Remittance ought to help growth
Friday, 31 July 2009
Ahmed Ali
The remitted foreign currencies from its overseas workers are a bulwark for the foreign currency reserve of Bangladesh. These help to underwrite steady import operations. At a media briefing on Wednesday organised by World Bank (WB) it was focused that the remittance flow to Bangladesh was projected to rise to $ 10.87 billion marking a nearly 12 per cent growth in the current fiscal year. Both the number of Bangladeshis going abroad with jobs and the remittances sent by them have maintained uptrends, despite the on-going global recession. This is, no doubt, a positive development. But the question which cannot help but arise is: whether the steady and rising flow of remittance is also helping the national economy vitally or creating economic growth as it should.
This issue was underlined at last Wednesday's WB briefing where it was noted that remitted resources are largely getting used up in spending of an unproductive nature than on worthwhile investments to expand the economy or on savings. The WB has been researching on what the beneficiaries of remittances do with the same in Bangladesh and found out that a lion's share go into such consumption activities.
Typically, the family members of an overseas worker who receive the money are likely to spend the greater part of it on just eating and dressing well and in other ways to demonstrate that their lifestyle has improved. In the urban areas, they may want to reflect their better lifestyle by moving into better rented quarters spending higher on rent.
There is hardly a Bangladeshi village now from where some people have not gone abroad with jobs. The families of such people are noted for their wealth display in many cases. These people who once reared their own cows for milk or poultries, now consider such activities as undesirable or not respectful. They would rather buy imported cow's milk to drink and buy poultries from the market than work on their own homesteads to produce essentials and save resources. People of this genre are also seen inviting a large number of people on social occasions like weddings and spending on food, ornaments and other display items. In some cases, they tend to buy lands. This is pushing up extraordinarily the price of land. The total amount of remitted resources being spent on consumption is fast increasing money supply ; therefore, remittance is considered also as contributory to increasing inflation.
Higher consumption, of course, is not always unhelpful for the economy. But in that case, it should be determined whether such consumption patterns are helping to create demand for a rise in local production activities creating jobs and income for people. But activities such as buying imported and canned powdered milk in no way help such objectives. One may say that beauty parlours fuelled by remittance are sprouting in some village areas, too, and growth of this service is not economically baneful for, at least, it creates jobs as beauticians and hairdressers. But the number of such jobs are not that many in number and village damsels can probably do without squandering money on such a lifestyle.
Meanwhile, the relatively much preferable spending of remitted resources would be in areas such as increasing homestead production, in farming or farm and non-farm enterprises such as in small and cottage industries. The net effect of such enterprising in terms of economy expansion, wealth creation, sustainable poverty reduction and employment, would be far greater than extending services such as beauty parlour, retailing of soft drinks and the like.
Thus, government should execute a plan of mopping up a big part of the remittance resources by issuing bonds with higher rates of returns for only the remitters. The resources mobilized from this move must not be spent on meeting government's administrative and non-productive expenditures but should go directly into productive sectors of the economy and building infrastructures.
Government's role in this area needs to be also the one of raising the awareness of remitters and their families that they can better spend the remitted money gainfully for themselves and the national economy. The national economy will largely be benefited through greater institutional saving of remitted money and from directly utilizing the same on productive ventures having longer-term prospects of returns.
The remitted foreign currencies from its overseas workers are a bulwark for the foreign currency reserve of Bangladesh. These help to underwrite steady import operations. At a media briefing on Wednesday organised by World Bank (WB) it was focused that the remittance flow to Bangladesh was projected to rise to $ 10.87 billion marking a nearly 12 per cent growth in the current fiscal year. Both the number of Bangladeshis going abroad with jobs and the remittances sent by them have maintained uptrends, despite the on-going global recession. This is, no doubt, a positive development. But the question which cannot help but arise is: whether the steady and rising flow of remittance is also helping the national economy vitally or creating economic growth as it should.
This issue was underlined at last Wednesday's WB briefing where it was noted that remitted resources are largely getting used up in spending of an unproductive nature than on worthwhile investments to expand the economy or on savings. The WB has been researching on what the beneficiaries of remittances do with the same in Bangladesh and found out that a lion's share go into such consumption activities.
Typically, the family members of an overseas worker who receive the money are likely to spend the greater part of it on just eating and dressing well and in other ways to demonstrate that their lifestyle has improved. In the urban areas, they may want to reflect their better lifestyle by moving into better rented quarters spending higher on rent.
There is hardly a Bangladeshi village now from where some people have not gone abroad with jobs. The families of such people are noted for their wealth display in many cases. These people who once reared their own cows for milk or poultries, now consider such activities as undesirable or not respectful. They would rather buy imported cow's milk to drink and buy poultries from the market than work on their own homesteads to produce essentials and save resources. People of this genre are also seen inviting a large number of people on social occasions like weddings and spending on food, ornaments and other display items. In some cases, they tend to buy lands. This is pushing up extraordinarily the price of land. The total amount of remitted resources being spent on consumption is fast increasing money supply ; therefore, remittance is considered also as contributory to increasing inflation.
Higher consumption, of course, is not always unhelpful for the economy. But in that case, it should be determined whether such consumption patterns are helping to create demand for a rise in local production activities creating jobs and income for people. But activities such as buying imported and canned powdered milk in no way help such objectives. One may say that beauty parlours fuelled by remittance are sprouting in some village areas, too, and growth of this service is not economically baneful for, at least, it creates jobs as beauticians and hairdressers. But the number of such jobs are not that many in number and village damsels can probably do without squandering money on such a lifestyle.
Meanwhile, the relatively much preferable spending of remitted resources would be in areas such as increasing homestead production, in farming or farm and non-farm enterprises such as in small and cottage industries. The net effect of such enterprising in terms of economy expansion, wealth creation, sustainable poverty reduction and employment, would be far greater than extending services such as beauty parlour, retailing of soft drinks and the like.
Thus, government should execute a plan of mopping up a big part of the remittance resources by issuing bonds with higher rates of returns for only the remitters. The resources mobilized from this move must not be spent on meeting government's administrative and non-productive expenditures but should go directly into productive sectors of the economy and building infrastructures.
Government's role in this area needs to be also the one of raising the awareness of remitters and their families that they can better spend the remitted money gainfully for themselves and the national economy. The national economy will largely be benefited through greater institutional saving of remitted money and from directly utilizing the same on productive ventures having longer-term prospects of returns.