Harvesting the crop of remittance gainfully
Saturday, 11 August 2007
Syed Fattahul Alim
The government often speaks highly of the non-resident Bangladeshis for their huge contribution to the economy. The contribution, as everyone is well aware of, comes in the form of the huge quantity of foreign exchange they send home regularly. Bangladesh is in need of hard currency. Export, foreign aid and Foreign Direct Investment (FDI) are the main sources of foreign currency in Bangladesh. Foreign currency plays a crucial role in meeting the cost of import and the balance of payment. The bigger the size of the foreign exchange reserve, the better it is for a heavily import-dependent country like Bangladesh. With few products to sell abroad, other than garments and some agriculture-based commodities, the country's potential for earning foreign exchange is very limited. Against this backdrop, the manpower export is growingly emerging as an alternative source of earning hard foreign cash for Bangladesh economy.
What was a mere trickle even two decades back has by now turned into a substantial flow of foreign currency into Bangladesh. Small wonder that all quarters are now singing the NRBs' praises for the foreign currency received at home from abroad. But the official channel of receiving the money has not yet been made free from encumbrances. When expatriate workers send their hard earned money home, they want that it should reach their family in a hassle-free manner and within the soonest possible time. Despite all the publicity about the improved services rendered by government-run modes of money transfer through the nationalised commercial banks, the speed of the transfer home from abroad is still very slow compared to the privately operated legal as well as illegal channels. A recently released Asian Development Bank (ADB) update has shown that government-run financial organisations take about a week to reach the expatriate wage earners' money to their respective destinations at home. In sharp contrast to this, the illegal channels that transmit money through the so-called 'hundi' ensure money transfer within half that time and at a premium rate of exchange. So, it is understandable why the hundi mode of transfer is still enjoying popularity among the NRBs.
While accepting the reality that money transfer through illegal channels are faster and more rewarding than the official ones, it is also true that the government's foreign reserve does not get any benefit from such transfer. According to estimates, only half of the entire home-bound remittances are made through regular channels. The rest are sent through informal modes of transfer including hundi. It is, therefore, obvious what a huge quantity of foreign exchange the government is losing day in and day out due to prevalence of irregular channels in the money transfer regime.
There is, however, no point in warning the remitters against going to the hundi operators by telling them that such a process is not reliable or that they run the risk of losing money. On the contrary, if truth be told, remittances made through hundi are based on goodwill, trust and reliability. So, under the normal circumstances, the irregular channels will prevail over the official ones and the economy will continue to be deprived of the full benefit of the inflow of remittance into the economy.
But then why is this furore over the expatriate wage earners' money? Does the country not have other channels, for example, export, foreign investment and aid as the more substantial sources of hard cash contributing more robustly to the economy? Oddly though, the multilateral lending agencies have calculated that the volume of forex earning through remittance is higher than that received through foreign aid and foreign direct investment (FDI) together. But the story does not end here. The rate at which the foreign remittance is flowing into the country will be increasing everyday. And time is not far off when foreign remittance will far outstrip other sources of foreign exchange earning in the economy. The reason is the number of people going abroad in search of job is increasing by leaps and bounds.
The ADB economic update has also portrayed a positive picture of the trend of manpower export from Bangladesh. In 1996, some 380 thousand people have gone abroad for overseas jobs. This figure is 51 per cent above what it was in 1995. During the first six months of 1997, on the other hand, the number of workers that migrated abroad for work is 335 thousand. That means, the number of people seeking job abroad during the first of the current calendar has about closed in on the total number of workers migrating to foreign lands in the previous year. Obviously, the growth in manpower export is increasing very fast every year. So, it is a matter of simple arithmetic to extrapolate the ever increasing size of foreign remittance in the future, given that the existing international market for migrant workers remains steady and predictable over an indefinite period of time.
Assuming that the international market will remain steady and that the manpower export will continue to demonstrate a healthy upward trend, one can logically hope that the country's foreign exchange reserve would also show a progressive growth in the years to come. Then again, the existing bottlenecks in the remittance regime remaining unaddressed, the desired level of benefit from that inflow of foreign currency in the economy will not be forthcoming.
A disconcerting report carried by the print media recently brings to focus a nexus between the local recruiting agencies and the employers or their brokers in the countries in the Middle East and Southeast Asia that host our migrant workers. The nexus, the report reveals, is responsible for smuggling to the tune of Tk. 40 billion annually out of the country through various kinds of payments the overseas jobseekers make to their recruiting agents. The calculation of this figure is based on the fact that on an average around 400,000 workers leave the country every year for foreign jobs and for each of them Tk. 100, 000 is paid as commission to the overseas employers or their agents abroad. This money the local recruiters pay as commission in the form of hundi to the outsourcers of the Bangladeshi workers in the host countries. Undoubtedly, this flight of capital from home is a huge drain on the national economy as well as on the real net earning of the country through manpower export.
Had the transaction for buying job demands abroad been regular and transparent, the migrant workers could be spared the ordeal they have to go through in search of an overseas job. At the same time, the economy would be better served through the process. To cut a long story short, Bangladesh's full potential for earning foreign exchange through manpower export is hitting more than one snag on the way. Firstly, the process of money transfer is cumbersome and lacks efficiency compared to irregular channels. Secondly, the method of sending the migrant workers to foreign lands is also not taking place in a systematic fashion. Thirdly, the government has no well-defined strategy to create trust among the migrant workers to the effect that their effort abroad is worthwhile and that the money will contribute desirably to the home economy's growth.
In fact, there is no point in gloating over the bloating forex account earned through migrant workers' labour unless the condition is created to invest that money productively in the economy. The government needs to put manpower export on a more sound and systematic footing than it is placed at the moment. It should get facilities equivalent to that being enjoyed by other export sub-sectors including the readymade garments.
And, to reap the full harvest of the lucrative crop called remittance, the government will have to modernise as well as render the official channels of money transfer more efficient to beat the informal and irregular channels.
The government often speaks highly of the non-resident Bangladeshis for their huge contribution to the economy. The contribution, as everyone is well aware of, comes in the form of the huge quantity of foreign exchange they send home regularly. Bangladesh is in need of hard currency. Export, foreign aid and Foreign Direct Investment (FDI) are the main sources of foreign currency in Bangladesh. Foreign currency plays a crucial role in meeting the cost of import and the balance of payment. The bigger the size of the foreign exchange reserve, the better it is for a heavily import-dependent country like Bangladesh. With few products to sell abroad, other than garments and some agriculture-based commodities, the country's potential for earning foreign exchange is very limited. Against this backdrop, the manpower export is growingly emerging as an alternative source of earning hard foreign cash for Bangladesh economy.
What was a mere trickle even two decades back has by now turned into a substantial flow of foreign currency into Bangladesh. Small wonder that all quarters are now singing the NRBs' praises for the foreign currency received at home from abroad. But the official channel of receiving the money has not yet been made free from encumbrances. When expatriate workers send their hard earned money home, they want that it should reach their family in a hassle-free manner and within the soonest possible time. Despite all the publicity about the improved services rendered by government-run modes of money transfer through the nationalised commercial banks, the speed of the transfer home from abroad is still very slow compared to the privately operated legal as well as illegal channels. A recently released Asian Development Bank (ADB) update has shown that government-run financial organisations take about a week to reach the expatriate wage earners' money to their respective destinations at home. In sharp contrast to this, the illegal channels that transmit money through the so-called 'hundi' ensure money transfer within half that time and at a premium rate of exchange. So, it is understandable why the hundi mode of transfer is still enjoying popularity among the NRBs.
While accepting the reality that money transfer through illegal channels are faster and more rewarding than the official ones, it is also true that the government's foreign reserve does not get any benefit from such transfer. According to estimates, only half of the entire home-bound remittances are made through regular channels. The rest are sent through informal modes of transfer including hundi. It is, therefore, obvious what a huge quantity of foreign exchange the government is losing day in and day out due to prevalence of irregular channels in the money transfer regime.
There is, however, no point in warning the remitters against going to the hundi operators by telling them that such a process is not reliable or that they run the risk of losing money. On the contrary, if truth be told, remittances made through hundi are based on goodwill, trust and reliability. So, under the normal circumstances, the irregular channels will prevail over the official ones and the economy will continue to be deprived of the full benefit of the inflow of remittance into the economy.
But then why is this furore over the expatriate wage earners' money? Does the country not have other channels, for example, export, foreign investment and aid as the more substantial sources of hard cash contributing more robustly to the economy? Oddly though, the multilateral lending agencies have calculated that the volume of forex earning through remittance is higher than that received through foreign aid and foreign direct investment (FDI) together. But the story does not end here. The rate at which the foreign remittance is flowing into the country will be increasing everyday. And time is not far off when foreign remittance will far outstrip other sources of foreign exchange earning in the economy. The reason is the number of people going abroad in search of job is increasing by leaps and bounds.
The ADB economic update has also portrayed a positive picture of the trend of manpower export from Bangladesh. In 1996, some 380 thousand people have gone abroad for overseas jobs. This figure is 51 per cent above what it was in 1995. During the first six months of 1997, on the other hand, the number of workers that migrated abroad for work is 335 thousand. That means, the number of people seeking job abroad during the first of the current calendar has about closed in on the total number of workers migrating to foreign lands in the previous year. Obviously, the growth in manpower export is increasing very fast every year. So, it is a matter of simple arithmetic to extrapolate the ever increasing size of foreign remittance in the future, given that the existing international market for migrant workers remains steady and predictable over an indefinite period of time.
Assuming that the international market will remain steady and that the manpower export will continue to demonstrate a healthy upward trend, one can logically hope that the country's foreign exchange reserve would also show a progressive growth in the years to come. Then again, the existing bottlenecks in the remittance regime remaining unaddressed, the desired level of benefit from that inflow of foreign currency in the economy will not be forthcoming.
A disconcerting report carried by the print media recently brings to focus a nexus between the local recruiting agencies and the employers or their brokers in the countries in the Middle East and Southeast Asia that host our migrant workers. The nexus, the report reveals, is responsible for smuggling to the tune of Tk. 40 billion annually out of the country through various kinds of payments the overseas jobseekers make to their recruiting agents. The calculation of this figure is based on the fact that on an average around 400,000 workers leave the country every year for foreign jobs and for each of them Tk. 100, 000 is paid as commission to the overseas employers or their agents abroad. This money the local recruiters pay as commission in the form of hundi to the outsourcers of the Bangladeshi workers in the host countries. Undoubtedly, this flight of capital from home is a huge drain on the national economy as well as on the real net earning of the country through manpower export.
Had the transaction for buying job demands abroad been regular and transparent, the migrant workers could be spared the ordeal they have to go through in search of an overseas job. At the same time, the economy would be better served through the process. To cut a long story short, Bangladesh's full potential for earning foreign exchange through manpower export is hitting more than one snag on the way. Firstly, the process of money transfer is cumbersome and lacks efficiency compared to irregular channels. Secondly, the method of sending the migrant workers to foreign lands is also not taking place in a systematic fashion. Thirdly, the government has no well-defined strategy to create trust among the migrant workers to the effect that their effort abroad is worthwhile and that the money will contribute desirably to the home economy's growth.
In fact, there is no point in gloating over the bloating forex account earned through migrant workers' labour unless the condition is created to invest that money productively in the economy. The government needs to put manpower export on a more sound and systematic footing than it is placed at the moment. It should get facilities equivalent to that being enjoyed by other export sub-sectors including the readymade garments.
And, to reap the full harvest of the lucrative crop called remittance, the government will have to modernise as well as render the official channels of money transfer more efficient to beat the informal and irregular channels.