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Expatriates of the world, unite!

Published Sep 14, 2011 12:44pm


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In the last fiscal year alone, overseas Pakistanis remitted over $11 billion, which accounts for almost 7 per cent of the national economy. On the other hand, total tax revenue generated in Pakistan accounts for 10 per cent of the GDP. Since expatriates contribute such huge sums to their motherland, it may be prudent to formalise expatriates’ role in securing Pakistan’s faltered economy.

One can propose reserved seats for expatriates in Pakistan’s Senate or the Parliament, or permanent representation in the Planning Commission or the State Bank to secure their sustained contributions to the economy. If this proposition seems farfetched, then expatriates may consider launching a development bank or a credit union to gain more control over remittances to Pakistan, which are expected to hit $14 billion next year.

Remittances pouring into Pakistan far exceed the social sector spending by the federal government. In the recent federal budget, the development expenditure is approximated at $5.2 billion, which is again much less than the $11 billion in remittances. Furthermore, remittances are an order of magnitude higher than what Pakistan receives in aid from development banks and donors for social sector spending.

Despite the remarkable contribution to social spending in Pakistan, expatriates have no real representation on any political and economic platform in Pakistan. Imagine for a second that the $2.5 billion in remittances contributed last year by 1.2 million Pakistani workers in UAE were in fact collected as part of a tax levied on overseas Pakistani workers. Shouldn’t the government then consider giving representation to the million Pakistani workers in UAE the same way it gives representation to the million taxpayers (and millions of tax evaders) who reside in Pakistan. After all, no taxation without representation was the slogan behind the American revolution.

I can already see people objecting to the propositions I have laid out above. One may argue that remittances are not taxes, but in fact are funds provided by the expatriate workers to their families back home for altruistic motivations. This may be true. But first let us review how remittances are used by the recipients.

While the government is severely constrained in its ability to assist the needy, the expatriates subsidise the maintenance of a broken social safety net in Pakistan. In most instances, remittances pay for rents, medicines, grocery bills, marriage expenses and other similar needs of low-income households who are unlikely to receive any meaningful support from the government. Similarly, remittances pay for tuition fees for children who would not be educated otherwise because of missing or inadequate public sector schools. The remittances therefore plug the gap in social spending in Pakistan.

Pakistanis have empowered thousands of bureaucrats and legislators at the federal, provincial, and municipal levels to disburse $5.2 billion in social spending. If one were to factor in overheads (wages, rents, fuel purchases, etc.), the services reaching the needy may value much less than $5 billion. On the other hand, $11 billion in remittances do reach the intended recipients with very little overhead. Shouldn’t we then consider empowering the stakeholders (the expatriates) whose social spending in Pakistan exceed that of the public sector social spending by the federal government.

It is unlikely that Pakistan’s political and military elite will allow expatriates any formal role in decision-making. Denying expatriates the recognition they deserve, however, will be a big mistake. Other countries with much smaller expatriate contributions have done more to recognise contributions of their respective expatriate communities.

Consider India where Non-resident Indians (NRIs) are courted by the federal and state governments. This is being done despite the fact that remittances account for merely 4 per cent of the Indian GDP whereas tax revenue accounts for 18 per cent of the Indian economy. In Lebanon, remittances contribute more than what the government collects in taxes while in Philippines remittances rival the total tax revenue.

The forecast for remittances for the current fiscal year is around $14 billion. This amount may grow even further at a faster rate in the next few years. What then should the expatriates do to better serve their motherland? I believe Pakistani expatriates have an opportunity to launch a development bank and use remittances to generate additional revenue to invest in development projects.

At present, the remittances flow to Pakistan through myriad channels, such as Western Union, who charge a fixed fee plus an amount in proportion to the funds being transferred. The expatriates may want to launch a credit union or a development bank that works with the existing banks allowing expatriates to electronically transfer their funds from their existing bank accounts to the development bank, which should charge considerably lower transaction fees than the competition and encourage expatriates to remit large amounts with disbursement schedules spread over months. The bank will be responsible for holding the funds and disburse as per remitters preferred schedule. As per remitters’ instructions, the development bank will transfer funds to existing retail banks, credit unions, or other financial institutions in Pakistan located close to the recipient.

Since the development bank will charge significantly lower transaction fees for remitting large amounts, the remitters will opt for the bank than other outlets, such as Western Union. For the time that the funds reside with the bank, an opportunity arises to invest those funds in capital markets. The profits generated through such short-term investments will provide capital, which the bank may invest in development projects, such as water supply schemes, etc., by extending interest free loans to communities.

There is still the question of who should decide what projects to invest in. Professor Madhav Badami of McGill University suggests that once the funds for development projects are available, NGOS, municipalities, hospitals and similar institutions should be invited to submit proposals for funding. An international committee of independent experts can adjudicate on the proposals.

Writing in the New York Times in March, Ngozi Okonjo-Iweala and Dilip Ratha of the World Bank floated the idea of Diaspora bonds, which developing countries can sell to expatriates to raise capital for development. They also show other arbitrage opportunities where banks in developing countries can create foreign currency assets by receiving remittances in foreign currencies, but paying out in local currency. The foreign currency asset could then be used as collateral for borrowing in overseas capital markets.

Given the lack of trust in state and its functionaries, Diaspora bonds may not work in Pakistan. However, an independently operated financial institution that serves expatriates’ needs by significantly lowering their transaction costs, and at the same time uses remittances to generate investment capital for development projects in Pakistan, may be more attractive to expatriates who could then be directly involved in alleviating poverty in the neighbourhoods they grew up in.

Murtaza Haider, Ph.D. is the Associate Dean of research and graduate programs at the Ted Rogers School of Management at Ryerson University in Toronto.  He can be reached by email at

The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.

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Murtaza Haider is a Toronto-based academic and the director of

He tweets @regionomics

The views expressed by this writer and commenters below do not necessarily reflect the views and policies of the Dawn Media Group.

Comments (47) Closed

Asad Shairani Sep 14, 2011 06:50pm
The indirect benefits of remittances you listed are to a great extent valid, but remittances are seriously overvalued specially if you compare their actual (direct) benefit versus their absolute value. The plugging of social spending gap argument can be valid for any business operating in the country and is not just limited to remittances. However I completely agree to your ideas of forming banks and other channels to get the most out of them.
jack Sep 14, 2011 06:53pm
As a overseas pakistani, something i would recommend is that they should really start and show some respect to people who live overseas, improve the conditions of the embassy back up pakistani's in difficult situations. Help them as a embassy should!
G.A. Sep 14, 2011 06:55pm
Good idea. Unfortunately, money and short cuts in business dealings is a major Pakistani weakness and most people would be reluctant to get involved. Perhaps if there is a team of honest individuals running the Pakistani government then it might possible. Even then expatriates would have to be in Pakistan in large numbers to have any say in decision-making.
Sohail Dada Sep 14, 2011 06:56pm
Very interesting and well written article. Eye opener. Keep up the good work compare.
Hasnain Sep 14, 2011 06:58pm
Much awaited details, if u didn't write this, may be I would have. Thanks a ton for the effort. May be someone somewhere in the Govt. offices have a glance on this & we get a bit of appreciation for our huge contributions to the Nation.
malik Sep 14, 2011 07:01pm
Excellent article, worth every paisa/penny.
Ahmed Sep 14, 2011 07:09pm
In the previous fiscal year there was a significant increase in overseas remittances. One aspect is that it’s the same money sent abroad from Pakistan and is returned as white money. Why would there be a sudden increase when the country is going through its worst phase of crime, war and faltered economy.
conflicted Sep 14, 2011 07:33pm
I like it. They are the true 'patriates' :))
Aamir Khan Sep 14, 2011 07:39pm
Interesting article, being one of Pakistanis residing abroad I do agree that overseas Pakistanis need some sort of representation in the decision making in the country. I think a first step in this direction would be to allow overseas Pakistanis to vote in national/provincial elections through the various Pakistan embassies and consulates located abroad. Their votes should be registered by such embassies/consulates and included in the voting results. A number of countries facilitate their overseas citizens in voting in their national elections. I think it is high time that such facilities are provided to overseas Pakistanis as well.
Asif Sep 14, 2011 07:49pm
Wow.. Youd have to be out of the box to to think this way. I always thought that Free Markets work best when you got your skin in the game. Its absolutely amazing to see social science fail against the spirit of National Identity. It seems Pakistani expats are as concerned about Pakistan as the Local Pakistanis minus the Government.
I Sep 14, 2011 08:03pm
Allowing representation of expats in law making bodies is a far fetched dream.... wouldn't work because the law making system in Pak is corrupt to its roots. That said, I like what you say about having a credit union like body to allow remittance to flow through it and allow re-investment of funds governed by a body that we can TRUST....
idrees janjua Sep 14, 2011 08:03pm
well suggestions are really thought provoking .
Syed A. Sep 14, 2011 08:08pm
Absolutely true. Overseas Pakistanis must get much more benefits as their contribution to the country is so huge. To top things the Election Commission wants to take away the rights of dual pass port holders by barring them to take part in elections. Pakistan's brain lies out side and efforts must be made to get them back rather than to push them further away. India's success story is largely due to the return of their people from overseas.
Tariq Sep 14, 2011 08:09pm
I live in Canada. I was at a dinner hosted by a Pakistani expatriate for the Pakistani Counselor General. The CG came in an expensive SUV chauffeur driven by a white driver. When the dinner was over at about midnight, the CG was offered a drive back home by the other guests. The CG arrogantly said "No need" as he nonchalantly whipped out his expensive cell phone and called a number. His official car arrived in 10 minutes, and he and his begum were whisked away, while those left behind wondered! Can Pakistan afford all this? Taxes anyone??
Hafeez Sep 14, 2011 08:27pm
A very good and needed proposition. An independently operated credit union where all the account holders will be members and a voice in management decisions. This will help almost all the expatriates who face problems/delays beside paying hefty fees.
Ali Sep 14, 2011 09:02pm
Expatriates have their interest in foreign countries, many of them are foreign nationals, and if they are involved in the government functions, that could influence the policies, & create conflict of interest. And, the remittance is like personal income of family, not tax, though it is earned overseas & sent to the families.
Ali Sep 14, 2011 09:56pm
Nonetheless, let me admit, your articles are impressive, always backed by facts and figures, and a source of useful knowledge & out of the box ideas.
Cyrus Howell Sep 14, 2011 11:45pm
"If wishes were horses, beggars could ride." MIGUEL CERVANTES
Adnan Sep 14, 2011 11:58pm
I completely agree with the jist of your article. Unfortunately it would be too much to expect the corrupt leadership in Pakistan to actually think constructively about the well being of this most unfortunate nation. Imran Khan seems to be the only hope for pakistan. Lets hope he makes it this time for the sake of Pakistan.
rehmat Sep 15, 2011 12:18am
Please note that these remittances are sent to their relatives. SO it is the family member of te expat that uses this amount - NOT the government of Pakistan. The only benefit that Pakistan government gets is that it helps the forign exchange position of the country. In other words, the government does not have any right to spend the money sent by expats as remittances.
An expat Sep 15, 2011 12:20am
A very nice article! But seems our government do not have time they are busy in politics of reconciliation. And sending back the foreign exchange in swiss accounts.
Ali Akbar Sep 15, 2011 12:38am
I am from Canada, I totally agree with Murtaza Hadier's thinking of how to bring the expatriates into the nation building process. The overseas pakistanies definately deserve very well respect and recongnition for their tirless efforts to bring Pakistan's economical and social sector up by helping them financially. The overseas Pakistanies must also be given respect when they go back pakistan instead of snatching their bags and life threatenting. Governemnt must keep in mind the contribution of these generous Pakistanies who by all means helping their motherland prosperity. I appreciate the writer, but I have seen in Pakistan they always expect from overseas Pakistanies but they never thought of thier own obligations for those fellows what they deserve in resturn.
Waqar Sep 15, 2011 12:41am
The author doesn't seem to understand the distinction between remittance and tax. Remittance is not money given to the government for it to spend, it is simply money being sent to relatives in pakistan and as such helps overall economy and blance of payments situation but is not a source of revenue for the government (unlike taxes which are direct revenue for the government).
Mudassar Sep 15, 2011 01:37am
Wonderful & very practical suggestions brought up by the writer.
abbas kd Sep 15, 2011 03:02am
Murtaza, great article & even better are the ideas of giving some sort of representation to Overseas Pakistanis in the senate or in any other institute there. Well, how about just getting some humane treatment at the Pakistani airports to start with when we come to visit that country after paying insane amount of upto $110.00 just to get Pakistani visitor's visa & being treated like a criminals by the Pakistani Immigration & Customs officials. This is not too much to ask for or not too far fetched idea either, right ?
Aqeel Jafri Sep 15, 2011 04:19am
Murtaza; It's so good to know that I am not the only one who had been talking on these lines for years. An expatriate for almost 20 years I fully agree with you and you have floated some great ideas. I had a similar discussion on my last trip to Pakistan (couple of months ago). Five members of our family traveled to Pakistan to participate in 3 weddings, spending almost $20,000. Another dimension to this is the amount expatriates spend on each visit including the revenue PIA earns form them. Great article.
Patak Sep 15, 2011 05:19am
The question is why is Pakistani taxes as a percent of GDP low? Is it because tax rates are low or because people don't pay taxes? Looks like more emphasis should be placed on tax collection also.
Usama Sep 15, 2011 05:54am
Excellent Idea! Float this around!
Mustafa Sep 15, 2011 07:36am
The author writes “One can propose reserved seats for expatriates in Pakistan’s Senate or the Parliament, or permanent representation in the Planning Commission or the State Bank to secure their sustained contributions to the economy. If this proposition seems farfetched, then expatriates may consider launching a development bank or a credit union to gain more control over remittances to Pakistan, which are expected to hit $14 billion next year.” My impression Is the author is proposing those who pay more taxes (or make greater financial contributions) to Pakistan should have more say as to how money should be spent. Unfortunately a “Riksha Wala” who may not be paying a penny as tax and a “Maha Raja” who may be paying one Lakh Rupees as tax have equal rights of "one man, one vote". The “Maha Raja” does not have a say as to how the government should spent his contribution to the country. Neither he has a reserved seat in the Parliament. I do not understand how the expatriates could be granted special privilege for their contributions in working of government. What I strongly believe is all expatriates living outside Pakistan should exercise their rights in federal and provincial electoral process of Pakistan as citizens of Pakistan.
Faraz Sep 15, 2011 09:42am
This idea should be materialized at the earliest.
Amna Ahmed Sep 15, 2011 01:54pm
impressive work by the writer! i think a union of expatriates should be formed that could present these valuable suggestions to the government.
Rajesh Sep 15, 2011 02:07pm
Nice article. I do feel a need to comment on one sentiment expressed by the author: “Despite the remarkable contribution to social spending in Pakistan, expatriates have no real representation on any political and economic platform in Pakistan.” Expats normally send money to their Pakistan resident relatives. If they had no relatives the chances of them sending money regularly is slim. Sure they may send donation and help in the case of national emergencies - but that amount may not match the regular remittances to relatives. Thus the presence of relatives inside Pakistan is as important as the presence of non-resident Pakistani's (outside of Pakistan) for getting these remittances. Another (more controversial) way of looking at this: expats love their roots and their country of birth, but they send money regularly not for the country but for the relatives. Their representation on any political and economic platform in Pakistan is thus via their relatives. Now if non-resident Pakistanis can potentially improve the quality of process/polity/policy then that is a different reason to provide them with more say. I don’t mean to belittle their contribution or motive or the benefit to Pakistan. Any positive contribution for national building/development is always welcome. Just my two cents to put things across more objectively. FYI – I am a nonresident Indian ‘expat’.
Atique Sep 15, 2011 02:50pm
I think we (expatriates) should seriously consider forming "Pakistan Expatriates Associations" in every country. These associations can coordinate to put pressure on the Pakistan Govt to use these remmitences to help fight poverty in Pakistan, for a smooth and respectful reception at the airports and Embassies to improve on the services it provides.We can also put pressure on the Govt to improve the Law & Order situation in Pakistan as it directly effects visiting expatriates. I hope the writer of ths article Murtaza Haider may like to comment.
Mohammad Ali Khan Sep 15, 2011 03:29pm
The money comes with a price.A large %age may come from Middle East with import of culture.Part of the mess in Pakistan may be due to this problem. On the other hand many educated Pakistanis in US,Canada,UK etc have helped in improving education in Pakistan. It is a double edged sword.No one wants to leave the motherland.Let us improve the conditions in Pakistan so that Pakistanis don't have to leave their motherland. At this stage Pakistan should create a process through which the Pakistani scientists who are abroad should be able to transfer their knowledge to eager students in Pakistan.They should create processes to facilitate Pakistani doctors from abroad to provide needed medical care. For the last ten years I have tried to stress VC of a university in Pakistan to have a pool of alumni come for regular lectures without success.
A Khan Sep 15, 2011 03:51pm
But the same personal income of family, then use the income to buy goods and services in Pakistan for which they pay "sales Tax". which in Tax as well isn't it? And most of the tax in Pakistan is collected through Sales Tax. Do you still think No representation of Pakistani overseas?
Ahsen Sep 15, 2011 04:58pm
I don't think expats are interested in dirty politics, providing voting opportunity outside Pakistan is a better start. As an expat, yes we remit to Pakistan for our relatives but also a substantial amount goes into charity. Having said that, we don't want anything in return as we spend money in Pakistan at our own free will. Our heart bleeds as much as anyone else at the condition of Pakistan and only wish to have a system that may improve the condition of Pakistan. In this regard the banks/ financial institutions can play a part to channel the funds in a more constructive manner but trust needs to be built to encourage people to invest. Additionally the confidence in stock market/ bonds/ other forms of investments can only increase if economy of the country improves. You cannot expect the diverse expat community which is so widely dispersed to form a financial institution as this is not practical. The NGOs are doing a good job by approaching the expats in various countries and channeling the funds for various calamities we have seen in Pakistan.
A Shah Sep 15, 2011 05:27pm
We need to get our house in order first and collect Tax from those at home before begging those abroad. Expats are not a charity!
Asif Sep 15, 2011 07:50pm
Pak State Bank collects US dollar, a foreign reserve currency, but returns newly printed Pak Rs ,which is of a lesser value, lower than the open market rate, to the families of Pakistani expats. This received foreign exchange helps pakistan reduce its international trade deficit. Lower the trade deficit, lower the Pak Govt has to borrow from IMF, world bank. So sure, Pak Govt gets the most out of remittance. Speaking of ex-pats as foreign nationals, we are still better than the ruling politicians whose kids reside in foreign countries. Your finance ministers have worked for world banks and foreign govts for crying out loud sake. Talk about conflict of interest
Asif Sep 15, 2011 10:19pm
Its not a source of revenue but its THE source to leverage National debt.
Ali Sep 15, 2011 10:43pm
The person who sends the remittance does not make the choice of spending, the consumer in Pakistan is the recipient of the remittance. The recipient has the choice to save or spend. People living in America, Canada, European countries, Australasia or middle east would send the money regardless of the choices the consumer would make in Pakistan. So we are not impacted, and not direct stakeholders in the process. Also, we pay income tax to the American government, and our taxes are used by the government to launch wars or drill oil, or pay for medicare, medicaid, foreign aid, so we become direct stakeholder. Our interests are directly tied with the taxes we pay, because we make the choices in America to earn & spend. I think if we are allowed to participate in Senate or other government functions, and because we belong to various countries with different interests , that could also mean conflict of interest.
Rajesh Sep 16, 2011 10:18am
I like your suggestion of "alumni come for regular lectures" - this should help broaden the horizon and get a first-hand account from expats/non-residents Pakistanis. The question is what if the more serious students start to feel that their chance for self-actualization (i.e. the possibility of having a sense of self-accomplishment in life) is better outside the country? Such lecture possibly need to be balanced by eminent local achievers - especially from the business community (not so much from the bureaucracy/military/political establishment. The emphasis should be more on sharing experience and learnings - less on moralizing and lecturing. And most importantly such people (sharing their knowledge/experience) need not be just of Pakistani decent. So roping in people traveling into Pakistan - businessmen, CXOs, journalists, authors, social workers, teachers/profs., scientists, marketing professionals, psychologists, artists....
Asad Shairani Sep 19, 2011 12:36pm
So some of our politicians making trips to Dubai every month and spending thousands of dollars their should now ask for representation? The author makes some valid points reg facilitation etc but remittances are seriously overvalued specially if you compare their actual (direct) benefit versus their absolute value. The plugging of social spending gap argument can be valid for any business operating in the country and is not just limited to remittances.
Nadeem Sep 23, 2011 01:52am
Writer is not saying that we should not tax anybody; he is trying to say Pakistan is not getting enough revenue from taxes but she is getting handsome amout from overseas remittances. We should utilize remittances in a meaningful way. When money is pouring in Pakistan it doesn't mean that it staying in receiver's pocket. It is coming out in MARKET, money is circulating in the market, it is increasing buying power of the people. It going from one hand to another. Circulation of money increase the demand of the commudities, that increase production, production generates income and revenue. Do you think our politicians is going to tax landlords? I don't think so; we/common Pakistanis have to use our resources intelegently. Establish a credit union or our national banks provide money transfer service with no or nominal charges because they are still getting something due to currency rate difference
Nadeem Sep 23, 2011 10:48am
I don't understand, why people are saying that remittances are not going to bring any change. Remittance receiver are not going to keep this money, they are going to use it. Very basic economic rule, when money circulate in the market, increase the demand of the commudities, which obvesily increase the production of commudities. Poduction bring in more jobs; some people get the benefit directly form the remittance and some get the benefit indirectly
Morad Mir Sep 24, 2011 04:21pm
Two things: Firstly, Pakistan needs to strengthen the Judiciary so all people and especially the Expats feel safe and secure to interact and operate in Pakistan. Secondly, the Expats need to get highly organised to be seen as a uniform and lucrative stakeholder in Pakistans future. Everything else will flow from this.
Mustafa Sep 25, 2011 05:29am
The vast majority of expatriates prefer to become citizen of their host country and get invoved in duties and responsibilities as a citizen of the new country. It is very difficult to put your two feets on two boats. However, sending money to their relatives in Pakistan, even without participating in other duties as citizen of Pakistan, is great help to Pakistan.
Aijaz Nabi Sep 26, 2011 12:19am
I wonder why our State Bank doesn't consider that foreign wages remitted by our citizens labouring in a foreign economy is actually a wind fall for our country and the state is the ultimate beneficiary. We en-cash these foreign funds without any effort and in return the Bank doesn't officially recognise any currency for direct rupee conversion other than yen, pound, dollar, sterling, mark or frank despite the fact that most remittances are made from riyal or dinar ! It is therefore futile to suggest unity among expatriates or shower them with suggestions on best social spendings or how to reap the maximum out of their remittance. Our state bank needs to recognize all international currencies for direct rupee conversion and save expatriate Pakistanis from double exchange loss !