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VOL. 25, NO. 17, December 23 2005 (Paush 08, 2062 B.S. ) |
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“Remittances Are Going Into Rural Areas Preventing Crisis”
Dr. Shanker Sharma
How do you see the role of remittances in the context of poverty alleviation?
Remittance has played a major role in reducing the poverty especially between 1996 and 2004 when we completed Nepal Living Standard Survey II. Even after 2003/04, a lot of people are going abroad for employment. For example, in the first five months of this fiscal year number of people going abroad increased by 51 percent. So this has become one of the major components in reducing poverty. What we want to do from the government side now is to see how we can use it to minimize the economic problem in rural region especially in food insecurity areas. Remittances are going into rural areas preventing crisis in different parts of the country. If we look at the number of households receiving the remittance, it increased from 23 percent in 19995/96 to 52 percent in 2003/04. If we look at the amount of remittances per recipient household, the amount has increased from Rs.15000 to 35000. Significantly, the highest growth in terms of getting remittances has increased in the first two poorest groups. Although the amount of remittances coming into the country has increased in overall, the percentage increase is higher in the poorest deciles. That shows it has made a major contribution in reduction of poverty.
What is its contribution to the GDP?
If we look at the official statistics of 2004, it is close to about 12 percent but we expect that a lot of these activities are not captured in survey or in the statistics published by the Nepal Rastra Bank. If we examine in real terms, the contribution of remittances to GDP could be about 18 to 20 percent. The contribution of remittances in national economy is very high.
How do you see the result of last one decade?
Over the last 10-12 years, one of the things we have seen is people are aware of various activities including the opportunities for going overseas. We are also getting demands for our human resources from more countries including Malaysia, which is now one of the major destinations for Nepalese people. Economic growth of recipient countries is very high. When we talk about the oil producing countries, the rising prices of oil has led to boom in their economy and number of construction activities there have grown up. Indian economy, for example, is growing very fast. As recipient countries have done extremely well in economic activities, that has also contributed to increase the outflow of Nepalese people for employment. Even in the countries like in Afghanistan, there is high demand of Nepalese for security. In many foreign embassies in Kabul, I saw Nepalese as they have very good reputations.
What is the number of Nepalese working in foreign country?
The latest statistics show that every eleventh person in Nepal is getting something from the remittance. This means there are very large numbers of migrant workers. If we talk about the total numbers, it probably something over million Nepalese are working overseas. When we talk about the sources of remittances, we have three parts. One is money going from urban to rural areas in the country. Number two is money coming from India and thirdly, money coming from third countries. The money coming from third countries is increasing very rapidly. Having said that, it is very difficult to say how many Nepalese are working in India.
How much remittances does Nepal receive?
If we see the statistics publish in 2003/04, the remittances were close to Rs. 47 billion (700 million US dollar). If we count other sources, it could be about Rs.100 billion (US$ 1.3 billion).
As the contribution of remittances is increasing, what does Nepal need to do to sustain it?
We have to do a number of things. First of all, we have to ensure the welfare of Nepalese working abroad. For this, we have to go through the negotiation process in various countries, which we have not done yet. If we train Nepalese going abroad, their income will increase by many folds. As most of the Nepalese going abroad are illiterate and untrained, they can be easily cheated. Many Nepalese sell their houses and lands to go abroad. The government has already initiated a program to provide loan through banks to those who cannot afford money to go abroad.
What are the challenges?
One of the major challenges is how to channelize the money coming from abroad to the productive sector. Other challenge is to regularize the process of sending Nepalese abroad.
Which are the areas where people invest their remittance?
We have not done any survey now. According to Nepal Living Standard Survey II, we have estimated the number of people going abroad and their contribution to family. Preliminary study shows that most of the money is either being spent in consumption by the family or to buy land and property. If we see the story in Pokhara, remittances have been invested to build houses but they are all empty. We don’t want that kind of unproductive investment. It can be channeled to productive investment. If we channel money to productive areas, the country can benefit a lot and people will also get good return. That is also the area of concern.
It is reported that there are many problems for sending money here. How do you look at it?
We have to set up systems through which the country receives remittances. People either bring the money by themselves or send through various friends. There is another channel called Hundi. Money coming through the financial sector is increasing very rapidly. What we get the record from Nepal Rastra Bank is money coming through the institutional channels only. Nepal Rastra Bank is working to bring the money through the financial channel. Banking channel is always secure. People are still cheated by hundi. Most of the money coming from India is through hundi. However, increasingly the money from overseas are coming through banking channels.
How are remittances contributing to the education sector?
We are doing a lot of studies to understand correlations between the remittances and other implications of the money to sectors like education. Our studies have found that many people are spending the remittance to educate their children. We have seen a lot of correlations between the money coming into the rural areas and increasing enrolment of children in schools. Remittances have played a major role in improving the overall social and human development indicators.
From which region do most remittances come from?
The contribution from India has declined from 33 percent to 23 percent share. The amount of money, too, has gone down significantly. The share of other countries has increased from 22 percent to 53 percent. Within Nepal, the money sending from urban areas to rural areas has also declined drastically. It is not that the opportunity in the urban areas has gone down but people probably migrated to the urban areas as the migration rate has gone up from 7 percent to 15 percent during the period of 1995/96-2003/04. That means a lot of people have migrated to urban areas. Overall, Nepal’s remittances have increased by 33 percent. People of richest quintile have received more money, as increment is much higher in terms of absolute figure for them.
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