Remittances - making a real impact on poverty

Life has changed beyond all recognition for Sanchita Magar, 20, an illiterate woman from a poor village in Makwanpur district, 128 km east of the capital, Kathmandu. Five years ago she came to the city and started work as an underpaid carpet weaver, then she got a job as a waitress but had to endure sexual exploitation by drunken clients. Last year she sought help from an overseas manpower agent who supplies domestic workers to households in Hong Kong and her luck changed. "I lead a comfortable life today, and can make enough money to send home to my parents also," Magar told IRIN on a shopping trip in Kathmandu during a month-long holiday. She gets a monthly salary of nearly US $500 - more than she could ever have dreamed of earning in impoverished Nepal. Magar is just one of an estimated 1.2 million Nepalis working abroad in nearly 40 foreign countries. Most are from low-income communities in rural and semi-urban areas of the country. According to rough estimates by Nepal's national bank, total remittances sent home by the expatriate workforce amounted to more than US $1 billion in 2004, making this the country's largest source of foreign revenue - more important than tourism, the most lucrative industry. REMITTANCES REDUCE POVERTY - OFFICIAL Early in May the government released the Nepal Living Standards Survey (2003-2004), showing that in less than a decade remittances had been responsible for an 11 percent reduction in the number of people living below the poverty line. The survey, conducted by the Central Bureau of Statistics and funded by the World Bank and UK's Department for International Development (DFID), indicated that the improvement occurred despite nine years of conflict with Maoist guerrillas that has severely restricted economic development. Other studies also support the government's findings on the importance of remittances. "The economic recovery in fiscal year 2004 was led by remittance-driven consumption expenditure, which accounted for almost all of the growth in GDP," said Asian Development Outlook 2005, a report by the Asian Development Bank (ADB). Nepal was ranked at 140 out of 177 countries on the UN's Human Development Index in 2004, and remains one of the least developed countries in south-central Asia. The ongoing conflict in the conflict-ridden Farwestern and Midwestern regions has also caused regional disparity in social development. "The economy is unable to provide gainful employment to all of its rapidly growing population, though the situation has been ameliorated somewhat by migration of labour to India, Southeast Asia and the Middle East," the report noted. "Any poverty reduction strategy has to look at four variables: growth in income, employment, empowerment and reduction in vulnerability of people. As more people get their money from abroad, they are likely to use that for their own betterment along those four variables. This, in turn, helps the growth in national economy," explained Ashutosh Tiwari, an economist from the International Finance Corporation (IFC), a member of the World Bank group promoting private sector investment in developing countries. The remittances helping to boost Nepal's economy have become so evident that the government has finally acknowledged the significant contribution made by expatriate workers, but experts say the authorities could do a lot more to promote overseas employment. "The government has not been able to support labour migration the way it is supposed to - people pay so much to go abroad - and the government has to be able to find ways to promote foreign employment more effectively," said Chandra Tandan of International Money Exchange (IME), a remittance company. NEPALI LABOURERS ABROAD "It sounds like easy money, but when you go to Qatar or any other Gulf country one can see how hard our Nepalis are working," said Prajuman Pokhrel from Nabil Bank, the principal agent for Western Union and a pioneer in remittance banking. "We should support them in every way possible." Around 25 remittance companies receive money from all over the world and forward it to cities, towns and district headquarters in Nepal. Most of them began operating in 2000 and have helped monitor the flow of remittances into the country, which has grown by 15 percent to 20 percent every year since 2001. "It's really remarkable to see how much of a contribution the migrant Nepali labour force has been making to the nation's economy," said Pokhrel. In the Gulf region alone, about 400,000 Nepalis are working in Bahrain, Kuwait, Saudi Arabia, Qatar and the United Arab Emirates (UAE). The demand was so high that Nepal had to open a consulate in Qatar to supplement the efforts of the embassy in Saudi Arabia, where there are over 200,000. Malaysia first opened its domestic job market to Nepalis in 2001, and about 150,000 workers have legally entered the country since then. Around 70,000 more are estimated to work in Hong Kong. Large numbers are also illegally employed in the rest of Southeast Asia, especially Japan and Singapore. The history of foreign employment dates back to the 19th century, when Nepalis first started working overseas as recruits to the Sikh Army in India and, later, the British army. Employment as unskilled labourers in many countries followed as they earned a reputation for honesty and reliability. The news that remittances were helping reduce poverty at home has boosted morale among migrant workers. "Finally, the government knows our worth. Perhaps such reports will also help to promote overseas employment, and the government will introduce more overseas-employment-friendly policies," said Ganesh Lama, who recently returned after nearly five years in the UAE. The young taxi driver was treated as a hero in his home village. "They all love me. Why? Because I paid for everything they now have!" he exclaimed. See IRIN's global overview: Remittances - money makes the world go round