Productive use of remittance
Thursday, 13 August 2009
Shafique Ahmed
REMITTANCE from Bangladeshi workers abroad is going up despite some unexpected developments abroad. According to the Bangladesh Bank (BB), remittance totalling $8.22 billion was received in the country in the last calendar year, marking a 25.36 per cent growth over the previous year's. The central bank expects the remittance to reach over $10 billion this year, despite global recession and other not-so-encouraging factors.
More money is coming through the officially approved channels. The remittance through the 'hundi' system is shrinking. There are plans to make remittance through the official channels more attractive to Bangladeshis abroad. It would be good to reduce the time needed to reach the money to the beneficiaries back home. The banks and money exchange houses should charge less from the remitters. The money should reach the beneficiaries at their doorsteps.
All these measures, if implemented, would be a welcome development. But the question that looms large is : whether or not the money could be better utilised. The remittance certainly shores up the country's reserve and helps to carry out import activities in a smooth way. The remittance earnings help the workers' families back home.
But there is no denying that much of the hard earned foreign exchange would continue to be spent for conspicuous consumption,such as buying lands, ornaments, luxury goods, for weddings and even just to show off. Of course, for many dependent families, it goes to buy daily necessities. Little is spent on the establishment of industries or other productive activities to generate employment or help accelerate economic growth on a sustained basis.
Unproductive use of remittance also contributes to inflation. It swells money in circulation without translating into corresponding output. Of course, it gives greater purchasing power to the beneficiary families. It seems that there is not a single village in the country without some of its individuals working overseas. The money pushes the demand and prices for many consumer items up.
It is, therefore, imperative to plan better utilisation of the hard-earned resource for productive activities. A government cannot decide how the money would be spent by the senders and the beneficiaries. But it can create opportunities for them to invest their resources in gainful productive ventures. The government needs to create incentives for such investment.
The greatest motivation for investment would be for the people to know its benefits. Side by side, government should attract a part of the money into official savings schemes or industrial bonds. It would help boost national savings for utilisation for industrialisation or other productive activities, that can accelerate the pace of economic growth.
REMITTANCE from Bangladeshi workers abroad is going up despite some unexpected developments abroad. According to the Bangladesh Bank (BB), remittance totalling $8.22 billion was received in the country in the last calendar year, marking a 25.36 per cent growth over the previous year's. The central bank expects the remittance to reach over $10 billion this year, despite global recession and other not-so-encouraging factors.
More money is coming through the officially approved channels. The remittance through the 'hundi' system is shrinking. There are plans to make remittance through the official channels more attractive to Bangladeshis abroad. It would be good to reduce the time needed to reach the money to the beneficiaries back home. The banks and money exchange houses should charge less from the remitters. The money should reach the beneficiaries at their doorsteps.
All these measures, if implemented, would be a welcome development. But the question that looms large is : whether or not the money could be better utilised. The remittance certainly shores up the country's reserve and helps to carry out import activities in a smooth way. The remittance earnings help the workers' families back home.
But there is no denying that much of the hard earned foreign exchange would continue to be spent for conspicuous consumption,such as buying lands, ornaments, luxury goods, for weddings and even just to show off. Of course, for many dependent families, it goes to buy daily necessities. Little is spent on the establishment of industries or other productive activities to generate employment or help accelerate economic growth on a sustained basis.
Unproductive use of remittance also contributes to inflation. It swells money in circulation without translating into corresponding output. Of course, it gives greater purchasing power to the beneficiary families. It seems that there is not a single village in the country without some of its individuals working overseas. The money pushes the demand and prices for many consumer items up.
It is, therefore, imperative to plan better utilisation of the hard-earned resource for productive activities. A government cannot decide how the money would be spent by the senders and the beneficiaries. But it can create opportunities for them to invest their resources in gainful productive ventures. The government needs to create incentives for such investment.
The greatest motivation for investment would be for the people to know its benefits. Side by side, government should attract a part of the money into official savings schemes or industrial bonds. It would help boost national savings for utilisation for industrialisation or other productive activities, that can accelerate the pace of economic growth.