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Remittance: boon or curse?

UAE has oil but the Sheiks in all the states there shared a common understanding: oil will dry up one day. So they invested all the oil money into making UAE a magnet for foreigners to work and invest. At the forefront is Dubai which is positioning itself as the hub for shopping and stylish real state. Is not our remittance similar to their oil?
 
Nepal's young generation is migrating abroad for more opportunities and employment. But remittance is just a short term sources not a sustainable form like oil to UAE.
 
Boon
Remittances in FY 2012/13 contributed around $3.5 billion a year to Nepal's annual income, up from just $50 million in the mid-1990s, and equivalent to almost a quarter of GDP. In fact, the figure is probably substantially higher as remittances are routinely underestimated; the rule of thumb is to add 40% to the official figures. Not all money is sent through legal or verifiable sources.
 
According to World Bank figures, extreme poverty has declined from almost 70% to 25% in the last 15 years, and the extra billions arriving direct to Nepalese households during this period are undoubtedly part of the story, along with large-scale state investment in social sectors and infrastructure.
 
It is known as a fact that the six month long blockade by India did not destroy our economy bringing us on our knees as envisioned by the miscreants. How could that be? We did not annihilate us because our economy is driven significantly by remittance as noted in the above statistics.
 
Curse
However remittance leads country nowhere in long term basis (no significance progress) for example Philippines which started remittance based economy long before us, has almost 15 million people working abroad but where it is now?
 
Philippines economy is heavily reliant upon remittances from overseas filipinos, which surpass foreign direct investment as a source of foreign currency. Remittances peaked in 2010 at 10.4% of the national GDP, and were 8.6% in 2012 and in 2014, Philippines total worth of foreign exchange remittances was $28 billion.
 
Solution for this scenario
Many might see the boons far outweigh the curses but we must find ways to consume our own manpower. Here are some ideas we have:

  • Labor market should increase in a sector wise basis like IT, service, hydro, manufacturing, etc. The sequence of which sector to focus should be based on the type of labor that is in abundance. That is a planning skill our government has lacked. Instead sector wise investment is based on wishful thinking and foreign interest.
  • 3P model: Public Private Partnership should be increased so that much needed infrastructure can be built that will employ our own people for decades. Given that most of the remittance comes from workers from construction sector, infrastructure is a logical sector that satisfies both labor type dominance and national interest. Only thing the 3P management must consider is to increase the budget for salary to match what a mason or welder would get in Dubai. If you do the cost benefit analysis, paying the Nepali labor at par of Dubai will be profitable highly.
  • We should create such environment where people are motivated to work in their own country rather than going abroad. It might be policies or incentives. Current scenario people are moving foreign country for more income generation.
  • Reduce long process for formalities to invest in our country, it will lead to foreigners demotivated to make investment here.
  • All sector private as well government and other sector should also take responsibility to create a favorable environment (legal, political), for the attracting more FDIs in our country
  • Incentivize remittance-receiving agriculture households to invest in capital goods and inputs to improve agriculture productivity so that it more than compensates for the yield losses arising from labor migration.
 
Conclusion
Until and unless we did not create more employment opportunities nothing will change to stop people migrating abroad. If we do not become wiser in time, we will be left with nothing into a new economy. That would be dangerous for us.

Authors: Mohan Ojha & Manohar Man Shrestha