Time Bomb of Foreign Employment

By: Bikal Dhungel

The UN estimated that at the end of 2013, there were 232 million international migrants worldwide. This number is increasing. Most of these people emigrate for employment purposes. The total amount migrants transfer to their family, called remittance flow has reached 414 billion dollars ( World Bank ). This figure is almost four times the total Official Development Aid ( ODA ) of 135 billion dollars ( OCED ) in the same year. The Middle East attracts a handsome number of migrants as countries like Kuwait, United Arab Emirates, Qatar etc having more migrants than the native population. Thank to the discovery of oil, these countries were turned from deserts to a powerhouse of world economy supplying oil needed to run the economies of other countries. They are highly dependent on migrant workers.

South Asian countries like Nepal, Sri Lanka, Pakistan etc have large number of youth forces working in the middle east. Nepal records the peak of over 3.2 million people living in foreign countries for employment purposes. Remittance Flow hence, is one of the major source of income and comprise of 22% of GDP. Out of the total workforce of 15 million people, 3.2 million or roughly one fifth , generating the amount of GDP that is also one fifth implies that per person, the foreign migrants are sending the equal amount of money that they would earn at home if they had a job. But job is not available at home. In this case, foreign employment is an opportunity to gain hard currencies but we should also keep in mind that creating jobs at home would bring back the migrant workers immediately in contrast to the argument of some policy makers who argued that due to higher earning in foreign countries, outward migration would continue whatsoever. It will certainly be this way, if the total earnings will be increased and if the labour standards will improve. However, it is true that remittance flow has made things possible that would not be in its absence. For example the children of migrant workers can attend the school or enjoy better nutrition for the time until one family member sends money home.

Despite all good things about remittance flow it would be economically correct to say that it is a time bomb ticking towards the end. We should consider the economic vulnerability of countries where most migrant workers are stationed. These are oil exporting countries and oil is limited. So, they should find other ways to sustain their economies in the future. In addition to that, many European countries for example are switching to Green Energy. Still, this is the issue of the future too far away. Current issue is the end of construction boom. Looking back to history, after World War II, all the countries that were involved or destroyed had a high growth in the decades following due to reconstruction and then booming years. Germany started to grow in the fifties, boomed in the sixties and slowly sustained at a low growth until the German economy did not need foreign workers and chancellor Willy Brandt called for “Anwerbestop”/No Recruitment in foreign countries. Japan had a similar story. After a large destruction in World War II including two atom bombs in Hiroshima and Nagasaki, already after 30 years it became worlds second largest economy only behind the US. South Korea and few other East-Asian countries share similar stories but then stopped growing and sustained at some point. The same trend is visible in China today. After Mao's death when Deng Xiaoping embraced a free market economy, China started to grow. It had a double digit growth for around three decades. China overtook the UK, then France, then Germany and Japan and stand today as second largest economy of the world. China has more than twice the economy of Japan and more than half of the US economy. Napoleon Bonaparte once said “ Let China sleep, for when she wakes, she will shake the world “. She indeed shaked but now the cooling down phase has arrived. China of course wants to be the Super Power, the number one economy of the world, the richest country. There are also forecasters who say that China will indeed overtake the US around 2035. However, we should keep in mind that the US is still the most scientific country of the world with fantastic educational institutes and research centers. Having a look at top 100 universities in the world, 45 are from the US and only 2 from China (Times higher education, 2014). The US Army spends more money than the next top 12 countries combined. The US Army controls whole waterways of the world so it can sink every ship it wants and watch them whenever it likes. The US Army is deployed in more than 150 countries around the world, which we do not hear in the news that often. In Germany alone over 40,000 US soldiers are stationed mainly in Rammstein, Wiesbaden, Kaiserslautern and 18 other cities Similarly, there are US Army bases in Japan, South Korea, Australia, South Africa, Egypt, Saudi Arabia, Turkey etc, which are strategically important places and they can launch war any time anywhere. Why I mentioned this is to say that China will not be a world power, at least not in next 100 years. Moreover, the US is one country, with a stable democracy and exemplary degree of freedom. It has one language and people from the whole world, highly qualified ones choose the US instead of China. China has huge disparity between rural and urban region. It doesn’t even have one language. There are 55 minority groups, some of them prone to conflicts like in Xinjiang or Tibet. China has ongoing border problems with all of its big neighbours including India, Pakistan and Vietnam. It still has a totalitarian government that massively restricts the freedom of people. The ruling party is still called “The Communist Party of China “ which doesnt allow freedom of speech, a vital factor for change, innovation and development. So, China's growth might not last longer.

With the same hypothesis, we can also forecast that rich countries of the middle east will shrink in the coming years or decade. When Qatar finishes building all its stadium for World Cup 2022, the labours used should return to their countries. Similarly, after all the needed infra-structures are built in UAE or Saudi Arabia, labours should return home. In the worst scenario, when another Economic Crisis hit in these countries, same labour forces are the ones to get hit first. But even without assuming the worst case, after all the construction works are done, a large part of migrants will return, without any benefits because they are temporary workers. The ones who will face consequences are their families who are so dependent on them. Once you are used to spending a certain amount of money, it is very difficult if there is suddenly no money coming. So, the family would stop consuming required nutrients, children will be out of school and there is a risk of being pushed to extreme poverty in a short time. If the Remittance will not be spent IN NEPAL now, we will face this problem. Current situation is, they are not spent. Nepalese import a large portion of foods from abroad mainly India and China. Since they are getting money transferred from abroad, they have increased their calories intake through more foods. But these foods were not produced in Nepal. When Nepalese for example demand more food, the entrepreneur in India invests more, produce more and sell more to Nepalese. So, the remittance flow is ending up in India and China because we buy their products. If the money is spent in Nepal, it would create jobs and even in the times of crisis, the situation will not be as bad as in the absence of investment. This is simple: just have a look at the list of items we import from India, then have a look if we can produce these goods locally (mostly yes ) and if so, get an expertise and invest. Nepal for example imports hundreds of tons of chicken every day, it imports vegetables like tomato, beans, green leaves but also other materials like pencils, pens, text books, cloths, etc. These few items can also be produced at home. But for this, the government should bring expertise, teach people how to do this, where to do this, then there will be a huge change. At least in agricultural sector, we are starting to see this change, which is positive. Buying goods locally would be cost efficient as we save a huge cost in transportation and import tax. This is also environmentally friendly. By this way, we can generate millions of jobs.

But in this essay, it is about Remittance. So, my point is, what will happen when all of a sudden, migrants come home ? In today's situation, people are sending money, they have money and they buy more foods. Still, the food production is somehow limited. That is why, it caused the rise in prices. The prices are now so high that the average goods price in comparison to 15 years before has quadrupled. This is also because of the policy of printing money by the previous government which simply raises the price and bring inflation but nothing more than that. So, when people suddenly have no income, they have no money to buy daily foods but the prices will remain the same. All of a sudden, they are unable to buy foods and there will be a high food shortage. Sure, when people cannot afford to buy foods, the prices will also go down but this is a slow process. Prices almost never go down all of a sudden rather do slowly. But people need foods and goods in a daily basis, so they might have a big problem. Moreover, in most of the places in the world, when similar scenario arises, the sellers tend to hide the foods, in order to stop the falling price. If few of them do this, it is not bad but if a large number of sellers or a big suppliers do this, it will have a huge effect. This is also the case with food speculation that caused thousands of death in Africa and South Asia in the recent years. So, the end of boom years will slow down the economy of the middle east, but in countries like Nepal, it might be the matter of life and death. The transition period when people cannot afford to buy and when price start to go down, this will be very critical. Unless the government intervene in the market, we will have a big crisis of hunger which will cause many deaths. Consequently, it will also keep people poor undermining their capacity to afford in the future. This is the period when the time bomb will explode.

So, to stop this bomb from exploding, it is necessary to create a business environment of investment. First step is again government. Through training programs for the youth, the government can initiate the project and also invite the private sector to provide supervision, with profit, which in-turn will motivate others to start the business. There are many people who have ideas and courage but no financial security to take a loan. The government can be the financial guarantee for such people. Slowly it will lead to the investment of money earned in foreign countries in Nepal itself and even in the day when 3 million migrant workers come back home, it will be business as usual and perhaps, nobody should die. Hence, start producing foods in Nepal, start businesses, do not consume all the remittances you receive rather save some for the rainy days, prioritize local products whenever it is possible. This will be the take 'off of ' of growth that brought some successful stories of Economic Development in some countries mentioned above.