Sumeera Shrestha

A considerable number of migrant workers still send remittance to Nepal via informal channels which should be remedied.

Every day, people cross international borders for jobs, business and education. It is estimated that every year, more than five million people migrate to a foreign country. This outflow affects places and people both in the destination and origin countries.

This trend of migration can be observed among both males and females. However, there are significantly more men migrating than women. With 108 potential labour migration destinations for Nepalis, approximately 1,200 people between 20 and 44 years of age fly out of the country to work abroad every day. Labour migrants come from all over the country. Most fly to India, the UK, Malaysia and the Gulf Countries where Nepalis are working in the security forces, care economy, construction and service sector.

A few villages in Rooma VDC of Myagdi, Nosa village of Pyuthan, Thakle and Bagaicha village from Kavre are examples where the number of farmers has decreased significantly as male members have migrated to work abroad while females either run a small hotel by the roadside or are housewives. However, in Kavre, due to its potential as an agricultural site for kiwi, coffee and citrus fruits, people from other districts are employed on organic farms. However, the locals are only getting paid a negligible wage. The migration of considerable parts of the productive labour force has hit the agriculture and manufacturing industries hard. It has to lead to an increase in labour wages, a highly constrained female labour market and imports of agricultural products and other goods.

The Nepal Living Standard Survey (NLSS) 2010/11 shows that 58.8 per cent of households received remittance in Nepal. This percentage is significantly higher than in previous NLSS surveys. Likewise, the average household remittance amount has increased from Rs 15,160 to approximately Rs 80,000. Nevertheless, the 23 per cent remittance contribution to the current GDP is one of the strong means to reduce the current balance deficit. A World Bank study states that a 10 per cent increase in remittance will decrease poverty by 3.5 percentage points. However, the question is: how efficient have remittance contributions to the GDP been, considering their effect on reducing poverty?

Stop consuming, start investing
The transfer of remittance through informal mechanisms is quite popular among migrant workers. Experts claim that if remittance entering the country through informal mechanisms such as hundi could be tracked, then the contribution of remittance to the GDP would be far greater than 23 per cent. It is clear that formal transactions incur costly transfer fees and complex administrative procedures requiring passports, a copy of a working identity card or permission and other legal documents. Most labour migrants either find these procedures inconvenient or their legal documents are held by employers till their work contract is over. The inaccessibility of their own documents has not just misled the tracking of remittance but has also denied them the basic right of self-protection. As a social transformation drive of remittance, even poor people are getting access to basic education, health facilities and the opportunity to start-up small businesses. However, most of the remittance is used for consumption while investment in business activities and the production sector is very low. This is the exact opposite of what the country needs.

In the beautiful village of Ghandruk in western Nepal, at least one or two members of each family are working abroad as migrant labourers. The few hotels are operated by elderly people with support staff. They seek financial and advisory support from their offspring abroad. A few other households are engaged in subsistence farming. Relatives of those working abroad can choose whether they want to be an active part of the labour force as they get some income in the form of remittance even without working themselves. Other factors such as gender, age and culture also affect the choice to participate in the labour force and the choice to engage in production, industry or the service sector. For instance, when male family members migrate, then women are responsible for all household chores. They have to deal with expenses and decisions which absorbs their energies, which could otherwise be used in the labour market. Also, educational barriers due to the comparatively lower literacy rate of females could prevent them from getting access to jobs. Overall, non-labour income and the remittance investment pattern allows for a greater risk tolerance among family members, leading to slower economic growth rates.

Remittance and infrastructure
Many migrants are motivated by the promise of new opportunities and the desire to obtain basic necessities for themselves and their families. In the case of Nepal, a major chunk of the population migrates as migrant workers while only a small share of them go abroad as student migrants aspiring for higher education. Though the chance of migration can’t be denied to anyone in our globalised world, finding new means and ways to lessen out-migration through opportunities in one’s own homeland is a must. The expectations of remittance through formal channels could be met if migrant workers were taught about this option prior to their departure. Assistance could be provided in the form of security, orientation, life and job-related skills. Migrant workers could be supported by coming up with cheaper interests and reliable sources. This could ultimately reduce the initial migration loan amount and families of these labour migrants could start saving and investing sooner once workers start sending home remittances

A big share of the incoming remittances could be used for renewing the national infrastructure, establishing industries, hydropower projects, building airports and so forth. These days, a lot of migrants are returning home with additional knowledge, experience, dedication and discipline. Programmes could be planned by returning migrant workers on local levels with the help of local companies. This could potentially widen the spill-over effect of these returnees among the local inhabitants. The creative minds and skills of the human resources should be made proper use of in order to improve active labour force participation towards a formal economy and the fostering of economic growth.

Shrestha is a Development Economics Graduate from the University of Warsaw

Published on: 29 November 2013 | The Kathmandu Post