The good and the bad

  • We need to conduct a careful study of both positive and negative effects of Nepal’s remittance-driven economy

Feb 2, 2017-

Around 1,600 Nepalis leave the country everyday in pursuit of foreign employment, pointing to the vital role remittance plays in the overall economy of Nepal. Increasing remittance is not unique to Nepal. The flow of international remittance in the developing countries too has surged dramatically from $30 billion in 1990 to $325 billion in 2010. However, in Nepal’s case, recent growth rates have been higher compared to other developing countries. 

On the bright side 

Job-related emigration has swelled thirtyfold from 10,000 departures in 1990 to 300,000 in 2010. And this estimate does not include emigration to India. As a result, the country’s economy has become remittance-driven, and the money sent home accounted for 29.2 percent of the Gross Domestic Product (GDP) in 2014. The figures mentioned above seem impressive for a poor, developing country like Nepal. Having suffered from issues ranging from political instability to natural disasters, remittance has cushioned the Nepali economy during tumultuous times. Its contribution to the GDP has resulted in poverty reduction and employment generation, among others. 

Nepal Living Standard Survey III shows that the poverty rate dropped from 42 percent in 1995-96 to 25.16 percent in 2011. A report prepared by Dr Jagannath Adhikary and Dr Ganesh Gurung states that the country was able to reduce the poverty rate by 10.9 percent in 2006 because of remittance, and without it the rate would have dropped by only 4.8 percent. Similarly, with the increase in remittance, even employment opportunities have expanded in the country. It has been estimated that approximately 0.43 million jobs were created in the country due to labour migration. Also, since the households receiving remittance have been able to spend more on consumption, the government and the private business sector have gained. 

Remittance has not only had an economic impact. The money sent home by migrant workers has led to social impacts too. Along with the increase in remittance, there has been a steady increase in school enrolment rates. Access to various means of communication has also increased. Another major positive social change has been in terms of female empowerment. With male members of the family having gone abroad for employment, female members have become the decision makers. The inflow of remittance has also enabled a number of them to start their own businesses. Also, labour migration hasn’t been limited to male members of the family. Women who otherwise would have remained unskilled and unproductive here have been able to get jobs and generate income for themselves. 

Not so rosy 

Along with the positive developments, there have been a few negative outcomes. Remittance has made an impressive contribution to the country, but we cannot ignore the side effects. One of the main concerns is that the remittance is being used as consumption expenditure and not as productive investment. Therefore, rather than acting as an economic stimulus, remittance is just being used to meet the consumption needs of households. Another argument is that remittance can also lead to brain drain in the labour supplying country. When a country depends so much on outside sources to sustain its economy, it causes a culture of dependency, and the economy becomes volatile. Any change in employment rules or the economy of the hiring country can shake up the economy of the dependent country.

Malaysia tops the list of destination countries for migrant workers from Nepal with almost 41 percent of the workers going there. Saudi Arabia is second with 22.9 percent of the migrant workers choosing to go there. These countries require unskilled labour which doesn’t help to improve the knowledge base of the migrant workers. Thus, there is no skill development that can be used after returning to the home country. 

Another issue is that most migrant workers are working in vulnerable working conditions without any effective legal protection, resulting in workplace exploitation. The number of migrant deaths abroad has jumped from 90 in 2008-09 to 842 in 2013-14. There have been incidences of sexual exploitation of female workers, especially in the Middle East, leading to several cases of mental and psychological disorder among them. Life has been miserable for family members back home even though there is a sustained flow of cash. Children lack adult guidance, the elderly do not have the support of their sons and daughters and spouses are forced to live without their life partners. This has broken family ties and shaken the values of Nepali culture which calls for strong family ties. 

With the spread of globalisation, the free flow and mobility of labour and capital across various countries has reached new dimensions. Developing countries like Nepal have benefitted from the inflow of remittance. With the growth of a remittance economy, there have been various impacts on Nepali society. We need to conduct a careful study of both positive and negative effects so that we can make the good ones count and play down the bad ones.


Gautam holds an MA in Devlopment from the South Asian University, Delhi

Published: 02-02-2017 08:48

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