High reliance on remittances

Pakistan lacks strategy to turn migration into sustainable development

KARACHI:

Pakistan's economic debate is often dominated by familiar indicators: inflation, foreign exchange reserves, fiscal deficits and IMF programmes. While these metrics are important, they reveal little about the country's long-term development trajectory.

A more fundamental question is whether Pakistan is unconsciously transitioning towards a remittance-dependent economic model. The evidence increasingly suggests that it is. As hundreds of thousands of Pakistanis continue to leave the country each year in search of employment abroad, remittances have become one of the economy's most important pillars.

Yet unlike countries that consciously incorporated labour exports into a broader development strategy, Pakistan appears to be arriving at this destination largely by default. What is emerging is not a carefully designed model but an economic adaptation to persistent weaknesses in domestic job creation, investment and industrial growth.

The appeal of remittances is understandable. Overseas Pakistanis contribute nearly $40 billion annually, helping support household incomes, finance imports, and stabilise external accounts. At a time when exports remain largely stagnant and foreign direct investment fails to gain momentum, remittances provide a reliable source of foreign exchange. They have repeatedly cushioned the economy during periods of crisis and remain one of the few economic indicators showing sustained growth.

The problem, however, is that remittances are increasingly being treated as a substitute for the difficult task of expanding domestic productive capacity. While policymakers celebrate record inflows, less attention is paid to the circumstances producing them: hundreds of thousands of workers leaving because the domestic economy is unable to generate opportunities at a pace sufficient to absorb a rapidly growing labour force.

In this regard, comparisons with the Philippines are instructive. The Philippines is often cited as a successful example of labour export-led development. Millions of Filipino workers are employed around the world, generating more than $38 billion annually in remittances.

Yet there is an important distinction. Labour migration in the Philippines evolved into a deliberate national strategy supported by specialised institutions, training programmes, welfare mechanisms and bilateral labour agreements. The country developed systems designed to maximise the value generated by overseas workers while providing support throughout the migration process.

Pakistan, by contrast, has not built a comparable framework. Migration remains largely fragmented and concentrated in lower and semi-skilled occupations, particularly in Gulf construction and service sectors. The result is that despite having more than twice the population of the Philippines and sending vast numbers of workers abroad, Pakistan generates broadly similar remittance inflows. In other words, it exports labour in large volumes but captures comparatively less value from each worker.

Yet even the Philippine model is no longer viewed uncritically within the country itself. A growing body of opinion among Filipino economists questions whether decades of dependence on overseas employment have reduced the urgency of pursuing deeper structural reforms. Remittances undoubtedly improved living standards and supported domestic consumption, but they did not transform the Philippines into a major manufacturing power comparable to several East Asian economies.

The concern is that labour exports became a convenient alternative to the more demanding process of industrialisation, technological upgrading and export diversification. This criticism deserves attention because Pakistan appears to be moving in a similar direction while lacking many of the institutional advantages that helped the Philippine model function as effectively as it did.

The more revealing comparison for Pakistan may therefore be Vietnam rather than the Philippines. Both countries faced significant developmental challenges in previous decades, but their responses differed markedly. Vietnam prioritised industrialisation, export competitiveness and integration into global manufacturing supply chains.

Through consistent policies, investment incentives and export-oriented reforms, it attracted substantial foreign direct investment and transformed itself into a major production hub. Today, Vietnam exports hundreds of billions of dollars' worth of goods annually, ranging from electronics and machinery to textiles and consumer products. Millions of jobs have been created domestically, productivity has risen steadily, and economic growth has remained among the strongest in Asia. Vietnam's success rests not on exporting workers but on exporting products, creating opportunities at home rather than relying on opportunities abroad.

Pakistan's trajectory increasingly appears to be moving in the opposite direction. The past several years have been characterised by repeated stabilisation cycles aimed at addressing external imbalances. While such measures may be necessary to restore macroeconomic stability, they are not a substitute for a growth strategy.

High energy costs, subdued private investment, policy uncertainty and weak industrial expansion have limited the economy's ability to generate employment on the scale required. This challenge is compounded by demographics. Pakistan's population exceeds 250 million and continues to grow rapidly. Each year, millions of young people enter the working age, including graduates, technicians and skilled workers seeking productive employment.

No realistic expansion of overseas labour markets can absorb the scale of workforce growth that Pakistan is likely to experience in the coming decades. Also increasing difficulties for Pakistani nationals to secure visas and immigration clearances create an increasingly unfavourable environment for the workforce expected to enter the job market in coming years. Labour migration can alleviate pressure, but it cannot become the primary engine of employment creation for a country of this size.

This reality carries important implications for economic policymaking. Remittances should undoubtedly be welcomed and overseas Pakistanis deserve recognition for their contribution to the economy. The issue is not whether labour migration should continue, but whether it is gradually becoming a substitute for domestic development.

A country can rely on remittances for a period of time, but it cannot achieve sustainable prosperity by exporting its workforce while failing to expand its productive base. Pakistan's growing dependence on overseas employment is not merely an economic phenomenon; it is a signal that domestic opportunities remain insufficient relative to the aspirations of its population.

Unless investment, industrialisation and export competitiveness return to the centre of economic policy, Pakistan risks drifting further towards an unorganised and ultimately unsustainable form of remittance dependence. The choice is not between migration and development. It is between treating migration as a complement to development or allowing it to become a substitute for it.

THE WRITER IS A FINANCIAL MARKET ENTHUSIAST AND IS ASSOCIATED WITH PAKISTAN'S STOCKS, COMMODITIES AND EMERGING TECHNOLOGY