unfortunately, this just repeats a common misunderstanding of diaspora, its potential, and possible success of a diaspora bond.

Unfortunately, temporary migrant workers who send the remittances can hardly pass for the larger financial donors needed for a successful bond issue. As such remittances flows cannot  be the sole determinant of the diaspora bond’s success.

By definition, remittances are individualistic going from a sender to a very specific family. These transfers are motivated by the specific household’s needs and working migrant’s abilities to generate sufficient earnings. A diaspora bond is a more complex international capital markets instrument requiring a long-term investment with bond prices significantly above typical labor migrant’s transfer to family. Of course, if a government issuing a diaspora bond can overcome these limitations it may still tap into this new diaspora made up of migrants.

However, in a probable successful scenario the key investors would be composed of the old diaspora, i.e. those with the sense of ethnic belonging but integrated in the host society on a more solid footing by either income or generations of expat life.

There are other proposals for engaging labor migrants’ potential, which should not go undiscovered, including a Migration Development Bank (as we propose here and a shorter write up here). This is true for Pakistan and others with large diaspora, including the post-socialist economies of Eastern Europe and former Soviet Union.

Aleksandr V. Gevorkyan //

The tunes of economic change or why ‘transformation’ and not ‘transition’ in the post-socialist transition economies

by Aleksandr V. Gevorkyan

The aim by itself is a lifeless universal . . .; and the bare result is the corpse which has left the
guiding tendency behind it.
Georg Wilhelm Friedrich Hegel, Phenomenology of Spirit

The 2009 film, How The Beatles Rocked the Kremlin, documented forbidden music’s cultural influence across Eastern Europe (EE) and former Soviet Union (FSU) through 1970-1980s. By early 1990s what captured the minds was the Scorpions’ ballad, Wind of Change.

This “wind” was that of hopeful future, push for national independence, and promise of economic prosperity. By 1992, the disintegration of the socialist economy system brought chaos across newly independent nation-states in Europe, the Caucasus, and Central Asia.

Ironically, the most onerous economic plan was the EE’s & FSU’s transition from planned economy to romanticized free market. Yet, despite the independence premium in national policy and evidence suggesting recent strong economic growth, post-socialist societies are still to achieve the ideals of those reforms.

The EE and FSU collectively represented up to 15 percent of the world’s economy in the 1980s. By 2016, they represented 6 percent of the global economy. Russia, the largest in the group, averaged 3 percent, with the  remainder going to the smaller FSU and EE economies (according to The Conference Board’s Total Economy Database).

Post-World War II societies in the EE saw massive industrial growth. Their relatively loose controls, trade links with Western Europe, and sustained private agriculture was distinct from the FSU-like socialism. By the early 1980s the socialist economic model began to show signs of structural weakness as productivity declined worsening the competitiveness of the EE’s semi-open economies. Tamás Vonyo (2017) offers new empirical evidence suggesting that by then the declining investment, despite tapping international capital markets, in industrial and technological upgrades, largely caused the inefficiency.

By the early 1990s more tangible changes replaced political announcements. Social costs were deemed to be collaterally minor as opposed to a greater goal of market prosperity (an odd parallel to the spirit of the socialist past). Those EE & FSU economies with significant dependence on the socialist common market, the Council for Mutual Economic Assistance, suffered the worst macroeconomic and social impacts in the “transition.”

Through mid 1990s life expectancy dropped, the system of state-provided basic healthcare services, education, and other social support collapsed as unemployment skyrocketed with state-funded enterprises shutting down and hyperinflation pushing some into barter, income and wealth inequalities climbed up. In his 2009 book From the Soviet Bloc to the European Union, Ivan Berend voiced reservations over the haste to declare absolute victory [of “transition”], citing population displacement and emerging social pressures, unintentionally masked by the economic growth often dependent on the integration within EU’s supply chain.

What has emerged out of the ruins of the formerly socialist system is often termed as “varieties of capitalism.” Echoes of the dreadful privatization have shaped modern institutional structures across the region. Recent data suggest that only a handful of countries reached the 1989 per capita income levels as of 2000. Income inequality, social polarization, as measured in World Bank data, has become far too pronounced. Questions about transparent governance, sustainable spending, rise of populist movements, inconsistencies in judicial reform and, in the EE’s deviations from the European Union’s general principles, and other examples seem to be at odds with the melody of change some three decades ago.

The smaller is the country the greater is the challenge of sustaining broader economic activity, attracting competitive foreign direct investment, avoiding underdevelopment, and securing social inclusion; all without falling into dependence on the earlier mentioned expatriate remittances or debt pile-up. This has been highlighted in recent studies on transitional periphery, as those smaller economies are often identified in literature.

Objectively, today, the post-socialist societies are deeply transformed culturally, politically, and in economic terms and continue to evolve. Yet this transformation and its eventual outcomes are firmly connected with the legacies of the socialist era and intensity of the 1990s turbulent variants of the reforms.

Perhaps, a more evolutionary approach to macroeconomic and public policy of the 1990s may have proven to be more prudent.

We will never know.

However, how the ‘transition economies’ learn and interpret this complex collective history in their present conditions will shape their individual future. That is, also, why there is a need to objectively accept the past and pragmatically seek balance in the present.


Dr. Aleksandr V. Gevorkyan is the author of Transition Economies: Transformation, Development, and Society in Eastern Europe and the Former Soviet Union  and Associate Professor of Economics at the Department of Economics and Finance of the Peter J. Tobin College of Business at St. John’s University.



Some quick (and really draft) notes on the #DiasporaBond idea that’s been discussed recently. The notes are based on my 2008 paper (see below). These are draft notes outlining general principles of a potential program – more certainly can be added.

Aleksandr V. Gevorkyan (July 31, 2018)

  • DiasporaBond in strict sense is a financial debt instrument, by which a country borrows from its expatriate (diaspora) community (affiliated by ethnic, religious, cultural, or other characteristics).
  • BENEFIT-1: a small economy with large diaspora is able to tap into international capital markets, otherwise closed off to the country or outcompeted by similar but stronger economies (what’s happening in #EmergingMarkets these days).
  • BENEFIT-2: borrowing at patriotic discount, i.e. borrowing at interest rates lower than would be borrowing in a competitive.
    • The reason: “diaspora” is assumed to be more altruistic in its intentions towards historical homeland and is willing to buy-in at a discount driven by patriotic motives
  • BENEFIT-3: potentially a substantial economic development booster

And some points to “consider”:

  • As a capital market instrument with longer maturity than short-term loans, DiasporaBonds are best to finance long-term projects
    • infrastructure (for prosaic reasons, roads, sewers, water supplies, energy); education & healthcare (building new facilities, revamping existing); capital financing for new residential development; capital financing for new industrial sectors / techno parks development
  • DiasporaBond is non-inflationary, this means it is not intended as consumer or business credit facility
    • Unless, of course, a host of serious macroeconomic conditionalities and strict checks/balances system are enforced.
  • On the latter point, conditions are appropriate as DiasporaBond financing would normally go towards areas in the national economy otherwise not appealing to a committed global investor.
  • Regulation: with all the usual players in place (Min Finance, Central Bank, investment bankers, etc), there perhaps should also be a State – Diaspora Supervisory   Board in some form – as an oversight, bringing Diaspora expertise, and advisory group – with a clearly defined (and limited) mandate.
  • WHO-1: DiasporaBond cannot not solely target labor migrants (or recent expatriates). Trends in remittances transfers are not indicative of the diaspora’s interest in purchasing a long-term sovereign bond at a discount rate with unspecified risks of repayment
  • WHO-2: Part of the DiasporaBond program’s success would be conditioned on availability of range of options for members of the “old” and the “new” diaspora in a range of denominations
  • WHERE: a DiasporaBond program requires clear identification of the applicable jurisdiction for any disputes and any other obligations to lender/borrower
  • DiasporaBond Exchange Program—may help individual investor to donate their bonds as charitable contributions to school, universities, hospitals, etc as a way of boosting endowments of the latter. Additionally, an exchange mechanism may be created to facilitate further financial market deepening.
  • Reaching beyond altruistic diaspora with the DiasporaBond requires solid presence in the international financial markets, macroeconomic and institutional predictability.
  • DiasporaBond may[!] lead to initiation of more stable large scale capital funding for a small open economy from a more diverse investor pool.
  • DiasporaBond is not a guaranteed success. Promoting and competing for diaspora investment interest requires massive dedicated effort and soft-capital concentration.


Gevorkyan, A.V. 2008. Fiscal Policy and Alternative Sources of Public Capital in Transition Economies: the Diaspora Bond. Journal of International Business and Economy, 9(2): 33-61.

Most definitive reference on the topic:

A migration development bank that works

There are two critical factors to the contemporary phase of global labor migration: diaspora and remittances (small foreign currency transfers from host to home economies). Both can be the forces contributing to and fostering macroeconomic development in (usually) structurally weaker home (sender) economies.The way to do it?

In a recent essay entitled “Toward a Migration Development Bank for Transition Economies” Otaviano Canuto and I try to rationalize some optimal solutions. Continue reading

The legends of the Caucasus…

In a recent paper, in the International Business Review, entitled “The Legends of the Caucasus: Economic Transformation of Armenia and Georgia”  I attempt to evaluate the past two decades of macroeconomic, business, and institutional transformation in the two small open economies.

All standard clarifications on the imperfections of the post-socialist transition aside, I argue, that the two are open to international business that follows the local context.

Continue reading

Sorting through “emerging” financial markets

Wrapping up this year’s Eastern Economic Association Conference, where I organized and chaired a session entitled ‘The perils of financial deepening and post-crisis development in emerging markets‘.

The panel addressed current opportunities and risks to [what we’ve become accustomed to refer to as] emerging economies given their increased involvement in the international capital markets & commodity trade, sovereign borrowing, and exchange rate stabilization strategies in the light of economic uncertainty exacerbated by sporadic capital flows, migration, trade imbalance, and a host of other factors, climate change included. Continue reading

Daron Acemoglu at Armenian Economic Association 2013 meeting;

Hi, follow this link for keynote address by Prof. Daron Acemoglu of MIT at the Armenian Economic Association’s meeting in October 2013.  AEA 2013, keynote: Daron Acemoglu, MIT

I followed up with a question on South Korea’s experience and transformation in Eastern Europe. Why such a question? The theme comes up routinely in almost any informed discussion centered around economic development. Check it here.

Overall, there were some really interesting points in the keynote presentation and in the Q&A and during the entire conference.