Diaspora Remittances as a Tool of Economic Diplomacy for Labor-Sending States

Background: Labor-sending states in South and Southeast Asia, including the Philippines, Bangladesh, and Nepal, have increasingly incorporated diaspora remittance flows into formal economic diplomacy strategies amid record global remittance volumes reported between 2021 and 2024. Aims/objectives: This research examines how governments leverage diaspora engagement and remittance-linked financial instruments to advance bilateral economic relationships with major host countries. Method: A qualitative comparative analysis was conducted using national remittance policy frameworks, bilateral labor agreements, and interviews with diplomatic officials responsible for diaspora affairs in two case countries. Results: Findings show that diaspora bonds and remittance-backed financial products have provided governments with alternative foreign exchange sources, while diplomatic missions abroad increasingly function as service-delivery hubs for migrant worker welfare, strengthening soft power and bilateral goodwill with host nations. However, dependency on remittance flows has also exposed sending states to vulnerability during host-country economic downturns and policy shifts on migrant labor. Conclusion: The study concludes that diaspora-centered economic diplomacy provides meaningful leverage for labor-sending states but requires diversification strategies to reduce structural dependency. Strengthened bilateral labor mobility agreements and migrant protection frameworks are recommended to sustain this diplomatic instrument over the long term. Policymakers in sending states are therefore encouraged to treat diaspora engagement as a durable strategic asset rather than a short-term fiscal cushion.

Keywords: diaspora diplomacy, remittances, labor migration, economic diplomacy, soft power