Unproductive use of remittances remains a cause for concern
Thursday, 3 June 2010
S. M. Abu Zaker
Population is the main problem of Bangladesh due to which the economic growth could not be achieved at a desired level. As such, every government takes necessary steps to export manpower to ease unemployment problem and increase foreign exchange earnings. These are the positive effects of foreign remittance. But the negative effect of the foreign remittance is required to be highlighted.
As per Bangladesh Bank statistics the wage earners remitted Tk.27256.20 million (US$763.91 million) in 1990-91 in Bangladesh. Within almost 20 years the inward foreign remittance increased 24 times i.e the remittance stood at Tk.666758.50 million ($9689.26 million) in 2008-2009. Actually it is a major foreign currency-earning sector of Bangladesh, which is strengthening the Bangladesh economy a lot. But due to lack of investment friendly environment as well as investment opportunity the remitted money could not be utilised in productive areas. An ignorant wage earner does not find out any productive sector where he can invest his money safely. Finding no other alternative the majority of wage earners spend their money on purchasing land or deposit in the bank in the form of Fixed Deposit. It is observed the wage earners normally prefer to buy land even by encashing fixed deposits. They feel safe to invest their money on land as the price of land continues to rise in this country of rising population growth. In village Dohazari of Chittagong the price of one decimal paddy land was Tk.2000 only in 1990. The price of the same land has increased to Tk.25000 in 2009. This means the rate of increase of the land price over almost 20 years is 13 times. Interestingly, the yield per acre over the period has not been increased. Though price of paddy has increased 3 times over the period, the total cost of the production has also increased 3 times over that period. Actually the net profit from the produce did not increase. So, it is found in that village that the profitability of the produce of that paddy land is not increasing, but the price of that paddy land has increased manifold. The wage earners of that village are interested to buy the agricultural land because they consider it as a safe investment and a durable asset. As the number of wage earners of that village has increased substantially, the unusual competition among them to buy the land leads to price hike of land, though productivity and yield of the land remains unchanged. The unhealthy competition for purchase of land has led to landlessness. The farmers who have small pieces of land are no more interested to cultivate the land, as the farming seems not feasible at all. But as there was no other alternative of earning livelihood they were forced to stay on cultivation to continue with their forefather's profession. As now-a-days the price of land has increased beyond expectation, they can easily manage sufficient fund to raise capital for switching over to other profession by selling even a small piece of land. Moreover, many farmers are spending on procuring VISA for Middle East or other countries for their sons at a cost of Tk.300,000 to Tk.500,000. This amount is being managed by selling their agricultural land. Due to such selling of land the farmers are becoming completely landless. Though after 5 to 10 years their sons will be eligible to purchase land, overall situation of landlessness will worsen. Now, a large number of farmers are switching over to other profession like trading and other unproductive activities as they have been induced to sell their land for good amount of money. Moreover, as the sons of the farmers are not becoming farmers and abstaining themselves from the cultivation process the productivity of agricultural land has dwindled.
According to Bureau of Statistics, the total area of cultivable land of the country was 20 million acre in 2003, which has reduced to 19.3 million acre after 5 years i.e in 2008, which is comparable with the area of 20.20 million acre in 1984. Though there are some other factors due to which cultivable land is declining, but due to inward remittance the rate of reduction of cultivable land is not negligible. Because, it is observed that most of the wage earners purchase the land not for cultivation but for dwelling houses for their own and rental income or for selling it as residential plot. Many of them purchase the land for monetary benefit, as bank interest is no more lucrative to them.
For the economic growth of the country the inward remittance is obviously essential. But we should seriously ponder as to how the remittance can be used in profitable and productive areas.
The writer is a vice president and manager of Exim Bank. He can be reached at abu_zaker@yahoo.com
Population is the main problem of Bangladesh due to which the economic growth could not be achieved at a desired level. As such, every government takes necessary steps to export manpower to ease unemployment problem and increase foreign exchange earnings. These are the positive effects of foreign remittance. But the negative effect of the foreign remittance is required to be highlighted.
As per Bangladesh Bank statistics the wage earners remitted Tk.27256.20 million (US$763.91 million) in 1990-91 in Bangladesh. Within almost 20 years the inward foreign remittance increased 24 times i.e the remittance stood at Tk.666758.50 million ($9689.26 million) in 2008-2009. Actually it is a major foreign currency-earning sector of Bangladesh, which is strengthening the Bangladesh economy a lot. But due to lack of investment friendly environment as well as investment opportunity the remitted money could not be utilised in productive areas. An ignorant wage earner does not find out any productive sector where he can invest his money safely. Finding no other alternative the majority of wage earners spend their money on purchasing land or deposit in the bank in the form of Fixed Deposit. It is observed the wage earners normally prefer to buy land even by encashing fixed deposits. They feel safe to invest their money on land as the price of land continues to rise in this country of rising population growth. In village Dohazari of Chittagong the price of one decimal paddy land was Tk.2000 only in 1990. The price of the same land has increased to Tk.25000 in 2009. This means the rate of increase of the land price over almost 20 years is 13 times. Interestingly, the yield per acre over the period has not been increased. Though price of paddy has increased 3 times over the period, the total cost of the production has also increased 3 times over that period. Actually the net profit from the produce did not increase. So, it is found in that village that the profitability of the produce of that paddy land is not increasing, but the price of that paddy land has increased manifold. The wage earners of that village are interested to buy the agricultural land because they consider it as a safe investment and a durable asset. As the number of wage earners of that village has increased substantially, the unusual competition among them to buy the land leads to price hike of land, though productivity and yield of the land remains unchanged. The unhealthy competition for purchase of land has led to landlessness. The farmers who have small pieces of land are no more interested to cultivate the land, as the farming seems not feasible at all. But as there was no other alternative of earning livelihood they were forced to stay on cultivation to continue with their forefather's profession. As now-a-days the price of land has increased beyond expectation, they can easily manage sufficient fund to raise capital for switching over to other profession by selling even a small piece of land. Moreover, many farmers are spending on procuring VISA for Middle East or other countries for their sons at a cost of Tk.300,000 to Tk.500,000. This amount is being managed by selling their agricultural land. Due to such selling of land the farmers are becoming completely landless. Though after 5 to 10 years their sons will be eligible to purchase land, overall situation of landlessness will worsen. Now, a large number of farmers are switching over to other profession like trading and other unproductive activities as they have been induced to sell their land for good amount of money. Moreover, as the sons of the farmers are not becoming farmers and abstaining themselves from the cultivation process the productivity of agricultural land has dwindled.
According to Bureau of Statistics, the total area of cultivable land of the country was 20 million acre in 2003, which has reduced to 19.3 million acre after 5 years i.e in 2008, which is comparable with the area of 20.20 million acre in 1984. Though there are some other factors due to which cultivable land is declining, but due to inward remittance the rate of reduction of cultivable land is not negligible. Because, it is observed that most of the wage earners purchase the land not for cultivation but for dwelling houses for their own and rental income or for selling it as residential plot. Many of them purchase the land for monetary benefit, as bank interest is no more lucrative to them.
For the economic growth of the country the inward remittance is obviously essential. But we should seriously ponder as to how the remittance can be used in profitable and productive areas.
The writer is a vice president and manager of Exim Bank. He can be reached at abu_zaker@yahoo.com