Outlook for overseas workers’ remittances

Published March 4, 2019
Emigration has become a controversial issue in the West because of a high rate of unemployment.— AFP/File
Emigration has become a controversial issue in the West because of a high rate of unemployment.— AFP/File

THE role of the surging workers’ remittances in improving the balance of payments seems to have persuaded the Economic Coordination Committee to set up an inter-ministerial task force. It aims to ‘formulate concrete proposals with clear targets for development and export of skilled manpower.’

The decision follows earlier piecemeal measures taken by the PTI-government since it assumed power in August last year.

In spite of a strong policy focus, a slow growth in export earnings from merchandise has lagged behind the much faster remittance inflow over the first seven months of the current fiscal year. Remittances climbed up by 12.2 per cent to $12.77 billion, narrowing the gap with export earnings at $13.2bn.

“The real contribution (to the balance of payments) has come from remittances that showed an improvement of $1.4bn,” says former federal finance secretary Waqar Masood Khan. Quoting export-import figures, he observes: “One would like to see the correction coming from a major cutback in imports and improvement in trade.”

Emigration has become a controversial issue in the West because of a high rate of unemployment, though emigrants usually get those low-paid jobs that natives generally shun

Led by the Ministry of Overseas Pakistanis, the proposed task force will have access to a databank, developed by the Ministry of Federal Education and Professional Training, of over 600,000 skilled individuals.

Labour skills training will also be reoriented to match the demand of employers of overseas compatriots. Collaboration of vocational training institutes with overseas employment promoters is envisaged to impart market-based training. Pakistan is also banking on Qatar to provide the promised 100,000 jobs soon.

Some financial analysts are not optimistic about the potential of remittances in the emerging global environment. This is not borne out by the data released in the World Bank Migration and Development Brief on Dec 8, 2018.

The Brief estimated that remittances to developing countries would increase by 10pc to reach a record level of $528bn in 2018, preceded by robust growth of 7.8pc in 2017. Remittances received by South Asia rose 13.5pc to $132bn. Global remittances which include flows to high income countries are projected to swell by 10.3pc to $689bn.

In fact, Pakistan has seen a stable growth of workers’ remittances when compared to erratic exports of merchandise in the aftermath of the global financial crisis.

According to the Pakistan Bureau of Statistics, workers’ remittances shot up from $6.451bn in FY2008 to $19.6bn in FY2018. Simultaneously export earnings rose merely from $19bn to $23.2bn. Human capital is acquiring a more significant role in economic development.

In a fiercely competitive international market, industrially advanced countries import cheap, skilled and highly educated professionals to reduce costs and enhance productivity. Labour-importing countries save money on the high cost of skills training and education of professionals. The demand for workers in labour-deficit countries fluctuates with economic cycles but does not perish.

Mobility of capital and the growth points it creates serve as a magnet for attracting both domestic labour and foreign manpower.

With the abnormal rise in dollar earnings since 1970s, the oil-rich Arab countries have invested enormous sums of money in socio-economic infrastructure which Asian labour was mobilised. Industries have been relocated in countries offering a competitive domestic advantage. Capital has no geographic bias.

However, emigration has become a major controversial issue in the West because of a high rate of unemployment, though emigrants usually get those low paid jobs that natives generally shun.

The white industrial labour in the US and native workers in European countries fear losing their jobs to emigrants more than increasing social exclusion and faltering public welfare programmes. But workers do not have the final say as can be seen in the case of Brexit.

The recent measures to boost remittances include incentives to banks and exchange companies of Re1 per incremental dollar if they bring 15pc more remittances. Diasporas buying housing units under Naya Pakistan Housing Scheme in their own districts are entitled to a 5pc discount.

While the impact of these measures is not known, the flotation of Pakistan Banao Certificates has, however, not received encouraging response with the reported subscription merely amounting to $1 million so far.

Awaiting enactment, the second mini-budget has proposed that non-resident Pakistanis be allowed to purchase motor vehicles and immovable property without the requirement of a tax return filing. Advance tax on cash withdrawals from remittance-based accounts is also to be removed.

While the country is endowed with rich natural resources and surplus manpower, it remains capital deficit. The unemployment rate is high because the surplus manpower has not been fully employed. While boosting export, care needs to be taken to not create domestic shortage of skilled manpower that may affect national productivity.

jawaidbokhari2016@gmail.com

Published in Dawn, The Business and Finance Weekly, March 4th, 2019

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

‘Source of terror’
Updated 29 Mar, 2024

‘Source of terror’

It is clear that going after militant groups inside Afghanistan unilaterally presents its own set of difficulties.
Chipping in
29 Mar, 2024

Chipping in

FEDERAL infrastructure development schemes are located in the provinces. Most such projects — for instance,...
Toxic emitters
29 Mar, 2024

Toxic emitters

IT is concerning to note that dozens of industries have been violating environmental laws in and around Islamabad....
Judiciary’s SOS
Updated 28 Mar, 2024

Judiciary’s SOS

The ball is now in CJP Isa’s court, and he will feel pressure to take action.
Data protection
28 Mar, 2024

Data protection

WHAT do we want? Data protection laws. When do we want them? Immediately. Without delay, if we are to prevent ...
Selling humans
28 Mar, 2024

Selling humans

HUMAN traders feed off economic distress; they peddle promises of a better life to the impoverished who, mired in...