In the right conduit
- The govt must work on policies that channel remittances into investments
Jul 8, 2014-
In 2010, the country’s central bank, the Nepal Rastra Bank, floated a ‘Foreign Employment Bond’ to mobilise remittance earnings for infrastructure development. Workers had the option to buy bonds in either their or their family members’ names. The bonds could be used as collateral to obtain loans and could be bought in foreign currency. The principal and the interest could be returned in Nepali rupees. But in the absence of incentives for agencies that transfer money, inadequate promotion of the scheme among foreign migrants workers and with lower interest rates on the bonds as compared to commercial banks, among other things, the scheme did not succeed.
So the Ministry of Labour and Employment’s new plan to establish a labour bank by the end of the fiscal year 2014/15 should be taken with a grain of salt. The idea, again, is to direct remittance for development work by providing loans at low interest loans to migrant workers. Their jobs will function as collateral and the members of the workers’ family can obtain loans and skills training to start small businesses. Ideally, the earnings of Nepalis abroad will help create employment within the country.
Migration research has shown that migrants invest in agriculture, housing and businesses, only after they have met their family’s food, health and education needs and paid off their debts. More importantly, investment occurs when migrants are certain about the returns and once there is a favourable climate. Political instability and a good business climate matter. Expectations from the labour bank, therefore, should not be pinned very high. Still, if the government’s plan is to succeed, it should learn from the failure of the employment bonds. To that end, the government should work together with money transfer agencies and widely publicise the workings of the bank among migrant workers and their family members back home. Any doubts that the public might have in the government’s ability to deliver should be addressed before it begins work after rigorous preparation.
Published: 09-07-2014 10:09