Foreign employment and remittance

Foreign employment and remittance:

Nepalese migrants used to leave the country for foreign employment with various motives long back ago. The demand for Nepalese labor abroad has relieved the unemployment problem to some extent and the remitted fund has contributed to reducing the poverty level of the country to a larger extent.

Among the various uses of remitted fund vary by reducing poverty, creating economic security and enhancing social status within the household and the community. Remittances have been playing a pivotal role by relaxing foreign exchange constraint, increasing contribution to GDP and strengthening the balance of payment situation of the country. Various policy measures have been undertaken by the concerned authorities for encouraging remittances through official channels and use of the assets and skills of the returnees for themselves as well as for the economic development of the mutiny.

The recent global economic crisis has compelled the concerned authorities to revise policies and programs regarding foreign employment regime of the country. Till 2011, Nepal stands as the fifth largest country in the world map in terms of the contribution of the remittance to the nation’s Gross Domestic Product (GDP).

The most visible effect of remittance flow in the country is manifested through its 23% share in GDP as stated by “Migration and Remittance Factbook 2011” of World Bank and it is expected to increase with the increasing labor migration (14.5% each year, Nepal Central Bank, 2011/12) particularly in middle east gulf countries like Saudi Arabia which stands as the second largest sources for remittance after the US.

 Importance of Remittance:

1. Adds to GDP

The direct impact of remittance to nation’s GDP would be only one side of the whole story, as the other side would clarify how this global phenomenon has indirectly resulted in poverty reduction, employment generation, increasing household income and capital formation in the nation.

As Mankiw states in his book that real variables like GDP don’t always explain the economic activities and their consequences in the real world and hence there is need of attention to other macroeconomic variables like employment and income.

2. Revenues for Government and Private Sector

Today, remittance has become an important source of revenue for government through tax and fees. These fees include fees paid by manpower companies, passport fees, value-added tax, and other non-tax revenues. Similarly, remittance has become an important source of revenue for the private sector as well.

Various recruitment agencies, agents, medical institute, orientation institute, training institute, advertisement, photograph shop, air-ticketing, local transport, hotels, restaurants, etc have been collecting a significant amount of revenue – Rs 107 million per day since the foreign labor migration has become a common phenomenon.

3. Employment Opportunities

Through 26 commercial banks, 2 finance companies and 45 money transferring agencies which are endowed with the responsibility of transferring foreign currency in the domestic financial market, vacancies for different senior and junior post are not a new phenomenon in different media. Expansion of airlines network and training institutes are increasing in proportion with increasing labor migration.

It is roughly estimated that about 0.34 million jobs are created all over the country by the phenomenon of labor migration – Foreign employment, remittance and its contribution to the economy of Nepal. These employment opportunities are to be understood in term of hotel accommodation, transport, recruitment agencies, and money transfer agencies, etc.

4. Poverty Reduction

Nepal Living Standard Survey  III states that due to remittance and migration driven economy,  poverty of Nepal reduced from 42% (1995-96) to 25.16%(2011). A report states that if there was no remittance inflow in the country then we wouldn’t have experienced the reduction of poverty by 10.9% in 2006, instead it would drop by only 4.8%.  Such reduction in poverty has helped in diversification in livelihoods, greater ownership, and acquirement of assets and capitals.

From the macroeconomic point of view, the remittance is the Major source of income for the 56% household in the nation.  Household income increased by just 22.4% in1995-96 while remittance has caused 70% increased during 2008. So, the household income’s contribution to increased financial capital, education of the children, social capital, and migration-specific knowledge can’t be ignored.

The returned migrant was found to have developed values like punctuality, work-ethics, gender sensitivity, and production capability.