19 July 2004	Monday	01 Jamadi-us-Saani 1425

Home remittances of Pakistanis overseas, estimated at three million or more, who send home nearly four billion dollars through formal channels by now, run the risk of declining steadily.

The total remittances had gone down officially to under one billion dollars before 9/11. And the remittances from the US were as low at $80 million; but since the US administration and other governments began looking into their bank accounts, the global remittances of Pakistanis abroad have gone up to nearly $4 billion.

And the remittances from the US which had shot up to $1,235 million in 2002-03 came down to a billion dollars last fiscal year. While the total remittances by Pakistanis were expected to decline on the basis of preliminary reports the year has closed on June 30 with almost $4 billion.

But now the Gulf states which employ about two-thirds of the Pakistani workers abroad are making frantic efforts to replace expatriate workers with their own work-force.

The reasons for that are many: the population of the gulf states is increasing rapidly and there is a large rise in the number of their nationals seeking jobs. The percentage of the population entering the job market is reported to be as high as four per cent. An increasing number of local women, too, are seeking employment, unlike in the past.

There is also a great political risk in letting a large number of nationals of the Gulf states remain unemployed. The Gulf governments, including those of Saudi Arabia and UAE, want to meet the basic demands of their people, particularly for employment and as quickly as possible.

When the people of the region are denied their political rights, they cannot be denied their economic rights, particularly employment. The local people have been preferring public sector, employment where the work load is not heavy, working hours not very long and the pay scales are good.

By now a minimum about 35 per cent of the jobs in the public sector have been taken by the nationals of the Gulf states. In many states far more. But by now jobs in the public sector have reached the saturation point.

Bahrain, Oman and Saudi Arabia have a relatively high percentages of the their nationals in their work force. So the governments are finding it difficult to continue to play their role of employer of the first and last resort.

A working paper was prepared for the IMF recently by Ugo Fasano of the IMF's Middle East, and Central Asia Department and Rishi Goyal of the IMF's Western Hemisphere Department on how the Gulf government are trying to cope with the rising demand of their nationals for employment in the face of shortage of vacancies or inadequate new jobs.

The Gulf governments are determined to create new jobs to meet not only the current demand for employment but also the future demand in view of the rapidly increasing population and the political need to accommodate them quickly in new jobs.

The governments realise the oil reserves of various sizes in different countries may get depleted in course of time, and in some countries rather quick. Hence the stress is on expansion of the non-oil sector and exploring altogether new avenues for employment.

Dubai after having very successfully established the Jubail Ali Free Trade Area is looking for other new avenues of a large kind. It is trying to become a tourist and convention centre, particularly after the annual meeting of the World Bank and the IMF there with great success last year.

It is now trying to become an international financial centre and a major regional stock market. Dubai is also inviting people to buy homes there and live there, particularly the rich retires from the West in view of its peaceful environment.

Bahrain has been a remarkable success in non-oil sector industry and services. It has become a major financial and banking hub of the region. And 80 per cent of its GDP is estimated to come from the non-oil sector.

So far the nationals of these countries preferred public sector jobs, while the expatriates went for the higher paying private sector jobs. But while the pay scales were better in the private sector, the qualifications can be more demanding and the hours of working long.

Now while 35 per cent of the jobs in the public sector have been taken up by the nationals of the Gulf states in Bahrain, that figure is an high as 90 per cent in the United Arab Emirates, according to the IMF working paper.

The Gulf states want their nationals qualify for the technical jobs in the private sector and with that end in view has made higher education and technical training almost free for their people. But not enough of their nationals are opting for such exacting training.

Hence such jobs are taken up by the expatriates, who are not now given jobs as readily as before and the governments verify the qualifications of the expatriates before issuing work visas for them.

The locals had guaranteed jobs with high salaries in the public sector and hence they did not care to seek higher qualifications or opt for tough technical training. All that is changing now.

The governments are also promoting self-employment and small scale enterprises for their nationals. As a result of such checks on expatriates, the home remittances of Pakistanis in UAE has come down from $838 million in 2002-03 to $500 million until April in 2003-04.

But the decline in home remittances of Pakistanis from Saudi Arabia has been negligible in recent years. They have come down from $561 million in 2002-03 to $469 million until April 2003-04.

But the decline in home remittances from Dubai has been not- able. They have come down from $581 million in 2002-03 to $373 million until April in 2003-04. A part of the decline in the remittances could be due to the fact that earlier they had sent the accumulated savings home through banks to avoid possible freezing on one account or another by foreign governments.

It is also likely that the Havala system has been reorganised and revitalised with a new vigour despite the determined efforts of the Pakistan government to check that.

Now that Dubai is advertising its luxury housing schemes in Pakistan very attractively how much money will flow out to buy those houses, although only an initial investment of 20 per cent is expected of the buyers.

On one side visas are becoming increasingly difficult for Pakistanis to visit Western countries or work in them. The humiliating pre-entry conditions are not acceptable to a large number of persons.

While jobs for Pakistanis becomes few in the West, the jobs in the Gulf states may decline steadily, as the governments of those states are determined to accommodate their own people in jobs as quickly as possible.

That means until conditions become better in the world and the prejudice against Muslims does not dissipate more jobs have to be created in Pakistan to accommodate new job-seekers. That is a tough job, along with declining home remittances which have helped build up the foreign exchange reserves of $12.5 billion .

The Indians in key position in the private sector in the Gulf state also prefer their own people for employment to Pakistanis. And that adds to the difficulties of Pakistanis looking for jobs in the Gulf states.

Meanwhile the government of Pakistan and the Pakistani banks are making frantic efforts to persuade more and more Pakistanis overseas to send their home remittances via banking channels instead of through the underground Havala route.

The success achieved in recent times should be sustained and the loop-holes plugged. But as long as the gap between the open market rate for the dollar and the inter-bank rate is nominal the Havala system will not become too strong. A weak dollar too helps.