The developing countries like Pakistan have failed to use the inflow of remittances, investment and aid to their own best advantage.

Pakistan too has been unable to capitalize on the sudden increase in their financial resources to generate a developmental momentum , which could utilize the indigenous skills to moderate if not reverse, the brain drain.

The phenomenon of recent overseas migration has attracted much attention and has been the focal point of many research studies with particular reference to its impact on the economies of developing countries.

Both individualistic and structural factors are said to be responsible for the spectacle of large scale international migration. On the individual level, people have migrated either to escape political repression, to avoid hunger, poverty and famine and to attain modicum of economic prosperity and material well-being.

There are also others who decided to emigrate to join their family or to impart good education to their children. Widespread unemployment is another factor prompting people to leave their country in search of 'new heaven'.

Pakistan faced critical shortage of foreign exchange and remittances provided the much needed 'breathing space' for bringing about structural changes in her economy. Remittances also helped in reducing the chronic deficit in balance of payment.

Labour migration from Pakistan started in the late fifties and early sixties to the Commonwealth countries, mostly to U.K in response to demand for production workers and manual labour.

The migration to the oil rich gulf countries started much later in the wake of the abnormal rise oil prices in 1973. This stimulated infrastructural construction work and related service -riented industries in the oil rich Middle East countries.

Pakistan was well placed to their demand for unskilled and semi-skilled labour. The government hard pressed by dwindling foreign exchange reserves and unemployment pressure took deliberate steps to encourage and organize the labour departure.

The Overseas Pakistani Foundation (OPF) was established in March 1979 to promote and facilitate out-migration from Pakistan. The phenomenal progress of workers' remittances on a large scale-in 1971 the total emigrants were only 3534, in 1992 this figure increased to 195,985- can be gauged from the Table.

The Table reveals the story of the phenomenal progress of the workers' remittances. From a paltry sum of $136 million in 1972/73, these grew up to $2886 million in just one decade in 1982/83.

This was also the peak year after which remittances have exhibited a downward trend. During 1982/83, the workers remittances exceeded the total merchandise exports of Pakistan ($2,886 million as against merchandise exports of $2,672 million) and constituted about 9 per cent of GNP.

By 1991/92 these were reduced to $1,562 million but still accounted for nearly 23 per cent of the merchandised exports and constituted nearly 3 per cent of GNP of Pakistan. The remittances again experienced a setback during 1998/99 and 1999/00. This was mainly due to sanctions imposed, and seizing of foreign accounts caused by nuclear explosions.

Workers remittances during 2001-02 ended up with impressive growth of 119.8 percent and aggregated at $2,389 million, as against $ 1.087 million recorded during 2000-01. For the fiscal year (2002-03), the workers remittances were $4,237 million - thus registering an increase of 98.6 percent- -highest ever in the country's history. The USA had emerged as the single largest source of cash remittances.

Remittances from the USA amounted to $943.2 million or up by 95.0 per cent over the corresponding period of last year. Remittances from the UAE are next in line with $ 665.9 million or 20.6 per cent of the total remittances.

Remittances from the UAE were also up by 91.4 per cent against the corresponding period of prvious year. Remittances from Saudi Arabia were $422.8 million or 13.1 per cent of the total and were higher by 63.2 per cent.

Major factors contributed to the rapid increase in the inflow of remittances include; significant improvements in economic fundamentals, confidence of the expatriate Pakistanis on the economic management of the country, better exchange rate offered in the inter-bank market as against the open market, aggressive marketing of Pakistani banks in foreign countries and motivating the people to send their remittances through banking channel, and crackdown on hundi/hawala system in the Middle East and other parts of the world.

Remittances have been a mixed blessing for the economy of Pakistan. There impact on the economy of Pakistan is reviewed as bellow.

Impact on balance of payment: On the positive side, remittances have a good effect on adverse balance of payments position of Pakistan which is a healthy sign of stable economy for planners.

Pakistan trade balance has always been in deficit except for few years. Foreign trade deficit increased from $184 million 1972/73 to $2'989 million in 1982/83. Workers remittances in this year exceeded even the total merchandise exports of Pakistan and constituted 110 per cent of total merchandise exports.

However these injections began to decline since 1982-83. Foreign trade deficit in 1990/91 was $2,483 million which reduced in 2002/03 to $610 million. The major factor contributed to reduction of trade deficit was huge increase in remittances which amounted to $4,191 million owing to the 9/11 incidence. Thus workers remittances are a major stabilizing factor in the worse BOP position of Pakistan.

Poverty alleviation: The impact of emigration on poverty alleviation has also been positive. The oil boom in 1973 and consequent phenomenal increase in income and foreign exchange resources of oil rich but man-power poor Arab countries opened new vistas of gainful employment for people of Pakistan.

The migrant workers largely belonged to either peasantry or rural unemployed or urban poor. This helped in extricating their families from below poverty line status.

With their salaries significantly higher than they could have ever dreamed at home, they were in a position to provide their families back home with the basic amenities of life. Thus these remittances played a significant roll in alleviating poverty and can play this role in future as well.

Domestic saving and investment: Impact of remittances on domestic savings and investment has not been as desired. According to one estimate, from two-third to three-fourth of the foreign exchange earnings of Pakistanis working abroad are remitted to Pakistan.

These are, however, squandered largely by the way of conspicuous consumption or real estate purchases and only 14-15 per cent of them utilized for production purposes.

Inflationary impact: Remittances have also contributed in fuelling inflationary spiral in the economy. Since bulk of remittances go down in to consumption stream (including real estate i.e. buying of land and construction of houses). This has resulted in pushing up of prices of consumer goods and agriculture and urban lands.

Brain drain: Although it is agreed that the number of emigrants falling in the brain drain category has been small, yet the qualitative magnitude is quite worrisome.

The professional class emigrating to various foreign destinations is high trained manpower and is being produced at very high cost. This problem is even more devastating by the open immigration programmes of many countries like Canada, Australia, New Zealand and the UK for the trained manpower. Thus remittances some time can also create high social cost of brain drain.