The remittance flows have further increased to $ 1,726.7 mn by end September 2006 and a 20% increase is expected by the year end. Remittances provide income support to families and opportunities for un-skilled workers to travel, improve skills, earn foreign exchange and engage in self-employment afterwards. It is estimated that about 1.3 mn Sri Lankan migrant workers are employed in different countries in various capacities. The banking sector, the government as well as the country as a whole benefit from worker remittances. The country uses remittances for payment of imports, goods and services while the banks invest remittances in foreign currency bonds issued by the government. That helps the government's foreign borrowing programme. More recently, the government resorted to issuing of foreign currency denominated bonds and attracted a significant part of worker remittances through banks. In addition, the banks also use worker remittances for their foreign currency trades and investments. If not for remittance inflows, Sri Lanka would have been severely affected by the increase in oil prices that raised the oil bill by three times in 2006. The enhanced remittance inflows also reduced pressure in the foreign exchange market and hence on the exchange rate.
Principle III: Remittance services should be supported by a sound, predictable, non-discriminatory and proportionate legal and regulatory framework The implementation of this principle requires special laws and regulations for remittances, while the existing or new laws should be sound, predictable, non-discriminatory and proportionate. Specially, for remittance corridors, (e.g. US-Mexico, US-Brazil, the Middle East-Philippines) both sending and receiving countries should cooperate with each other to sort out legal obstacles in transferring remittances. It is also noteworthy to consider avoiding dangers of over-regulation in remittance transfers. The Money Laundering and Terrorist Financing Acts can also deter some of the cross-border money transfers. The authorities responsible for implementation of these legislation should be mindful of the need to use judgment in dealing with genuine remittances. Principle IV: Competitive market conditions, including appropriate access to domestic payment infrastructures, should be fostered in the remittance industry. This requires the avoidance of exclusivity conditions as imposed on an agent choosing to offer only one remittance service and to promote several direct /indirect access to domestic payment systems in the country. Here too, the central banks have a role to play. The central banks and supervisors should  BIS Review 3/2007  5  work with competitive authorities to ensure consistent approaches and discourage exclusivity conditions. It is also important for supervisors to ensure that money transfer systems are not unnecessarily anti-competitive. Principle V: Remittance services should be supported by appropriate governance and risk management practices Good governance and risk management practices by all stakeholders make remittance service safer and help protect consumers.