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How Open Borders Enhance Economic Opportunities for Countries

Tina Savic

Tina Savic

Tina Savic is Project Manager at the Andan Foundation, Switzerland.

Globalization has led to liberalizing the flow of goods, capital, and information across international borders. However, the movement of people across these same borders is still extensively regulated. Even prior to the terrorist attack of 2001 in New York that resulted in 9/11, there was already prevailing anti-immigrant rhetoric in the political discourse of many nations, not just the USA. This means that borders continue to not only be a cause of inefficiencies in the labor market but also a significant source of human suffering and injustice.

Benefits of an open border policy

Despite growing security concerns, a paradoxical situation has arisen in which the political and economic reality presents a different picture, showing that open borders enhance opportunities for countries, which allows liberalization of movement.

Group of immigrants carrying backpacks and walking at sunset

One such reality is the free movement zones, such as the EU. These zones have expanded their reach, enabling more liberal movement across borders. Additionally, a number of bilateral and multilateral agreements have been signed to increase the fluidity of cross-border movement. International trade negotiations have also been geared towards facilitating the movement of people providing goods and services. Furthermore, many developing countries have been pushing for greater access to the labor markets of the industrialized world.

Increased labor market participation

One of the most significant economic benefits of open borders is the increase in labor market participation. When countries open their borders, they allow individuals from other countries to enter their workforce, leading to an increase in the labor supply. Thus, open borders can enable nations to tap into the skills and expertise of a broader workforce, creating a productive environment that fosters growth across various industries. This enhancement in economic activity results in more innovation, investment, and entrepreneurship, which ultimately drives economic growth.

In 2015, Germany opened its borders to refugees fleeing conflict in Afghanistan, Iraq, and Syria. While there were concerns regarding the potential strain on resources and security issues, according to the German Institute for Economic Research, the open border policy has led to significant economic benefits for the country. The influx of refugees has helped to alleviate Germany's labor shortage to some extent and led to a boost in the German economy, with increased demand for goods and services. Of course, the relatively unstructured inflow of migrants was not optimal, which led to higher costs to society than would have been the case if a more structured, targeted approach was made.

If too many unskilled individuals immigrate, or those with skills that are not required in the host country at the time, combined with a high level of social welfare benefits such as in Germany, that can also lead to negative net effects. However, if properly targeted and if social security benefits are limited at the outset and instead focus is set on integration, both the countries and migrants can benefit. Contrary to popular belief, even the countries from where people migrate benefit as there is an increased skills transfer between the two countries, transfer payments to family members back home, and eventually increased investments and trade with the original home countries.

Boost in trade

When people are free to move between countries, goods and services will flow even more freely between nations. This leads to increased trade, which is beneficial to all parties involved. Countries can access products and services that may not be available in their own markets, while businesses can tap into new markets and expand their customer bases. Furthermore, trade is often a significant driver of economic growth.

Increased innovation

As Klaidi Shehi writes, when people from diverse cultures come together, they bring a wealth of unique perspectives and ideas that can lead to new innovations. California’s Silicon Valley, which is now a prominent technological hub and home to some of the world's biggest technological companies such as Apple, Google, Facebook, is an example of how relatively open borders can also be beneficial for fostering innovation and creativity. These technological institutions, alongside many others, have largely succeeded because of the steady influx of immigrants in the region — those from within the USA but also and in particular those who immigrated to the USA from other countries. As explained by UC Berkeley’s Professor AnnaLee Saxenian, from the early 1970s to this day, immigrants have played a vital role in the flourishing of Silicon Valley. Their innovative ideas, skills, and talents have helped to elevate the region to become a global center of excellence in the technology industry.

Foreign direct investment as a driver of economic growth

When countries have open borders, this also encourages foreign direct investment (FDI). With open borders, businesses can easily set up operations in other nations and relocate business managers, sales persons, and technical specialists, which often translates into job creation and economic growth. Investments can come in many forms such as acquiring assets, investing in businesses, establishing new branches or businesses, and providing financial support to business partners to facilitate export activity or similar. In addition, when businesses invest in other countries and move employees there, they bring with them their resources, technology, and know-how, which can be shared with the local workforce. This exchange helps to boost productivity, increase efficiency, and promote competition overall, which is always a net societal gain. India, for example, has been pursuing a policy of open borders for the past three decades. Since implementing these reforms, India's economy has grown at an average rate of 7.9% per annum according to the World Bank, with FDI being a significant contributing factor to this growth. India received USD 51.5 billion in FDI in 2020, making it one of the top recipients of this kind of investment in the world.

How integrating refugees and migrants drives growth

The paradoxical nature of the current situation regarding cross-border movements presents a complex but actually manageable situation. While security concerns must be acknowledged and addressed, it is essential to recognize the economic and social benefits that come with liberal movement across borders, including the positive contributions that refugees and other migrants can make. With the right policies and training opportunities, refugees can bring with them or acquire the skills they need to thrive in their new countries. Similarly, the host countries would thrive as any economy can only reach its full potential for growth when there is no shortage of skilled labor to fill its open positions. The well-managed immigration of refugees in particular always contributes positively to the host country's economy by starting businesses, creating jobs, and filling skills gaps in certain industries.

Canada's Private Sponsorship of Refugees Program is an example of a successful refugee integration program that allows Canadian citizens and organizations to sponsor refugees' settlement. The program has facilitated successful resettlement efforts by providing refugees with the resources they need to thrive in Canada, including language training, job training, and social integration. Other countries should follow Canada's exemplary lead in this regard.

In conclusion, open borders can significantly enhance economic opportunities for countries, especially when it comes to integrating migrants. Policies that prioritize inclusive growth rather than exclusionary approaches can generate economic benefits for both individuals and societies as a whole. The free but well-managed movement of people can lead to an increase in the flow of capital, labor, and ideas between countries, which results in increased productivity and economic growth. This is the ultimate open border system we envisage to implement in the Andan Global City, which will demonstrate in practice the power that can be unleashed when refugees and other migrants are given an opportunity to thrive. What Australia, Dubai, Hong Kong (SAR China), Singapore, the USA, and many others have done before, other countries can and should do. The Andan Global City will aim to implement this method as a permanent feature and pillar of its economic plan and success.

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