Bringing it back home

  • Remittance must be treated practically, not ideologically, for it to lead to economic growth
- Saloman Rajbanshi
Bringing it back home

Apr 7, 2015-

For South Asia, a hub for human capital export, united we bargain, divided we beg. Given the massive numbers of South Asian citizens leaving the region for employment elsewhere, South Asia as a collective needs to come up with the formation of a unified mechanism, says the Organisation of Human Resources Exporting Countries, comprising of major source countries of migrant workers in the region. This could work in a similar fashion to the Organisation of the Petroleum Exporting Countries (OPEC), which strives for unified policy to get the best value for every barrel of crude oil it exports to the international market to secure a steady income for producers and a fair return on capital for those investing in the petroleum industry. Can South Asia come up with a strategic mission similar to this to benefit from the abundance of human capital in the region? But human capital is not a commodity and it requires an essentially human touch throughout the process of its development, deployment, and retirement.

Practically speaking

No one likes to be an advocate of foreign employment. But people need to be more practical than ideological. If all work is respectable, what is wrong with foreign employment? Labour mobility is an offshoot of globalisation and trade liberalisation. The market for human capital has become global and is wide open. In the 21st century, it would be foolish to attempt to reverse the process of globalisation and trade liberalisation. Remittance and export earnings data of the three major labour supplying countries—India, Bangladesh, and Sri Lanka—clearly shows an upward trajectory, indicating potential.

There have been several studies carried out to examine if increased remittances lead to economic growth. Interestingly, not all the findings of those studies are identical. Some of them have established a positive link between increased remittances and economic growth in some countries at a given point in time while others have not.  

For remittance to have a positive impact on economic growth, two critical factors must play a significant role—the volume of remittance and an enabling environment for investment in productive sectors. The volume of remittance is directly linked to, among others, the skill of migrant workers and access to and cost of official channels for transfers of remittance. A substantive and sustained volume of remittance can be mobilised into productive investment to make a tangible impact on economic growth.  

Shifting focus

There are many in Nepal who are of the opinion that foreign employment is no good for the country. Political leaders pledge to create more jobs domestically so that young men and women will not have to live with the exploitation and hardships they face in foreign lands. But they have no clue how and when they are going to create these jobs. No doubt, the ideal situation would be to create employment opportunities within the country. However, even if increased remittances have not been significantly contributing to economic growth, they have provided some degree of instant relief on alleviating of poverty. Hence, we must shift the focus of the debate. Instead of merely saying that foreign employment is not respectable, we must think on how to maximise benefits from increased remittances and minimise the cost involved, particularly at the household and community level.

How to make best use of remittances is an important question to be addressed by policymakers. It is not fair to blame the people for spending their incomes on consumption when the government has not been able to create an enabling environment for productive investment. Spending income on consumption is natural, according to Maslow’s hierarchy of needs. It is not fair to blame the working poor for not investing in a productive sector when we can clearly see even relatively well-off families competitively consuming their earnings for their material wellbeing. Nevertheless, increased consumption does accelerate economic activities through the multiplier effect.

Making productive use

A timely recommendation for now is that institutions introduce new savings instruments as well as further opportunities whereby migrants can channel their remittance funds into productive sectors of the economy, as argued by the World Bank. Education in financial planning and business development/management could be effective in harnessing the development impact of remittances. Migrant workers investing their remittances in business opportunities within their local towns would create employment and growth opportunities. However, for this to happen, incentives need to be offered by the government. These incentives could include public infrastructure and development in regional centres to encourage remittances investment in these areas, as well as tax incentives for certain projects deemed suitable for development.  

Furthermore, women do not get equal opportunity when it comes to foreign employment. The government policy of banning women below a certain age from taking up foreign employment does more harm than good. Female migrants frequently face demands for higher payments from recruitment agents and are also often subject to assault by employers, according to Unifem. The focus should be on addressing the root cause of the problem. Education and training are key to the protection of workers. The government must also push for labour-receiving countries to comply with minimum labour standards at the workplace.

Rajbanshi is associated with the International Labour Organisation.

Views expressed are personal

 

Published: 08-04-2015 08:51

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