The recent news that remittances touched nearly $14 billion in fiscal year 2013 is a testament to just how successful the programme has been.
One of the most successful and least celebrated government programmes that is currently in operation is the Pakistan Remittance Initiative (PRI), which seeks to increase the volume of money sent home by overseas Pakistanis through formal channels. The recent news that remittances touched nearly $14 billion in fiscal year 2013 is a testament to just how successful the programme has been. The PRI is based on a simple premise: overseas Pakistanis used informal channels because they offered lower transaction costs and no bureaucratic hassle. The State Bank of Pakistan decided to beat those informal channels, not by locking them all up, but by competing on price. It has offered to subsidise the cost of money transfers to formal sector players, an initiative that costs the government a negligible fraction of a percentage point of the total remittances being sent home, but has resulted in Pakistan becoming the cheapest place in the world to send money to, according to a study by the World Bank. As a result, informal money transfers — while they still exist — have been reduced to a shadow of their former sizes.
But the PRI is interesting not just for its success in raising remittances: it is a good example of the government attracting money by competing for it, and thus, raising the quality of its services. Too often, the government makes laws and puts the burden of compliance on the citizenry, rather than designing them in accordance with people’s needs.
The government would do well to take this approach to policymaking in other areas, particularly those concerning foreign investment. Many foreign companies have been eyeing Pakistan as an investment destination. Our government can either greet them with mountains of paperwork to fill out, which would drive away the majority of them, or it can simplify the rules that govern their behaviour and encourage more of them to invest their money.
Published in The Express Tribune, July 15th, 2013.
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Excellent editorial. Thank you for a positive and encouraging review of the government policies. My hats off to Express Tribune for it focus on just the news but a good journalistic analysis as well.
$14 billion is a good start. However we must ask ourselves a simple question.,
--- How much foreign remittance/income/exports/cash is really needed for a country of approximately 200 million people?
A) It may turn out that $14 billion per year is enough to meet our needs. --- if this (option A) is the case, then we should be content with current set of policies and the level of foreign remittances.
OR
B) it may turn out that we really need $140 billion that is 10 times or even 30 times the $14 billion/per year.
--- If option B is the case, then we need a massive overhaul of national thinking, and more importantly a brand new vision.
Whatever the case may be, we should also not forget that foreign money is brought in by "foreigners". Thus as a nation we have to understand that we must cater to the needs of "foreigners" (within the limits of our historical norms) if we want them to bring their cash to our country.
Best wishes.
Want to increase the remittances in long term? Give training to Pakistanis living abroad. They will get professional jobs and send bigger amounts.
The editor raises a good point on remittances and foreign investment. Pakistan is a good destination for foreign investment as it provides cheap labor for production. Providing security is a key element to attract foreign investment.