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COVER STORY |
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COVER STORY |
REMITTANCE With the slow down of
economic activities and low demands of workers, large numbers of unemployed youths see
foreign employment as the best alternative for their career. Along with solving
unemployment problems back home, the remittance sent by them is beginning to grow
astronomically as it is the only sector thriving at present thereby, injecting life into
otherwise ailing economy. At a time when country's exportable traditional commodities like
carpets, garments and handicrafts have been facing one or the other problems, burgeoning
remittance has provided the much-needed fillip to the national economy. It is the single
biggest source of foreign currency with its contribution of more than 40 billion a year to
the state coffers. Even then, due to lack of clear policies and institutional
encouragement, this sector is riddled with many problems. Will remittance continue to
flourish and rescue the Nepalese economy? By KESHAB POUDEL "Our country advances only through
crisis and in tragedy," this is what Georges Clemenceau, France's leader in the first
world war had said expressing implications of the great wars to his country. Clemenceau's expression referred to France
- world's developed and powerful country ñ is equally applicable to the present day
Nepal. In its long history of survival, Nepal has made progress despite crises and
tragedies. As Maoist insurgency hits almost all
economic sectors and the country is in terrible economic turmoil, the growing foreign
employment has come up as the redeemer. While exports are yet to recover, tourism and
other industrial sectors are almost at standstill, remittance has sprung from behind to
create a new economic phenomenon pushing the economic drive almost by itself. Although
remittance cannot support economic growth for long run, everybody concurs that it will
temporarily help to rejuvenate national economy.
Finance Minister Dr. Prakash Chandra
Lohani is presenting his fiscal year 2002/2003 budgets shortly and remittances will,
without doubt, have many positive contributions to his budget. According to reports, remittances have
increased 35 to 37 percent in the current fiscal year compared to the last year. The
unofficial estimates point that the country has received remittances worth over Rs. 42
billion in the last eight months of current fiscal year alone. Contributions to Economy: The exact contribution of foreign
remittance to the Nepalese economy is still vague. According to unofficial estimates, its
contribution to the Nepalese economy is 20 to 25 percent right now. The study done by
David Seddon for the British Government's Department for International Development (DFID)
in 1999 indicated that the value of foreign employment laborers could be as high as Rs.69
billion - which is roughly equivalent to 25 percent of official gross domestic product
GDP. Since the study is based on the data of 1999, the scenario might be different now
especially with the remittances growing rapidly in the last couple of years. Every body agrees that remittances have
supported the growth of rural as well as urban economy since it plays a crucial role in
different sectors ranging from savings to investment and from expenditure to consumer
economic activities. The recent boom of real estate business in the urban areas including
the Kathmandu valley was the result of the remittance rocketing.
"Remittance has made major
contribution to the economic sector of Nepal. The recent financial forecasting by Nepal
Rastra Bank have shown that the amount secured through remittance have increased by many
folds," said Dr. Shanker Sharma, vice chairman of National Planning Commission. According to a recent report published in
the Time Magazine, over the past decade, remittances of wages from migrant workers to
their native countries have risen by 44 percent to an estimated US$ 138 billion last year
and they are projected to grow by an additional 28 percent over the next three years. As number of foreign workers increase, many
money transfers agencies have opened their shop in Nepal bringing in the remittances
through official channels. Western Union Money Transfer is one of the most famous one. But
there are various other agencies including private sector commercial banks that are now
trying to do transaction since the profit margin is rising. Following the September 11 terrorist
attacks, many unofficial ways like Hawala of sending money have halted so there is a
growing demand of formal channel. Some see there is a very nominal effect of
remittance. "Share of remittances in the economy has been glorified to an unnecessary
extent since there is no country in the world that has prospered by exporting
people," said Dr. Narayan Manandhar. From Himalayan Bank to Western Union Money
Transfer, which controls nearly 80 percent of the global electronic money-transfer market,
and other commercial banks are helping foreign workers to send back their money to home.
The Himalayan Bank is serving mostly to the Middle East countries through its official
partner Habib Bank. Since banks charge relatively high
percentage of commission for money transfer, many foreign workers prefer to send their
remittances through middlemen. As there were many hurdles in official channels, the
government recently announced a new system to smoothen the money transfer. With the increase in the volume of
remittance, the country's foreign exchange reserve has increased over the years and it is
now in a position to sustain imports for about eleven months. "When foreign trade is
yet to fully recover, the remittance is supporting Nepalese foreign currency
reserve," said Dr. Rabindra Shakya, former senior advisor at the Ministry of Finance.
"Nepal's trade with other countries is falling. Its trade deficit with India is
growing. As the growing trade deficit will have a significant adverse impact on the
Nepalese economy, the remittance has to chip in to fill the gap," said Dr. Shakya.
"The recent figures have shown that Nepal has received huge amount of money in form
of remittance." With the destruction of many valuable
infrastructures and continuous political instability, Nepal has lost a great opportunity
to accelerate the economy in faster pace, but the tragedy and crisis have also taught
different ways of survival. Although the foreign employment gives
opportunity for the limited number of unemployed youths, it also helps to make big
differences in the overall economic activities. As the demand of Nepalese worker is rising
in different parts of the world, more people will fly overseas for the employment.
According to government estimates, there will be more than 500,000 Nepalese abroad next
year. The number could be much higher if those who have gone on individual basis are taken
into account. Once the Iraq stabilizes and opens its doors for foreign workers, more
unemployed Nepalese will benefit.
The present work force working in
foreign country is just a tiny fraction of Nepal's population but large number of
migration is taking place within the country as poor rural families are moving to the
urban areas in search of jobs. Some argue that foreign employment will
benefit a small group of population and such populations are economically insignificant.
Since foreign employment costs money to travel and other expenses, most poor families
cannot afford money to send their offspring abroad. "Only the people from the middle class
and rich people can afford to go out of the country since it requires huge amount of money
as initial investment," said Dr. Manandhar. It is estimated that a man has to pay up to
Rs.200, 000 to go to foreign country for employment. This money will be spent to procure
air tickets and other travel expenses. The agents of manpower agencies, too, bag a certain
portion of the money. Experts hold the view that poor people cannot afford it. For the
poorer section of population, migration to nearby towns and bordering Indian cities are
the best available options. Irresistible Attraction Migration is exception, not the rule, for
two major reasons. The first and most powerful is inertia: Most people lack the desire and
drive to leave home and move away family and friends. Second reason is that there are many
restrictions in and outside the country because countries control the movement of people
through passports and visas. International migration is usually a major
individual or family decision that is carefully considered -crossing national borders to
settle or work in another country is not an easy decision. The studies taken at
international level show that there are two broad categories of migrants: those who
decided to migrate to another country for primarily reasons, and those who moved primarily
for non-economic reasons. The factors that encourage a migrant to
actually move are grouped into three categories: demand-pull, supply-push, and network
factors. Economic migrants may, for example, be encouraged to migrate by demand-pull guest
worker recruitment; non-economic migrants might be motivated to cross borders to join
family members settled abroad. Leaving one's country to work in foreign
land requires courage or desperation. Most of the job seekers from Nepal are going to the
country with a hostile climate to make money. As the large numbers of Nepalese do not have
minimum skills, they are hired as a labor. Had the government provided some kinds of
technical education, the situation would have different. Uncertain government Policy The government does not have a clear policy
on the foreign employment. Despite its major share in the economic sector, the government
has not taken any steps to recognize their contribution to national economy. Large numbers
of foreign workers, who are bringing back billions of rupees equivalent of foreign
currency as remittances, are being ignored and discouraged. Although the foreign employment is not
permanent solution for the unemployment problems, it will temporarily help to sustain the
economy and settle the unemployment problems. With the upsurge of Maoist violence, the
foreign investment and other domestic activities are on virtual standstill. According to the report published by
Department of Labor and Employment Promotion, more than 500 industries were closed down
between the years 2001 to 2002 laying off more than 34,000 workers. The report
showed that 4,296 industrial establishments offered jobs to 394,541 workers in 2001 but
the number of establishments came down to 3617 with total work force of 359,323 in 2002. With the employment opportunities declining
back home, the growing demand of Nepalese workers abroad is an encouraging sign. But, the
frequent policy changes have made the situation complicated. The recent announcement of the
government-requiring fulfillment of certain conditions before deeming any person eligible
for the foreign employment will create more problems rather than help it. The countries like the Philippines followed
by Bangladesh and Indonesia are reaping high benefits of the foreign employment and
remittance. India, Pakistan and Sri Lanka have also sent a large number of workers to
different parts of the world. According to an estimate, there are 7 million Filipinos
abroad and they send home US$ 7 billion a year. In Bangladesh, there are 1.6 million
abroad. In case of Nepal, there are still contradictory statistics regarding the number of
Nepalese working abroad. It is estimated that there are more than 500,000 currently
working in different parts of the world including gulf and East Asian Countries. History of Foreign Employment The history of foreign employment in Nepal
is as old as two hundred years. Following the 1814 AD Sugauli Treaty with British India,
Nepal opened its door to allow the recruitment of its citizens as soldiers for the British
India. Since then foreign remittance has had a high effect on the Nepalese economy. Even
today Nepalese youths are recruited for British and Indian army. These youths send bulk of
money as remittances. Nepalese ex-servicemen bag huge amount of foreign currency from
British government as pension and other benefits. Same is the case with Indian Gurkha. The
money they send contributes to stimulate the rural economy as most of their families are
based in remote parts of the country. They also help in poverty alleviation. Of late, Nepalese people have started
flocking to Gulf countries where there is a huge demand for Nepalese workers. Now, many
Nepalese are recruited to the East Asian countries including Malaysia, Hong Kong, South
Korea and others. Along with going in legal way, there are many Nepalese who are working
in different parts of the world staying there as illegal immigrants. There are estimated to be 50,000 Nepalese
population in Hong Kong and more than 5,000 in United Kingdom and 20 to 25 thousand in the
United States. Migration is as old as humans wandering in
search of food, but foreign employment is relatively recent phenomenon. It is only after
the oil crisis of 1971 and rising in the prices of oil, the Middle Eastern countries have
started the development activities hiring the labor from the countries like Nepal. Hey-days of Foreign Employment Like it or not, foreign employment is the
only burgeoning industry in Nepal today. With the tourism and export-oriented industries
having taken a deep plunge, thanks to the domestic situation of insecurity, remittances by
hundreds of thousands of workers abroad have become the mainstay of foreign exchange
earning. As the Finance Minister Dr. Lohani's new
budget's forecast is expected to rely heavily on remittance, it will indicate what Nepal
is gaining out of it. According to Nepal Rastra Bank's recently
released state of economy of last ten months, the country received more than Rs. 33
billion as remittance. During the same period of fiscal year 2001, the amount was just
over Rs.20 billion. Unofficial estimates showed that the amount
is considerably more than the official disclosure. According to unofficial sources, the
country received 41.1 billion in the last ten months against 32.7 billion in the 12 months
of previous year. If the total amount is added including those coming through
non-banking sectors, this amount is going to be much higher. Hurdle Against Foreign Employment While the foreign employment supports
national economic growth and stimulates short-term economic activities, the government
actions seem to be discouraging it by creating hurdles one after another. In its recent policy announcement, the
government has tried to put certain indirect restrictions on the foreign employment giving
permission to handful of companies to issue eligibility certificates. Few months ago, many
people had to lose the opportunity thanks to the scarcity of the passport books. "Opposition parties have been
encouraging their student unions to lockout the schools and the government is discouraging
the foreign employment. It is very strange to see whose interests they are serving,"
said a political analyst. "From revolutionary to democrats and regressive, all of
them seem to be bent on sabotaging the country." Despite such anti- foreign employment
policy, the demand of Nepalese labor continues to go up. In the last eight months, Nepal
has seen certain increase in the export to third countries including the garments and
carpets but the exports to India drastically declined and the trade deficit rose. Effects of Remittances One can see the effect of remittances in
many sectors including in the urban as well as rural economy. In urban areas like in
Kathmandu, Pokhara, Biratnagar and other cities, the prices of real estate has jumped up
by many folds. The real estate values of Kathmandu, which was stagnant, began to
rejuvenate since last one year. Despite the uncertainty and threat of
violence, people find real estate as the safest bet. The government is expected to receive
many fold increase in the land revenue. It has also affected the living condition
in the rural areas as the poverty is said to have declined from 42 percent to 38 percent
in the last few years. The remittances helped to inject money in the rural economy.
Although the government is yet to evaluate what impacts the remittances have left in the
rural economy, it has sent a positive sign. The country's total internal savings have seen
tremendous change. "The money sent by the Nepalese may
induce inflation as land prices go up and investments in housing increase," said Dr.
Narayan Manandhar. "People going out of the country are only a safety valve and it is
not a solution for the long term unemployment problems." Number of Foreign Workers According to the recent figures by the
Department of Labor and Employment Promotion, the total number of workers who have gone
overseas from 2049/50 till 2059/60 stands at 259,044. Saudi Arabia has the largest share
of Nepalese workers with 87,298 work forces and the Malaysia has about 80 thousands
workers. It is due to Nepalese workers that many
flights have been started and continue to expand. The Royal Nepal Airlines Corporation
(RNAC) has expanded its flights to the UAE and Malaysia. Qatar Airways and Gulf Air have
increased their flights to Kathmandu ñ all because of growing number of Nepalese workers
who travel to cities like Kuala Lumpur, Dubai, Abu Dhabi, Riyadh, Doha and so on. Currently the government has recognized 16
countries as overseas employment destinations. They include Saudi Arabia, Kuwait, Quarter,
Oman, UAE, Bahrain, Hong Kong, South Korea, Singapore, Brunei, Malaysia, Saipan, Iraq,
Macau, Israel, the Maldives and Kosovo. Latvia and Seychelles are two other countries,
which the government has recognized, of and on. A report prepared by the International
Labor Office (ILO) and Department for International Development (DFID) on Managing Foreign
Employment in Nepal: Issues, Challenges and Strategies in
December 2002 showed that the country has unemployment rate estimated at 15.4 percent.
Underemployment is widespread and is estimated at 47 percent of the labor force. In
addition an estimated 300,000 new entrants join job market every year. The report estimated that out of some
100,000-120,000 Nepalese citizens estimated as overseas migrant workers, annually, around
75 per cent are believed to be unskilled laborers, while 25 percent are in semi-skilled
and skilled categories. The wage differential between laborers and semi-skilled workers is
around Rs.4,000 (per month), while skilled workers are entitled to higher wages. For some
skilled occupations, wages reach Rs.24,000. Such wage differentials provide a clear signal
for private individuals to acquire higher skills and for the government to increase the
share of skilled workers going overseas. The labor sector plans also include an
ambitious target for expanding the number placed in foreign employment from 104,739 in
2001/2002 to 550,000 in 2006/2007. According to the Population Census 2001,
national report, published by Central Bureau of Statistics, there were 762,181 Nepalese
abroad during the period of census and the 589,050 of them were working in India. As the country plunges into deeper
economic, political and social crisis, the people have learnt a new way of survival even
making contribution to the national economy. Although the remittance and foreign
employment are not a permanent solution of economy, these phenomena will help to kindle
the country's economy growth. |
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