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Harnessing the diaspora for sustained development

Year of Publication: 4 January 2013 |The Himalayan Times

Publication Type: NEWS

Published by: CESLAM

Birendra Kumar Budha

Diaspora, persons who have migrated and whose descendants maintain a connection to their homeland, are potential source that Nepal can harness for economic development. About 982,000 people have emigrated from Nepal up to 2010, states the Migration and Remittances Factbook, 2011 of the World Bank. Unrecorded migrants, children and grandchildren boost the number sharply, although there are no good estimates particularly due to illegal emigration, open border and high integration of Nepal with the Indian economy.

Although many, perhaps even most Nepalese diaspora, view their homeland warmly, they left for a reason. There are a number of push factors such as poor political and economic governance, unemployment and pursuing higher education blended with the pull factors of higher labor demand and higher wages spurring emigration. Moreover, those Nepalese who pursue advanced degrees in developed economies, especially the traditionally immigrant nations such as the United States, Canada and Australia, fail to return after graduation. Nepalese diaspora members can make contributions to their homelands in financial and social aspects. Members of this diaspora sent about Rs. 359 billion in remittances to residents of their home at Nepal in 2012. The true size of remittances, including unrecorded flows, is believed to be significantly larger due to the open border with India and network of informal money remitting channels. Remittances are a large source of funding: they are close to 23 percent of the GDP, four times larger than official development assistance and 66 percent of foreign currency earnings. Even small fluctuations in remittances can pose macroeconomic challenges to Nepal. Even though remittances has provided lifeline to the poor in Nepal, reducing the cost of sending remittances and channeling these to productive uses pose a key challenge.

Bitter to say, skills and entrepreneurial capabilities of the diaspora are lost to the nation and the tens of billions of dollars they do not send home but save outside Nepal each year. Persuading these emigrants and their offspring to return home is generally a vain hope. Experience from many of the government initiatives implemented by developing countries in Africa, Asia, and Latin America have also demonstrated that it is difficult to promote return, and particularly permanent return. It is the urgent need for Nepal to initiate efforts to tap the skills and resources of emigrants and their offspring. Prominently, Nepal needs to formulate diaspora strategy-an explicit and systematic policy initiative or series of policy initiatives aimed at developing and managing relationships with a diaspora. Though policy initiatives may be diverse in nature, the strategy, in general, must incorporate the essential elements like goals, mapping diaspora geography and skills, creating a relationship of trust between diaspora and the government, and ultimately mobilizing diasporas to contribute to sustainable development. In addition, diaspora diplomacy is urgent too. Establishing structures to address diaspora issues such as diaspora departments in ministry of foreign affairs, providing informational linkages, establishing knowledge exchange networks and loosening bureaucratic hurdles to their participation are pivotal in this front.In the current context of resource deficit, Nepal can mobilize diaspora resources via various instruments such as deposit accounts, securitization of remittance flows, transnational loans, diaspora bonds and diaspora mutual funds. Diaspora bond can tap into the emotional ties of the diaspora and potentially help lower the cost of financing of development projects. Realizing this, Nepal has already issued the Foreign Employment Savings Bond, targeting the migrant workers; but only tiny amount, for example, Rs. 3 million from total issue of Rs. 5 billion were sold in 2011/12. Uncertainty, high political risk, low confidence and lack of financial literacy were the causes behind such failure. 

Success of diaspora bonds, in addition, requires issuance of bonds with varying denominations and special infrastructure bonds for entire diaspora, utilizing raised money to finance projects that interest overseas migrants and enhancing financial literacy of migrants, particularly workers. Additional potential instruments may be provision of special deposit accounts for non-resident Nepalese and diaspora investment funds, which can take the form of mutual funds and private equity to be invested in Nepalese companies. Many countries are adopting the policy of dual citizenship for diaspora, which can encourage greater diaspora participation in their countries by facilitating travel, avoiding the constraints foreigners face on some transactions and providing access to public services and social benefits. 

As an alternative to the dual citizenship, some countries such as Ethiopia, India, and Mexico offer special identification cards that entitle migrants to specific rights. Granting voting rights to the diaspora is also in practice. It is time to think whatever is best and possible for Nepal. The diaspora should be considered not just as sources of financing, but as development partners too. 

Published on: 4 January 2013 |The Himalayan Times

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