Prithvi Man Shrestha

It was launched to channelise remittances into the national development, but the Foreign Employment Bond (FEB) has failed miserably for the second straight year. Targeted at Nepali migrant workers abroad, the FEB failed to find enough subscribers this time too.

Nepali migrant workers subscribed bonds worth Rs 3.38 million against the target of Rs 5 billion until the extended deadline that closed on June 21. Last year, bonds worth Rs 4 million were subscribed against the target of Rs 1 billion. The government, in the last fiscal year’s budget, had planned to issue FEB worth Rs 7 billion.

Foreign employment bond is one of the key instruments that the government has adopted to raise internal loans. The government aims to raise Rs 33.68 billion from internal loans this year.

Amid complaints that remittances are being used only for consumer purpose, the government aimed to utilise the remittances in development activities through such bonds. But its efforts haven’t been fruitful even when other development bonds are attracting massive subscriptions. Now, government officials say they could raise the remaining amount through other instruments.

“We may raise the remaining amount by converting the foreign employment bond to other types if necessary,” said Bodh Raj Niraula, head of the budget department at the Finance Ministry.

Of the five countries—South Korea, Malaysia, United Arab Emirates, Saudi Arabia and Qatar—where the bonds were issued, nobody subscribed from South Korea, according to the Nepal Rastra Bank (NRB) that issued the bonds.

Why Nepali migrant workers gave a cold response to the FEB despite having good interest rate of 10.5 percent? Agencies involved in the distribution of FEB say lack of awareness and complicated procedures are responsible for the low subscription.

Chandra Prakad Dhakal, chairman of the IME Group, whose sister concern International Money Express (IME) was involved in selling foreign employment bonds, said lack of awareness and some complicated procedures resulted in low subscription of the bond.

IME is one of the seven sales agents appointed by NRB for the distribution of foreign employment bonds. “As most of the migrant workers send home money for repayment of loans instead of savings, expecting more from workers might have been a false belief,” said Dhakal.

NRB officials say the sales agents are complaining about the complicated procedures of making certificates and distributing them. “Some sales agents also complained that migrant workers are being concerned about the exchange rate,” said a senior NRB official.

After the maturity of the bond, subscribers will get the payment as per the exchange rate maintained at the time of subscription.

Migrant workers can subscribe bonds themselves or in their family members’ names. Subscribers can also take loans by putting the bonds up as collateral.

Now, the government is considering resizing the FEB for the next fiscal year. “We may rethink on the size of the foreign employment bond for the next fiscal year, as efforts for two consecutive years could not yield desired results,” said Niraula.

Published on: 26 June 2011 | The Kathmandu Post