Economic and Social Impact of Massive Refugee Populations on Host Developing Countries, as well as Other Countries: A Quantative Assessment on the Basis of Special Case Studies

EC/48/SC/CRP.40

ECONOMIC AND SOCIAL IMPACT OF MASSIVE REFUGEE POPULATIONS ON HOST DEVELOPING COUNTRIES, AS WELL AS OTHER COUNTRIES: A QUANTITATIVE ASSESSMENT ON THE BASIS OF SPECIAL CASE STUDIES

I. INTRODUCTION

1. The economic and social impact of large refugee populations on host developing countries has been the subject of attention within the international community since the 1970s. UNHCR's Executive Committee has recently taken a keen interest in this and related issues, such as international burden-sharing. A comprehensive conference room paper looking closely at these impacts and at the results of international responses was presented to the Standing Committee in January 1997 and should be read in conjunction with this paper.¹ United Nations Secretary-General Kofi Annan has also included mitigating the social and environmental impact of refugees in host countries as a humanitarian imperative in his report on the causes of conflict and the promotion of peace and sustainable development in Africa.² In his report, the Secretary-General enumerates deforestation, the overstretching of local facilities and illicit small arms trafficking, as examples of the negative impact of massive refugee populations on hosting countries. The most dramatic example, in recent years, is Guinea, a country with the highest per capita refugee population in the world and which continues to receive refugees, most recently from Guinea-Bissau.

2. The issue has therefore received considerable attention, and several studies, often showing both the negative and positive impact, have been published. This paper will not repeat the review contained in the above-mentioned paper presented to the Standing Committee in early 1997. It will instead concentrate on cases of host developing countries where attempts have been made to assess, in a quantitative manner, the economic and social impact of large refugee influxes. The paper also puts forward some recommendations for further consideration of this issue.

II. SPECIAL CASE STUDIES

3. Though many studies have attempted to quantify the impact, both economic and social, of large refugee influxes (for example, Pakistan, Islamic Republic of Iran, etc.), the case studies described below have been chosen to exemplify different methodological approaches to the issue. As expected, these studies show that the negative impact of massive refugee populations outweigh the positive aspects of their presence in host developing countries. These case studies also illustrate the difficulties in trying to quantify the impact of a multi-faceted phenomenon which affects a host area in a highly complex manner. Finally, the assessments mentioned below show the variation in methodological approaches to quantification of the impact. In the more academic assessments, the negative impact has been quantified alongside the positive one and pertinent calculations on costs and benefits have been made.

A. Central America

4. In the early 1990s, the International Conference on Central American Refugees (CIREFCA) provided seven countries in the region with an opportunity to assess the impact of uprooted populations and to share these analyses with the international donor communities in an effort to obtain the necessary support to adequately address their needs. Since the seven CIREFCA-convening countries (Belize, Costa Rica, El Salvador, Guatemala, Honduras, Mexico and Nicaragua) counted on the support of both UNDP and UNHCR in this endeavour, developmental concerns were often, but not always, incorporated in the diagnostic studies and in the proposed strategies and projects.

5. The most serious attempt to quantify the impact of forced migrations on the Central American economies and societies was carried out in 1989. The study,³ funded by UNDP and coordinated by the Economic Commission for Latin America and the Caribbean (ECLAC), was undertaken by a group of Central American social scientists and economists, and presented during the First International Meeting of the CIREFCA Follow-up Committee, held in June 1990 in New York. The study, however, provides quantitative data mostly about the economic impact and suffers from the same methodological drawbacks mentioned above. Although the study looks at both countries of asylum and countries of origin (where research on the impact of internal displacement was also included), the discussion below will only refer to countries hosting refugees.

6. The CIREFCA document looks at and provides figures for unemployment rates among refugees, the increase in local production resulting from the massive presence of refugees and the volume of fiscal resources allocated by host Governments to the provision of social services and assistance. With respect to the latter, the study shows that the volume of financial resources allocated by host Governments to direct assistance to refugees was minimal, while those disbursed, both directly and indirectly, for the provision of social services (education, health and housing) were significant. As the authors state, it is impossible to accurately reflect the amounts actually spent by Governments in the provision of such services to refugees since the respective budgets are not disaggregated by category of recipient.

7. One of the few countries where such disaggregation exists is Belize. In this country, at one point hosting the largest per capita refugee population, it was found that the Government destined only 1 per cent of its health budget and 1.5 per cent of its education resources to refugees. If other immigrants are included, the expenditure in health services, for example, increases to 3 per cent of the health budget. In Belize, the 22,000 refugees produced annually some $ 8 million and generated a demand in goods of $ 6 million. As expected, the findings point to a negative impact on government-sponsored social services, but an increase in agricultural and industrial production, and in the demand for goods. The difference between increased refugee production and demand for goods shows the existence of savings and/or remittances.

8. Regarding the demand of goods generated by the massive presence of refugees and, consequently, the effect on the economy, the authors only found inconclusive evidence. They tried to quantify this effect on the production and demand of goods through two computerized models (one for asylum countries and another for countries of origin). These models attempt, through various means, to evaluate the impact of a large refugee presence on income distribution, government finances and foreign trade.

9. The authors used mostly official records and only those which proved to be more reliable and consistent. However, they point to the following constraints on their efforts to quantify the social and economic consequences of large refugee populations on host countries:

(a) Statistical data in Central America is, in most cases, highly deficient, dissimilar and dispersed;

(b) Some of the data has an ambivalent political meaning and, therefore, Governments are not always ready to share it;

(c) As a great of number of the refugees were not recognized as such or lacked documents, quantifiable data is not forthcoming and oftentimes inexact.

B. Malawi

10. In 1990, close to 10 per cent of the population of Malawi was constituted by refugees, mostly from Mozambique. This refugee population absorbed substantial government resources which had originally been intended for development purposes aimed at helping the poorest strata of Malawi's population. Because of the heavy burden imposed on the country, the issue was highlighted during the World Bank Consultative Group Meeting on Malawi, held in Paris in May 1990. For this purpose, a report was jointly prepared by the Government of Malawi, the World Bank, UNDP and UNHCR, based on an estimation of uncompensated public expenditures carried out in 1988.⁴

11. The report on The Impact of Refugees on the Government Public Expenditure Programme concluded that substantial direct and indirect expenditure had an impact on the Government's recurrent and capital investment costs in essential social and infrastructure sectors. Therefore, extrabudgetary resources were urgently needed to compensate the Government's diversion of funds towards refugee-hosting areas. Based on this assessment, an "Emergency Assistance Programme" amounting to $ 25 million was put forward to ameliorate the adverse impact of refugees on the economy during 1990 and 1991. Other participants in the Consultative Group Meeting, such as the European Community, supported the proposed methodology to address the negative impact of refugees on development.

12. The proposed assistance programme had two basic objectives. On the one hand, it aimed to restore public goods and services to the same level and standard as before the influx of refugees. On the other hand, the programme was designed to strengthen the capacity of the areas hosting refugees. The second objective meant that the assessed $ 25 million cost went beyond addressing the impact of hosting refugees and into capacity-building efforts in the refugee-affected areas.

13. A methodology was devised to estimate public expenditures arising from the massive presence of refugees and which had not been compensated through the humanitarian assistance programmes of UNHCR and others. This expenditure review looked at direct public expenditures made by the Government out of budgetary resources in support of refugee programmes and at the indirect costs arising from the deterioration of Malawi's infrastructure and the crowding out of Malawians from government-provided goods and services. Although considered as extremely high, the social welfare losses, however, were not taken into consideration because of difficulties in quantifying them and donors' resistance to finance compensation for such losses. Finally, the impact of refugees on the private or parastatal sectors was not reflected in the estimation.

14. As in the case of CIREFCA, donors were asked to provide additional grants to Malawi over and above existing and expected commitments of project and adjustment aid. In both instances, for a variety of reasons, the requested additional grants did not materialize. Instead, the more strictly humanitarian proposals were accepted and funded (usually through UNHCR and non-governmental organizations (NGOs), leaving the host countries with unfunded proposals related to the rehabilitation and development of refugee-affected areas.

C. United Republic of Tanzania

15. The complexity of the impact of massive refugee flows into a developing country has been recently demonstrated in the United Republic of Tanzania, where large numbers of refugees from Burundi and Rwanda arrived in 1993 and 1994, respectively. It is also in the United Republic of Tanzania where greater efforts have been made to quantify the effects of the phenomenon in order to take necessary measures to limit negative impacts. These efforts have ranged from governmental assessments (supported by the United Nations system), to donor-sponsored studies to academic research. These assessments have mostly looked at impact on the environment, government services and infrastructure, the local economy and food security.

16. Soon after thousands of refugees from Burundi and Rwanda arrived in late 1993 and early 1994 respectively, the Government of the United Republic of Tanzania decided to form a Task Force to assess the negative impact of the refugees on the natural resources, local population and social and economic infrastructures. Because of its tradition as an asylum country, the United Republic of Tanzania was well aware that early recognition and assessment of the impact was a first step in sensitizing the donor community and soliciting donor support for refugee-affected areas. An assessment was carried out in September 1994, in collaboration with United Nations agencies.⁵

17. The assessment report of the Task Force was based in five sectoral studies undertaken by United Nations agencies, at the request of the Government of the United Republic of Tanzania. FAO, UNDP, UNHCR, UNICEF, WHO and the World Bank supported the Government in the rapid assessment of the negative consequences of the massive influxes of refugees. The report provides basic information on the affected areas prior to the arrival of the refugees, thus showing the remoteness and poverty of these regions. Despite this, no assessment or discussion of the positive impact of the refugee presence was set forth in this document, the main purpose of which was to make recommendations of actions to be undertaken to mitigate against future damage.

18. The United Republic of Tanzania report presents some quantification of the impact, particularly in the environmental sector (for example, estimates of the consumption rate of fuel wood). Yet, because of the rapidity of the exercise, most of the impact was based on apparent visibility and rough estimations, with many issues warranting further investigation. To redress the assessed impact, proposals amounting to Tsh 4,338,108,706 ($ 8.3 million) were put forward for the two regions (Kagera and Kigoma). A subsequent UNDP/UNHCR programming exercise carried out in October 1995 came up with a figure of $ 12 million for a multisectoral programme.

19. The assessment presented by the Government of the United Republic of Tanzania resulted in subsequent refinements of the estimates. These studies further developed some of the indicators measuring the impact. Price increases affecting basic commodities were calculated, the overstretching of services was quantified and the positive impact of the large refugee presence began to be mentioned. Project proposals based on these assessment missions were put forward by United Nations agencies and NGOs, such as FAO⁶ (for the productive sector), UNEP/Habitat⁷ (for environmental concerns) and CARE⁸ (also for the environment). Because of the regional nature of the crisis, regional strategies began to be proposed, leading to assessments in other countries as well.⁹ Some of these were presented at a donors meeting held in Geneva in January 1996, where the joint UNDP/UNHCR initiative was presented and endorsed by the donor community.

20. More recently, assessments of the differences of the impact, both negative and positive, at a more micro level have been conducted by academic researchers. Through participatory research carried out in 1997, a detailed assessment of the costs and benefits associated with the refugee influxes into the United Republic of Tanzania, and of the distribution of those costs and benefits amongst the host population, is presented in a systematic fashion in one of these academic studies.¹⁰ These findings point at the unevenness of impacts, between regions, villages, population segments and sectors, thus leading the author to conclude that the cost/benefit approach is too simple. Her findings corroborate the combination of negative and positive impacts, as well as the difficulties in quantifying, in an objective manner, those effects.

21. The United Republic of Tanzania experience shows the importance of an early assessment of the impact of refugees, of the involvement of specialized agencies in the technical estimation of this impact and of including in programme proposals small-scale rehabilitation and "preventive development" projects benefiting the local population and refugees alike. The latter (as included in the UNDP/UNHCR Initiative for the Great Lakes Region) means that the proposed short-term programme cannot be used as a financial estimation of the impact, since the programme was not meant to bring the refugee-affected regions back to the situation ex-ante. Instead, the programme was designed to strengthen the absorption capacity of the refugee hosting areas and to have a direct impact on poverty reduction and local capacity-building, hence increasing the financial contribution to be made by the international donor community.

22. A comprehensive impact assessment was also carried out, with UNDP support, in the Democratic Republic of the Congo in August and September 1995. Impact assessment studies have continued to be undertaken, mainly in the United Republic of Tanzania and the Democratic Republic of the Congo. These have been done, inter alia, by CARE/ODA, FAO, the German Agency for Technical Cooperation (GTZ), the International Fund for Agricultural Development (IFAD), UNDP, UNEP/UNCHS and UNHCR. Most of these have looked at impact on entire regions and concentrated on the macro level.

III. CONSTRAINTS AND FUTURE APPROACHES

23. The three cases reviewed above exemplify recent attempts to quantify the economic and social impact large numbers of refugees can have on hosting developing countries. They are, by no means, an exhaustive sample. Similar efforts have been carried out in other countries which have had, for many years, to host large refugee populations. The cases of the Islamic Republic of Iran, Nepal and Pakistan could have easily been discussed here. These and the reviewed cases, however, show the results and constraints of recent assessments.

24. The cases of Central America, Malawi and the United Republic of Tanzania point to the following limitations in assessing, quantitatively, the impact of refugees on developing countries:

(a) Availability and quality of data. To adequately assess the impact refugees have on a host society or region, baseline data on economic and social indicators prior to the arrival of refugees is needed. Unfortunately, many developing countries lack systematic, reliable and updated data on certain indicators or sectors, particularly for remote areas, such as the ones refugees usually move into. Also, Governments rarely disaggregate data concerning the provision of social services according to beneficiary, unless those services provided to a particular population category (such as refugees) are subsidized by donors. Furthermore, it is difficult to measure long-term benefits which may result from expenditures on education and social services allowing refugees to contribute to the economy of the host country. Finally, the political ambivalence of some of the data detracts from the credibility of some evaluations;

(b) Assessment bias. Depending on the main objective of the interested party, the result of the assessment will vary. Governments are understandably interested in financial compensation for the negative consequences of hosting large numbers of refugees. As a result, the benefits accrued from the refugee presence are usually not factored in their assessments, despite the fact that, in most situations, the negative impact still outweighs the positive. Also, in view of time limitations and resources, government-sponsored assessments invariably can only establish the general impact on the population at large and not the differences in impact underscored by the more detailed, academic research carried out in the United Republic of Tanzania in 1997;

(c) Sectoral bias. Because of the apparent visibility and availability of measurable indicators, the impact in certain sectors has received more attention in the assessments. Infrastructural damage, environmental concerns and the overstretching in the provision of social services have been more easily quantified. The impact on local economies (both positive and negative) and the social consequences of massive refugee populations (such as the increase in delinquency, prostitution, etc.) have received less attention, because of the difficulties in assessing the issues, and the longer-term approaches needed for a satisfactory solution.

25. The case studies also point to certain factors which must be taken into account for future attempts at evaluating the impact of large refugee populations on hosting countries:

(a) Costs. Properly assessing the economic and social impact of refugees in developing countries is a costly affair. Large amounts were spent by international organizations in the technical estimations mentioned above, with some of these studies proving to be, in the end, not cost-effective. As the above cases show, the response of the donor community to the proposals based on the impact assessments has not been that positive;

(b) Purpose. The purpose of assessing the impact should be made clear to all parties concerned. Depending on whether affected countries are looking for prevention, rehabilitation or compensation (or a combination of these), the assessments will have to be conducted accordingly;

(c) International fora. Affected Governments must consistently present their assessments in the various fora where development needs are set forth. Malawi is one of the rare exceptions where their assessment of the refugee impact was formally presented at a Consultative Group Meeting organized by the World Bank. In most other cases, the absence of these assessments in the portfolios presented at UNDP-sponsored Round Tables or World Bank-led Consultative Group Meetings is only too common;

(d) Balance. Positive and negative impacts should be estimated simultaneously, and thus present a balanced assessment. At the same time, the financial support requested to address some of the negative impact must take into account not just the humanitarian assistance already flowing into the refugee-affected areas but also some of the positive impact;

(e) Responsibility. As the United Republic of Tanzania case shows, affected countries should be responsible for taking the initiative of assessing the impact, with the support of specialized agencies which have the technical expertise to carry out these assessments. It is evident that UNHCR, despite its mandate to provide international protection and assistance to refugees, does not have the capacity to undertake such estimates. It can, however, play a catalytic role in facilitating such studies as done in the past (for example, Malawi, Great Lakes region of Africa, etc.);

(f) Innovation. Modern technologies and approaches might improve the efficiency and speed of making assessments. Satellite-imaging can now provide Governments with "before-and-after" images showing environmental changes, crop production and population movements. United Nations agencies are establishing better indicators for assessing environmental management, including in refugee-affected situations. Other sectors are also receiving similar attention in this respect. The United Nations Office for the Coordination of Humanitarian Affairs (OCHA) has been working to improve the capacity of the United Nations system for assessing and monitoring the impact of sanctions.¹¹ The methodology and indicators proposed by OCHA could be used as a basis for assessing the impact of refugees on host developing countries and thus contribute to enhanced responses from the humanitarian and development communities.

(g) Funding. (Additional) Funding of impact-related projects in refugee hosting countries is one of the fundamental issues that needs to be addressed. Based on the lessons learnt from the past experience (including Pakistan and the Islamic Republic of Iran), new funding' windows should be explored to address this problem in a more predictable and equitable manner.

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1 Social and Economic Impact of Large Refugee Populations on Host Developing Countries (EC/47/SC/CRP.7).

2 Annan, Kofi. July 1998. The Causes of Conflict and the Promotion of Durable Peace and Sustainable Development in Africa: Report of the Secretary-General (A/52/871-S/1998/318).

3 Montes, Segundo et al. El Impacto económico y social de las migraciones en Centroamérica. (CIREFCA/CS/90/INF.3)

4 Government of Malawi, World Bank, UNDP and UNHCR. April 1990. Report to the Consultative Group for Malawi on the Impact of Refugees on the Government Public Expenditure Program.

5 United Republic of Tanzania. September 1994. Assessment Report on the Impact of Refugees on the Local Communities in Kagera and Kigoma Regions.

6 Food and Agriculture Organization of the United Nations. August 1995. Tanzania. Refugee Affected Areas Development Project: Identification/Formulation Mission Report (Final).

7 UNEP/Habitat Task Force on the Continuum from Relief to Development. May 1995 Proposals for Measures to Mitigate the Impact of Refugees on the Environment and Settlement and Contribute to Sustainable Development, Kagera Region, Tanzania: Report of the Rapid Appraisal Mission.

8 CARE International UK. December 1996. Rapid Assessment for Responding to Environmental Impacts from Refugee Influxes in Kigoma Region, Tanzania.

9 For example, UNEP/Habitat's Strategic Action Plan for the Great Lakes Region of Africa (Rwanda, Burundi, Tanzania, Uganda and Zaire), drafted in December 1995, and The UNDP/UNHCR Initiative in the Great Lakes Region, also drafted in late 1995.

10 Whitaker, Beth Elise. August 1997. Refugees, Hosts and the Struggle for Resources: The Impact of Rwandan Refugees on Tanzanians in Karagwe District. Unpublished manuscript.

11 OCHA. October 1997. Toward More Humane and Effective Sanctions Management: Enhancing the Capacity of the United Nations System.