Remittance in Nepal: Fact, trend, and effect of COVID 19
Introduction to Foreign
Employment
When
the labor force of any country moves to another country for job opportunities
then it is called foreign employment. It means it is the situation of getting
work outside of the homeland or job was done in a foreign land. It is the process of draining the youths to foreign countries for earning money and raising the standard
of living.
In the world there are many countries, which are poor, unemployed, and politically unstable and based on agricultural output. So, these factors push their citizens to go for foreign employment. It means different factors like unemployment problem, poverty, fewer income jobs, and individuals wish for better life standard in these nations are compelled people to go foreign land.
There
is exactly the same case for Nepal as well. Existing poverty, increasing economic
inequality, political instability, irresponsible governance, and state, and
youths wish to not confine themselves within the country, etc are the inspiring
factors to push Nepalese workers to foreign soil.
Increasing demand for workers from South Asian countries is also a factor for the increase in the number of Nepalese going for foreign employment. The influences from friends, relatives as well as pressure from family also play a prominent role in the promotion of foreign employment in Nepal.
The trend on people who want to go foreign employment in very recent time is somehow towards falling down but still a significant number of Nepalese workforces is working outside the country.
Increasing demand for workers from South Asian countries is also a factor for the increase in the number of Nepalese going for foreign employment. The influences from friends, relatives as well as pressure from family also play a prominent role in the promotion of foreign employment in Nepal.
The trend on people who want to go foreign employment in very recent time is somehow towards falling down but still a significant number of Nepalese workforces is working outside the country.
Historical view on
foreign employment of Nepal: From global warrior to global workers
After
Anglo-Nepal War, the history of Nepalese going abroad for employment has
started. Although there is prolong history of foreign employment of Nepal, the
informal and temporary migration for foreign employment started before early 19th a century where Nepalese traveled Lahore (Now Pakistan) to join the Army of
Sikha Ruler Ranajit Singh.
But if we look in the numerical number, after Anglo-Nepal Treaty of Peace and Friendship of 1816 that recruited 3000 Nepalese soldiers in the British Gurkha Regiment. Thereafter, the signing of Peace and Friendship Treaty between India and Nepal in 1950 was a turning point in the movement of Nepalese migrants for employment in India. The treaty established the movement of workers on a reciprocal basis and Nepalese labors needed to work permits.
But if we look in the numerical number, after Anglo-Nepal Treaty of Peace and Friendship of 1816 that recruited 3000 Nepalese soldiers in the British Gurkha Regiment. Thereafter, the signing of Peace and Friendship Treaty between India and Nepal in 1950 was a turning point in the movement of Nepalese migrants for employment in India. The treaty established the movement of workers on a reciprocal basis and Nepalese labors needed to work permits.
After
the enactment of the Foreign Employment Act, 1985, Nepalese workers started to
migrate beyond India for employment. Until the restoration of democracy in
2046, the majority of the Nepalese workers mainly visited India.
But, after much political change and different movements in Nepal, the situation and trend of Nepalese worker's movements to foreign employment have diversified and people extensively started to go beyond India, especially they started to go to the gulf countries for foreign employment.
The boom of oil industries in Gulf countries created a massive demand for the labour force. Consequently, a large number of Nepalese youths migrated to Gulf countries for employment. As per the data and information of the Department of Foreign Employment (DofE), around 1,500 workers cross-national territory for a job every day taking a work permit.
Malaysia, South Korea, UAE, Qatar, Bahrain, Kuwait, Israel, and Hong-Kong have been the major utopian land for seeking their future. However, educated and skilled people in Nepal also started to visit Europe, America, and Japan. India is still a popular destination for foreign employment for the majority of the people from Sudur Paschim and Karnali provinces.
But, after much political change and different movements in Nepal, the situation and trend of Nepalese worker's movements to foreign employment have diversified and people extensively started to go beyond India, especially they started to go to the gulf countries for foreign employment.
The boom of oil industries in Gulf countries created a massive demand for the labour force. Consequently, a large number of Nepalese youths migrated to Gulf countries for employment. As per the data and information of the Department of Foreign Employment (DofE), around 1,500 workers cross-national territory for a job every day taking a work permit.
Malaysia, South Korea, UAE, Qatar, Bahrain, Kuwait, Israel, and Hong-Kong have been the major utopian land for seeking their future. However, educated and skilled people in Nepal also started to visit Europe, America, and Japan. India is still a popular destination for foreign employment for the majority of the people from Sudur Paschim and Karnali provinces.
Migration and Remittance:
Issue for Nepal
A notable proportion of Nepalese citizens engaged in wage labor perform their
work at a place distinct from home and thus migration of labor and remittance
income plays a vital role in the Nepalese economy and society as a whole.
According to approach paper to 13th Plan, and
Population Census Report (2011) the economically active population (those aged
15-59 years) comprises 56.96 percent of the total population of Nepal.
Around 30 percent of economically active are unemployed or underemployed and
more than 450,000 people enter the labor market annually.
The lack of adequate employment opportunities within the country has created a high rate of emigration for foreign employment, around 1,500 individuals every day. Due to increased globalization foreign employment has been increasing each year. Due to an increase in foreign employment, the Nepalese economy is enjoying an increasing trend in remittance income but it has also increased foreign dependency at the same time.
The lack of adequate employment opportunities within the country has created a high rate of emigration for foreign employment, around 1,500 individuals every day. Due to increased globalization foreign employment has been increasing each year. Due to an increase in foreign employment, the Nepalese economy is enjoying an increasing trend in remittance income but it has also increased foreign dependency at the same time.
Remittance in Nepal: Fact, trend, and effect of COVID 19
Remittance is defined as a transfer in cash or kind sent
to or received by households over the year. All transfer received from or sent
to a single source is counted as a remittance.
While looking at the data on remittance to Nepal, one of the most detailed national sources on remittance for the 1990s is provided in the Nepal Living Standard Survey (NLSS) for 1995/96. The data of the World Bank shows remittance inflow to Nepal accounted from 0.99 to around 32 percent of GDP of Nepal.
While looking at the data on remittance to Nepal, one of the most detailed national sources on remittance for the 1990s is provided in the Nepal Living Standard Survey (NLSS) for 1995/96. The data of the World Bank shows remittance inflow to Nepal accounted from 0.99 to around 32 percent of GDP of Nepal.
Table-I: Personal remittances received (% of
GDP)
Year
|
Remittance
Income (% of GDP)
|
Year
|
Remittance
Income (% of GDP)
|
1993
|
1.489
|
2007
|
16.79
|
1994
|
1.232
|
2008
|
21.73
|
1995
|
1.291
|
2009
|
23.20
|
1996
|
0.977
|
2010
|
21.64
|
1997
|
1.006
|
2011
|
22.29
|
1998
|
1.390
|
2012
|
25.42
|
1999
|
1.658
|
2013
|
28.97
|
2000
|
2.029
|
2014
|
29.44
|
2001
|
2.447
|
2015
|
31.43
|
2002
|
11.21
|
2016
|
31.21
|
2003
|
12.18
|
2017
|
27.51
|
2004
|
11.30
|
2018
|
28.56
|
2005
|
14.90
|
2019
|
27.3
|
2006
|
16.06
|
Source: World Bank
 |
| Remittance inflow to Nepal (1993-2019)
The figure exhibits total remittances as a percentage of GDP from 1993 to 2019. Y-axis shows the total remittances inflows
as a percentage of GDP and the X-axis shows the time period. The remittance inflow
looks up to fiscal year from the year 2001 from 1993. Total remittance is in
increasing trend especially after 2002.
The inflow of remittance looks decreasing from 2017 and in 2019 it is estimated about 27.3 percent of GDP of Nepal by the World Bank. In amount, it is $8.1 billion in 2019 and while comparing with data of 2018, it is grown by 2.71% only as it was $7.886 billion in 2018 as per the data of the World Bank. Due to the pandemic and lockdown of 2020 WB has projected that the remittance inflow of Nepal will decrease by 14 percent. It means the inflow of remittance as a percentage of GDP to Nepal also reduced more in 2020.
Key Features of migration
from Nepal
There
are few significant features of labor and
worker migration and remittance of Nepal. One of them is an important role of India as a major destination for Nepalese workers. It may be due to the physical
closeness, and accessible labor market of India.
There is no accurate figure regarding how many Nepalese are working and living in India but according to different census reports of the government and other media reports approximately 3 million Nepalese are living and working in India and most of them are from the far western and western regions of Nepal.
The majority of the Nepalese
workers in India are low wage earners and inferior types of workers.
According to the report of International migration, multi-local livelihoods, and human security; Perspective from Europe, Asia and Africa (2017) there are two types of Nepalese workers in India. One, those who have established in India after a prolonged period of work and second are not settled types of workers. The following are the major sectors where the majority of the Nepalese workers are working in India. |
- A restaurant worker in both big and roadside small Dhaba,
- Factory workers
- Watchmen
- Driver
- House Servant
- Agriculture
- Porter
- Stone puling
- Coalman workers
- Rickshaw puller
- Indian government servant
While looking the recent data of Economic Survey, more than 1000,000 Nepalese people are working in Malaysia only. A total of 4,365,415 workers have been migrated for foreign employment by the end of FY 2017/18. Out of them, 41, 67,310 are male, and 1, 98,105 are female workers. Till mid-March of FY 2018/19, out of total number of workers migrated for foreign employment, 30.1 percent workers migrated to Malaysia, 27.4 percent to Qatar, 20.2 percent to Saudi Arabia, 13.1 percent to United Arab Emirates and 9.2 percent to other countries. Institutionally, Nepal Government has opened 110 countries for foreign employment but, on individual basis, Nepali workers have been migrated to 172 countries for foreign employment from labor approval. The main destinations of Nepalese workers are Malaysia, Qatar, Kuwait, Bahrain, Saudi Arabia and United Arab Emirates. A total of 45, 40,906 Nepali youths have received labor approval for foreign employment from FY 2009/10 to mid-March of FY 2018/19.
Table-II:
Descriptive statistics of remittance inflow over the last 27 years
Remittance as percentage of GDP
|
Inflow of remittance (US$ in Billion)
|
|
Mean
|
15.36022
|
2.728000
|
Median
|
16.06900
|
1.453231
|
Maximum
|
31.43200
|
8.293841
|
Minimum
|
0.977000
|
0.044160
|
Observations
|
27
|
27
|
Source:
Own Calculation
The data in the above
table shows, the average value of the ratio of remittance to GDP of Nepal is 15.35
percent during the last 27 years from 1993 to 2019. Maximum was accounted in
2015/16 with 31.43 percent of GDP and least was in the year 1996 with 0.977 percentage
of GDP.
Similarly, if we see as per the amount of money in US $, on an average, Nepal is receiving 2.73 billion US $ remittance with a maximum value of US $ 8.29 billion in 2018 and lowest in 1996 with an amount of 0.044 billion US $.
Similarly, if we see as per the amount of money in US $, on an average, Nepal is receiving 2.73 billion US $ remittance with a maximum value of US $ 8.29 billion in 2018 and lowest in 1996 with an amount of 0.044 billion US $.
Table-III: Annual remittance inflow to Nepal over the last 27 years
Year
|
Remittance inflow (USD Billion)
|
Year
|
Remittance inflow (USD Billion)
|
1993
|
0.055
|
2007
|
1.734
|
1994
|
0.050
|
2008
|
2.727
|
1995
|
0.057
|
2009
|
2.983
|
1996
|
0.044
|
2010
|
3.464
|
1997
|
0.049
|
2011
|
4.217
|
1998
|
0.068
|
2012
|
4.793
|
1999
|
0.083
|
2013
|
5.584
|
2000
|
0.111
|
2014
|
5.889
|
2001
|
0.147
|
2015
|
6.730
|
2002
|
0.678
|
2016
|
6.612
|
2003
|
0.771
|
2017
|
6.928
|
2004
|
0.823
|
2018
|
8.294
|
2005
|
1.212
|
2019
|
8.100
|
2006
|
1.453
|
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| The inflow of remittance to Nepal in USD
Nepalese Economy is
Remittance Based Economy: Some shreds of evidence
Nepal Living Standards
Survey (NLSS) report of 1995/96 of the government of Nepal was the first and
detailed document to find the data and information relating to remittance in
Nepal during the 1990s. Thereafter government of Nepal has published the same
report in 2003/04 and again in 2010/11.
The NLSS report for 1995/96 shows that 760 of the 3322sample households receive a total number of 954 cases of remittance and which accounted for 23% of families were receiving during the year.
Table-IV:
Distribution of remittances in Nepal (Based on three reports of NLSS)
Source: NLSS
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Impact
of COVID-19 in global remittance and remittance to Nepal
The pandemic may have a long-lasting and severe impact on the economy of Nepal if we
see it from the side of remittance income. The entire world is in lockdown
for the last 45 days and this has brought stop in all the economic activities
all over the world.
It has increased so many challenges in all the sectors of the economy throughout the world. For a country like Nepal, from where more than 45 lakhs youths are in foreign employment in more than 170 countries and have contributed economy with significant figures and values, which could have a deep and serious loss to the entire economic system of the nation.
It has increased so many challenges in all the sectors of the economy throughout the world. For a country like Nepal, from where more than 45 lakhs youths are in foreign employment in more than 170 countries and have contributed economy with significant figures and values, which could have a deep and serious loss to the entire economic system of the nation.
Recently
the World Bank said through a report named COVID-19 Crisis through a Migration
Lens, there could be a deep, long, and universal economic crisis when viewed
through the migration lens. The economic impact of COVID-19 may be seen in
different forms.
Remittance has provided an economic lifeline to the poor HHs in the countries like Nepal and due to coronavirus, almost all the countries are facing health crisis-driven economic recession and due to this, there is high possibility of a loss of employment, wages, health insurance coverage and other kind payments to the migrant workers.
Remittance has provided an economic lifeline to the poor HHs in the countries like Nepal and due to coronavirus, almost all the countries are facing health crisis-driven economic recession and due to this, there is high possibility of a loss of employment, wages, health insurance coverage and other kind payments to the migrant workers.
According to the World Bank, the economic impact of COVID-19 is the most serious and deep than any other pandemic ever. The current world is highly interconnected and countries are linked with each other with different means and with a global spread of the coronavirus all the chain and links are broken down and affect is noticed universally. Due to such reason the economic and financial effect of COVID-19 seems most severe and deep than the rest of the epidemics.
The highlight of the report
The
economic crisis driven by COVID-19 could be long, deep and pervasive from the view
point of migration and remittance inflows.
Migrants
may face the exposure of contamination and also the possibility of a loss of
employment, wages, and health insurance coverage.
According to the report, in 2020, remittance flows to low‐ and middle‐income countries are expected to drop by around 20 percent to $445 billion, from $554 billion in 2019. It means the global flow of remittance is expected to fall by 20 percent.
Effect
in East Asia and the Pacific Region
In 2020, due to the impact of COVID‐19, the remittance flows are expected to cry off by 13 percent.
In 2020, due to the impact of COVID‐19, the remittance flows are expected to cry off by 13 percent.
Effect
in Europe and the Central Asian Region
In 2020, this region is estimated to face the most
significant and the highest percentage of decline in remittance inflows as a comparison to the rest of the world. It is expected to fall by about 28 percent, due to
the combined effect of the global coronavirus pandemic and sinking oil prices.
Effect
in Latin America and the Caribbean Region
In 2020, the remittance
flows to the LAC region are expected to fall by 19.3 percent. These
projected growth rates are lower than the decrease of 12.3 percent during the global financial crisis of 2009.
Effect
in the Middle East and North African Region
Remittances to the MENA region are projected to fall
by about
20 percent in 2020, following a rise of 2.6 percent in 2019.
The effect in the South Asian Region
The inflow of remittance to the South Asian Region was
grown by 6.1 percent in 2019. But in 2020 due to the global pandemic remittance
flow to South Asia are projected to decline sharply by 22 percent.
Effect
in Sub-Saharan African Region
In 2020, due to the causes of COVID‐19 crisis, remittances
are expected to down by 23.1 percent.
The
effect on inflow of remittance to different sectors
of the world can be shown in the following diagram;
More
on the case of South Asia and Nepal
India is the largest remittance receiver country of South Asia and in fact, India is in the first rank in remittance receiver
countries from the global factor market. India is followed by Pakistan,
Bangladesh and in the fourth rank are our country Nepal.
But if we see the inflow of remittance as the ratio of country’s GDP Nepal comes in the first rank in South Asia and which is followed by Pakistan, Sri Lanka, Bangladesh, Afghanistan, and India comes in 6th place.
Due to
COVID-19 the region is expected to the lost inflow of remittance by 22 percent. The following table shows the countrywide expected decline in South Asia.
Table-VI: The expected decline rate of remittance inflow to South Asian Countries
Country
|
Expected
rate of decline (%)
|
India
|
-23
|
Pakistan
|
-23
|
Bangladesh
|
-22
|
Sri
Lanka
|
-19
|
Nepal
|
14
|
Afghanistan
|
NA
|
Bhutan
|
NA
|
Source:
World Bank
Following graph shows the
rate of expected decline of remittance inflow to South Asian countries due to
the effect of COVID-19 in 2020.
India and Pakistan both are expected to decline in remittance inflows by 23 percent, 22 percent in Bangladesh, in Sri Lanka it is expected by 19 percent and in Nepal by 14 percent.
India and Pakistan both are expected to decline in remittance inflows by 23 percent, 22 percent in Bangladesh, in Sri Lanka it is expected by 19 percent and in Nepal by 14 percent.
Source: World Bank
According to
the World Bank the remittance inflow to Nepal was 8.1 billion US $ and accounted
27.3 percent of GDP of Nepal. If we consider the rate of decline projected
by the World Bank, the amount of remittance to Nepal in 2020 will 6.966 billion
US $, lowest in the past three years.
According to the data of Nepal Rastra Bank, in the
first eight months of fiscal year 2019/20, Nepal has received Rs. 592.42 (5.2
billion USD) billion and which is 1.8 percent increment as a comparison to the
same time period of the previous year.
Fortunately, or providently, before the starting of a global pandemic, the current fiscal year of Nepal has completed its initial
eight months with the normal situation and received almost 5.2 billion USD as
remittance and this amount covers about 65 percent of the average expected amount
of remittance to be received in the current fiscal year.
With four months to go before the end of the current
financial year, the epidemic has spread and the country has been in lockdown
for the past two months. Still, we have two months to end of the current fiscal
year but how long will this epidemic last and when will the countries reopen
from lockdown, it is yet not sure.
With this, the country has already felt the decrease in remittance inflow by more than 80 percent during the two months of lockdown and still, we are in lockdown so it can be estimated that the remittance to Nepal in this year could be declined by about 15 to 20 percent with comparison to a previous fiscal year.
With this, the country has already felt the decrease in remittance inflow by more than 80 percent during the two months of lockdown and still, we are in lockdown so it can be estimated that the remittance to Nepal in this year could be declined by about 15 to 20 percent with comparison to a previous fiscal year.
Role
of Government to lessen the adverse effect of falling remittance
The government collects its revenue from different sources
like value-added tax, income tax, customs duty, non-tax revenue, and so on. Among
these sources, custom accounts around 20 percent, which is a significant value
for the small economy like Nepal and it is almost near to the contribution of
income tax to the revenue of the government (about 25 percent).
It shows an immense volume of imports in the country. The increasing contribution of custom duty to the revenue of the government is inspired by the inflow of remittance. Remittance has increased the consumption pattern of Nepalese residents and has increased in the demand for the product in the market.
With very little production inside the territory, the government has to import to meet the market demand and through this economy was running smoothly, and the government was also able to get a huge amount of tax conveniently.
It shows an immense volume of imports in the country. The increasing contribution of custom duty to the revenue of the government is inspired by the inflow of remittance. Remittance has increased the consumption pattern of Nepalese residents and has increased in the demand for the product in the market.
With very little production inside the territory, the government has to import to meet the market demand and through this economy was running smoothly, and the government was also able to get a huge amount of tax conveniently.
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