Dr Vikash Raj Satyal

Of late, ‘Remittance’ seems to be the answer to every query related to economics in Nepal. It seems so at the current juncture. Recently, the Central Bureau of Statistics made public two important findings.

One was the Nepal Living Standards Survey (NLSS) 2011, according to which poverty has decreased from 30.9 percent to 25.4 percent in five years. The second was the Population Census 2011, which found that the population growth rate had encouragingly declined to 1.4 percent from 2.25 percent ten years ago. These are remarkable findings.

Most researchers found it difficult to digest the news of such a dramatic decline in poverty in a period of political instability, when industries were shutting down, the economy was in the doldrums and the business barometer of NEPSE nosedived. Some politicians are a little worried about the slowing population growth in their constituencies.

As demographics change, they fear losing their traditional vote banks. But policymakers and donor community are happy at the news of slower population growth as it reflects their success in education and health programs. General public, including the bulk of the journalists, are asking: What is the secret behind such a miracle? Does it point to a definite mantra of success or it is just ‘nonsense correlation’, i.e. theory that progress is positively correlated with chaos and anarchy. The general public wants to know.

What they have heard so far from experts at the Planning Commission and eminent economists and sociologists is adding, not to clarity, but to confusion. However, the government researchers from CBS, guided by the World Bank, have provided, rather predictably, the same readymade answer: Remittance.

Remittance has become a catchword in the last few years as more and more Nepalis leave the land for the Gulf. The share of remittance is now over 23 percent of GDP. This share of remittance in GDP stands out when compared to other developing countries, according to the World Bank´s Fact Book.

The other question people frequently ask: Is remittance beneficial for the country? Has it helped improve vital sectors like health, education and industries and to usher in sustainable development?

The top remittance earners in terms of its share of the GDP--Tajikistan, Tonga, Haiti and Lesotho--are all poor countries. Unfortunately, right lessons have not been derived from their fate.

Whatever we earn from remittance, the money is not being diverted into development of large projects or for development of vital infrastructure. Nor it is going into good social causes. In the last eight years our Human Development Index progress has crawled along, from a value of 0.44 to 0.45; comparably, other South Asian countries have made remarkable achievements without remittance. It also indicates negligible influence of remittance in health and education.

If we look at the trade deficit we find where all our remittance money is disappearing. In the last decade trade deficit has increased alarmingly, as has the remittance (see the graph). The trade deficit was 47 percent of GDP in 2010/11 and Gross Consumption was 93 percent of GDP. This hints large spending in consumption of imported foods, clothing and luxury items. There is no cause to celebrate this sorry state of affairs.

Accompanied to the unproductive use of remittance is the sad story of those who have had to keep their land and other valuable asset in bank to pay the manpower companies, to cover travel costs and, when they get into trouble abroad, to take care of themselves and make the return journey. The remittance is also closely linked to human trafficking, child labor and labor drain. The question is: How long can we rely on it? For how long will the same sad story be repeated and how long will the planners, researchers, economists, sociologists, politicians still be in a thrall of remittance, the supposed cure of all ills?

Published on: 15 November 2011 | Republica