Dr. Girish P Pant

The potential to be tapped with caution In order to maximize more gains from remittances, the government must devise the following two-fold policies, namely, receive more remittances through formal rather than the non-formal routes, and augment the levels of remittances by stimulating migrants to invest their savings in productive assets at home

In the second part of the 19th century, emigration played a salient role in alleviating poverty in Western Europe, as about 50 million departed, mostly to America. In those days, whole families moved permanently. Nowadays, most of the migrants are male employees who travel to foreign destinations temporarily, and send a huge chunk of their earnings home. Indeed, these earnings have multiplier effects in raising productivity and reducing poverty, inter alia.

Remittances to developing countries have skyrocketed, from about US $ 25 billion in 1990 to an estimated $ 125 billion in 2004 to $ 325 billion in 2010.

In 2003, workers' remittances (US $ billion) were at 3.2 in Bangladesh, 17.4 in India, 4.0 in Pakistan and 1.3 in Sri Lanka. In 2010, the figures rested at 11.1 in Bangladesh, 55.0 in India, 9.4 in Pakistan and 3.6 in Sri Lanka. Analogously, in 2003, workers' remittances as a percentage of Gross Domestic Product (GDP) stood at 6.1 in Bangladesh, 2.9 in India, 5.8 in Pakistan and 7.1 in Sri Lanka. In 2009, the percentage was 11.8 in Bangladesh, 3.9 in India, 6.0 in Pakistan and 7.9 in Sri Lanka. In all these countries, remittances comprise a massive form of merchandize exports, commercial services exports, foreign direct investment and Official Development Assistance (ODA). Further, both in Bangladesh and Sri Lanka, remittances have been the second-largest foreign exchange inflows after readymade garment exports. Indeed, in 2008 and 2009, remittances became very vital in the poorer countries emanating from global crisis leading to a very sharp curtailment of private capital inflows.

The total remittances' figures of 2010 ($ 325 billion) divulge that India is the top recipient ($55.0 billion) , closely followed by China ($ 51.0 billion) and Mexico ($ 22.6 billion). In fact, India claims nearly 17 per cent of the world's remittances.

Other top recipients include Philippines ($ 21.3 billion) and Nigeria ($ 10.0 billion) which feature at the top in South-East Asia and Africa, respectively. There has been some debate over the potential benefits when skilled and highly skilled people emigrate. The “brain drain“ symbolizes an incisive divestment of manpower for developing countries, and social and economic costs are also involved. In the case of Nepal, there has been a steady increase in semiskilled and unskilled workers migrating abroad in search of employment.

Starting from the late 1980s, Nepalese migrated in copious numbers to South East Asia and the Far East. The cynosure moved to the Gulf countries and Malaysia in

the mid-1990s. Recently, there has been an uptick in people migrating to Japan and Republic of Korea after fulfilling language requirements, among others. In 2010, remittance receipts stood at $ 3.5 billion while the figure as a percentage of GDP stood in 2009 at 22.9 The most up-dated statis tics of the Department of Labor and Employment gives a pellucid picture about destinations of employment. During the first ten months of the current fiscal year, that is, 2010/11 (mid-July to mid-May), the number of Nepalese workers going overseas soared by 17.4 per cent compared to the same period of the last fiscal year, 2009/10. During this review period, 269,540 workers left the country.

Malaysia received 87,829 (32.6 per cent) workers, while Qatar absorbed 74,282 (27.6 per cent). Correspondingly, Saudi Arabia and UAE recorded 52,626 (19.5 per cent) and 33,145 (12.3 per cent) persons, respectively. Other major destinations included Kuwait, Bahrain, Republic of Korea, Oman and Hong Kong.

However, there are also some caveats. A huge chunk of manpower is migrating through non-institutional and private channels. For instance, it has been conjectured that half of the Nepalese working in Qatar come through personal links and other non-institutional channels. More than 90 per cent of the laborers through non-formal avenues utilize counterfeit papers to acquire visas. Another worrying trend is that Nepalese laborers are also

working in countries where a prohibition has been imposed by the Government of Nepal. For example, in spite of a restriction, more than 10,000 women are working as household maids and skivvies in Saudi Arabia.

Hence, it is exigent that the Government concoct effective policies at the highest level to rectify these problems. Also, as adumbrated earlier, in Nepal, remittances as a percentage of GDP is a whopping 22.9 which does not bode well. It may not be a good indicator of economic sustainability.

It is a volatile market—as recent experiences have divulged—because workers are mostly unskilled and are sacked whenever there are economic upheavals. Thus, the financial authorities must formulate viable measures to tackle this issue in case of its occurrence.

In order to maximize more gains from remittances, the government must also devise the following two-fold policies, namely, (a) receive more remittances through formal rather than the non-formal routes, and (b) augment the levels of remittances by stimulating migrants to invest their savings in productive assets at home.

Published on: 6 July 2011 | The Himalayan Times