Harnessing our remittances
Policymakers must pay attention to concerns of overseas Pakistanis, channel their incoming funds to bolster economy.
The writer is a development consultant and a PhD student at the University of Melbourne syed.ali@tribune.com.pk
Given the fact that Pakistan has now become the fifth largest recipient of remittances in the developing world, our policymakers need to pay more attention to issues of concern to overseas Pakistanis and try to channel their incoming funds to help bolster the national economy. According to the State Bank of Pakistan (SBP), remittances of $11 billion by overseas Pakistanis accounted for seven per cent of the national economy. On the other hand, the total tax revenue generated within Pakistan accounts for merely 10 per cent of GDP. Remittances pouring into Pakistan far exceed social sector spending by the government or what Pakistan receives in aid from international lending agencies.
Despite the significance of expatriate contributions in securing Pakistan’s faltering economy, expatriates have no representation on political or economic platforms in Pakistan. The Indian government, however, has taken numerous measures to court non-resident Indians, although remittances account for merely four per cent of the Indian GDP. Given that our government is severely constrained in its ability to undertake public expenditure, expatriate participation and earnings can also be used to help achieve pending development goals. Remittances already help subsidise the deficient social safety net in the country by helping pay for bills, medicines, marriage expenses and other needs of low-income households, including tuition fees for children who would not be educated otherwise.
The World Bank has floated the idea of diaspora bonds, which developing countries could sell to expatriates to raise capital for development. Given the lack of trust in the state and its functionaries, diaspora bonds may not work in Pakistan. However, an independently operated financial institution that specifically serves expatriates’ needs, such as significantly lowering their transaction costs and at the same time uses remittances to generate investment capital for development projects remains a feasible option to enable expatriates to be directly involved in alleviating poverty in their old neighbourhoods.
Remittances through formal channels have surged in recent years subsequent to international pressure to curb money laundering. The SBP, the Ministry of Overseas Pakistanis and the Ministry of Finance launched the Pakistan Remittance Initiative to facilitate faster and cheaper remittance flows. Recently, NADRA also began the ‘National Cash Remittance Programme’ to enable more than 100 NADRA centres to process inward home remittances from overseas for the general public using smart national identity cards. These are positive steps.
Policymakers now need to help create incentives for migrants to invest ‘surplus money’ that remains after daily expenses to serve as a multiplier for development. Recent analysis of the remittance data shows that a large proportion of remittances are put into real estate, purchase of agricultural machinery, food and marriages. Less than half of the sampled households were unable to direct any remittances towards investments or savings. One possibility to facilitate this process would be providing permanent expatriate representation in the Planning Commission or the State Bank to put in place an enabling policy environment and programmatic interventions to ensure their sustained contributions to the national economy.
There is also a need to pay attention to improving the recruitment system, enhancing the skill level of Pakistani labour migrants and preventing their exploitation but these issues require a host of other measures, which have to be discussed subsequently.
Published in The Express Tribune, December 31st, 2012.
Despite the significance of expatriate contributions in securing Pakistan’s faltering economy, expatriates have no representation on political or economic platforms in Pakistan. The Indian government, however, has taken numerous measures to court non-resident Indians, although remittances account for merely four per cent of the Indian GDP. Given that our government is severely constrained in its ability to undertake public expenditure, expatriate participation and earnings can also be used to help achieve pending development goals. Remittances already help subsidise the deficient social safety net in the country by helping pay for bills, medicines, marriage expenses and other needs of low-income households, including tuition fees for children who would not be educated otherwise.
The World Bank has floated the idea of diaspora bonds, which developing countries could sell to expatriates to raise capital for development. Given the lack of trust in the state and its functionaries, diaspora bonds may not work in Pakistan. However, an independently operated financial institution that specifically serves expatriates’ needs, such as significantly lowering their transaction costs and at the same time uses remittances to generate investment capital for development projects remains a feasible option to enable expatriates to be directly involved in alleviating poverty in their old neighbourhoods.
Remittances through formal channels have surged in recent years subsequent to international pressure to curb money laundering. The SBP, the Ministry of Overseas Pakistanis and the Ministry of Finance launched the Pakistan Remittance Initiative to facilitate faster and cheaper remittance flows. Recently, NADRA also began the ‘National Cash Remittance Programme’ to enable more than 100 NADRA centres to process inward home remittances from overseas for the general public using smart national identity cards. These are positive steps.
Policymakers now need to help create incentives for migrants to invest ‘surplus money’ that remains after daily expenses to serve as a multiplier for development. Recent analysis of the remittance data shows that a large proportion of remittances are put into real estate, purchase of agricultural machinery, food and marriages. Less than half of the sampled households were unable to direct any remittances towards investments or savings. One possibility to facilitate this process would be providing permanent expatriate representation in the Planning Commission or the State Bank to put in place an enabling policy environment and programmatic interventions to ensure their sustained contributions to the national economy.
There is also a need to pay attention to improving the recruitment system, enhancing the skill level of Pakistani labour migrants and preventing their exploitation but these issues require a host of other measures, which have to be discussed subsequently.
Published in The Express Tribune, December 31st, 2012.