[ Contribution of Expatriate Workers of Bangladesh]

Contribution of Expatriate Workers of Bangladesh

Contribution of Expatriate Workers of Bangladesh

Submitted by Mohammad Towhidul Islam 13374020 Mahfuzur Rahman

Submitted to Mahmood Hasan

BRAC University 28 March 2014

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Executive Summary
Bangladesh is a hugely labor surplus country and consequently participates in the supply side of the global labour market. The country has a long history of migration and it is one of the major labourexporting countries in the world. Each year a large number of people of this country voluntarily migrate overseas for both long- and short-term employment. Despite countrys long history of migration, increase in oil price in 1970s opened up vast scope for Bangladeshi migrants in the Middle East which was later on expanded to the newly industrialized countries of South East Asia. Labour migration from Bangladesh was geared furthermore for the government of Bangladesh promoting international labour migration as part of an overall development plan. With the passage of time international migration became part of the economic, social and political fabric of the country. Remittances flow is one of most visible attributes of international migration. Remittances sent by overseas migrants contribute a lot to the economic development of the country through enhance foreign exchange reserves and income. Like overseas employment, expatriate workers remittances flow has been showing increasing trend year by year. As Bangladesh is a hugely labour surplus country and as it is not possible for the successive Bangladeshi Government to create employment opportunities for all of its manpower, international migration would the best possible option for these Bangladeshi migrants. However, it can be turned into a major development enhancing process which can reduce poverty and be an important livelihood strategy of the poor Bangladeshi.

Contents
Introduction .................................................................................................................................................. 6 Nature of migrated employees of Bangladesh ............................................................................................. 7 Trend of Migration and remittance inflow in Bangladesh ............................................................................ 7 Country wise-migration source..................................................................................................................... 9 Impact of Migration and Remittance to the Economy of Bangladesh ......................................................... 9 Socio-Economic impact of migration and Remittance................................................................................ 10 Impact of Remittance on balance of payment, investment, and national savings .................................... 11 Challenges faced by migrant workers ......................................................................................................... 11 Productive use of remittance...................................................................................................................... 12 Recommendation........................................................................................................................................ 13 Conclusion ................................................................................................................................................... 14

Introduction
An expatriate (sometimes shortened to expat) is a person temporarily or permanently residing in a country other than that of the person's upbringing for the purpose of working. Expatriates can be skilled or semiskilled or even unskilled workers. International migration is one of the most significant features of globalization. Nearly 200 million people or 3 percent of the world population live outside their countries of birth and worldwide remittance flows are estimated to have exceeded $483 billion in 2011(World Bank 2011). Bangladesh like other South-Asian countries is in a situation of surplus manpower with a combination of professional, skilled, semi-skilled and less-skilled labor force. Local wage employment cannot absorb the huge low skilled and less educated workforce. This large volume of workforce needs to be engaged in employment to ensure their participation in the economic development of the countries as well to improve their family standard. Presently about 7.5m Bangladeshi migrants are working all over the world. Yearly migration from Bangladesh is about 0.3-0.4m. In the years of 2010, the migration from Bangladesh was 3,90,702. Bangladeshi workers are mainly engaged in 143 countries of the world but about 90% of the migration takes place in the Middle East and Malaysia. Libya, Qatar Saudi Arabia, UAE, Kuwait, Oman, Malaysia and Singapore are some of the major countries of destination. Cash remittances to Bangladesh from its global Diaspora of migrant workers the countrys secondlargest source of foreign exchange behind the garment industry continue to slide. The Bangladesh Bank, the countrys central bank, reported that in January, such remittances totaled $1.25 billion, a 5.8 percent decline from the year-earlier period, and the sixth consecutive month of falling inflows. From July 2013 to January 2014, the first seven months of the current fiscal year, remittances amounted to $8 billion, a 9 percent drop from the comparable year-ago period. Bangladeshi officials attribute the steady drop in remittance income to the reduced number of migrant workers journeying to the Middle East. Only about 450,000 Bangladeshi migrants found jobs overseas in 2013, a 33 percent plunge from the prior year (the Refugee and Migratory Movements Research Unit, University of Dhaka). Also, a large number of Bangladeshi jobseekers returned home, especially from either tightening labor markets and/or stricter visa regimes in Saudi Arabia, the United Arab Emirates, Malaysia and Kuwait. But, remittances from workers abroad are crucial to the impoverished, overcrowded South Asian country billions of dollars of remittances in the past few decades have helped push up Dhakas foreign exchange reserves above $18 billion, Reuters reported. Bangladesh, a state of some 160 million people, has an estimated 9 million migrant workers in the Middle East, Europe, North America and elsewhere; they sent a total of $14.5 billion in remittances during the 2012-2013 fiscal year. In order to boost remittances, the Bangladesh central bank suggested a comprehensive effort to increase the skills of migrants and to improve incentives for such workers overseas to remit funds back home for the purposes of investments. Bangladeshs chaotic politics may also be hurting remittances. In early January, parliamentary elections deteriorated into turmoil and violence after the opposition Bangladesh National Party and its Islamist allies boycotted the polls, thereby giving a fragile and disputed victory to the ruling Awami League. The 6

central bank noted that uncertainty over the elections likely dissuaded investments into the country both by foreign sources and Bangladeshi migrant laborers.

Nature of migrated employees of Bangladesh

Currently two types of international migration occur from Bangladesh. One takes place mostly to the industrialized west and the other to Middle Eastern and South East Asian countries. Voluntary migration to the industrialized west includes permanent residents, immigrants, work permit holders and professionals. They are usually perceived as long term or permanent migrants. Migration to Middle East and South East Asia are usually for short term and that migrants return home after finishing their contracts of employment in the host countries. Bangladesh has classified temporary migrant population into four categories. These are professional, skilled, semi-skilled, and unskilled. Doctors, engineers, nurses and teachers are considered as professionals. Manufacturing or garments workers are considered as skilled; while tailor, mason, etc. as semi-skilled workers; housemaid, cleaner, laborers are classified as less-skilled.

Trend of Migration and remittance inflow in Bangladesh

Bangladesh started to migrate workers abroad from 1976 starting with slightly over 6000 workers. Since then the growth of migration and remittance inflow from these migrated workers is in increase. The year to year change in both of these figures is shown below: Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 No. of Labor Migration 254190 272958 252702 381516 832609 875055 475278 300702 568062 575389

Figure: Trend of migration from Bangladesh The above table shows that the flow of labor migration in Bangladesh has been increasing until the year 2008. In case of labor migration in Bangladesh, the 2007 and 2008 editions were good because the record numbers of workers have gone to abroad these years for employment. Later, it has been continuously to decline over the next two consecutive years because of global financial crisis. Due to the global financial crisis, the owners of business organizations in the Middle East countries are bound to close their business operations. In addition to Middle East countries, the owners of other countries in the world are also bound to close their business operations because of global economic crisis. As a result, the flow of labor migration in Bangladesh has been declining drastically in the years 2009 and 2010. Again, the flow of labor migration has been increasing in the years 2011 and 2012. Thus, the government should find out the new-new labor markets to enhance the export of labors in the upcoming years. 7

Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Remittance (in billion USD) 3.18 3.56 4.25 5.48 6.57 9.01 10.72 11.00 12.17 12.87 15.09

Figure: Trend of remittance inflow in Bangladesh The above table shows that the flow of remittance income of Bangladesh is increasing. Although the flow of labor migration is decreasing after the year 2008 but the flow of remittance income of Bangladesh is increasing. The reasons are that the government and private recruiting agencies have taken various initiatives such as pre-departure training (language, culture, custom, value system, rules & regulations of the host countries), monitoring (within and outside the country) and diplomatic & high profile discussion with the government and private owners of the host countries. Through these activities, the government and private recruiting agencies can send more people abroad which will increase the remittance income of Bangladesh. In Bangladesh, female migrants make up a low proportion of labor migrants. Officially the flow of female migration is started in 1991. Until 2003, only 1% of Bangladeshi labor migrants were female. This number has increased to 3% in 2011 but it is still represent a small proportion in relation to overall Bangladeshi migrant flows. According to record of the Bureau of Manpower, Employment and Training (BMET), a total of 182,558 female migrated to more than 18 countries. The major destinations are Lebanon, the United Arab Emirates (UAE), Kingdom of Saudi Arabia (KSA), Jordan, Kuwait and Malaysia. Female migrants jobs included: doctor, nurse, medical technician, cleaner, housemaid, garment worker and factory workers.

Different studies showed that women's contribution to the remittance is more than their male counterpart because they remit on average 72% of her income to the home against the men who remit 45% to 50% of 8

their income. Therefore, it is clear that in spite of low proportion of female migrants workers in abroad, the flow of remittances (by female migrant workers) have a significant effect on their families as well as in the national economy.

Country wise-migration source

Bangladesh exports manpower mostly in Middle East countries. The Kingdom of Saudi Arabia is the most important source of remittances. Its share is about 29 percent of the aggregate remittances received in Bangladesh. The US, accounts for the second largest source nearly 15 percent of the total. Remittance figure attains 11.14% of GDP and 6 times of Overseas Development Assistance (ODA) and 12 times the Foreign Direct Investment (FDI) flow to Bangladesh.

(Source: Calculated data from Board of Investment, Bureau of Statistics).

Impact of Migration and Remittance to the Economy of Bangladesh

Migration plays a very important role in the national economy mainly in two major ways; firstly it reduces unemployment and secondly migration results in remittance flows for the country. The migration has shown steady growth over the year that is constructive to the development of Bangladesh; as inflow of remittance has increased every year. The links between migration and remittances are self evident. Both have a strong co-relation to poverty reduction in home countries. Remittance has become an important feature for the developing countries like Bangladesh for socioeconomic advancement. Remittance has a significant role to maintain balance of payment and to enrich foreign currency reserve. It also has a great contribution in Gross Domestic Product (GDP) of the country. Migration is gradually being considered as the development alternative to the family level of workers particularly the illiterate and un-skilled workforce. Remittance has a considerable contribution to ease foreign exchange constraint, stabilizing the exchange rate and allowing Bangladesh to import much needed raw materials, intermediate goods and capital equipment. Comfortable reserves of foreign exchange have also contributed to overall macro stability and 9

have reduced aid dependency. Remittance increases with the expanding migration process and accelerating movement of people for overseas employment market. Remittances from migrants have positive impacts on poverty reduction and development in Bangladesh substantially contributing to the achievement of the Millennium Development Goals. These positive impacts become greater when remittances can be saved and invested in infrastructures and productive capacity. Government policy measures induce such use. Significant barriers to migration and remittance transfers need to be addressed in order to harness opportunities for development and poverty reduction, including through easing financial transfers, setting appropriate incentives, improving policy coherence in migration and remittance polices, and facilitating the temporary movement of people. Migration can indirectly help alleviate poverty by raising the productivity, education and health of their families. Success of a migration depends on the positive gains and benefit accrued for the family members particularly to the children of women migrant workers. With the increasing importance of migration, government wants to maximize the contribution of manpower export for economic growth and poverty reduction of the country. It is now well accepted that one of routes to achieve the economic emancipation for Bangladesh lies in manpower export sector. The remittance and economic development in Bangladesh can be broadly explained in two ways; overall Macroeconomic benefits of remittance and Microeconomic benefits at household level. The migration of workers in search of economic opportunity has enormous implications for development. It has significant positive impacts on household well-being and economic growth through improved income and increased integration in the global economy (World Bank 2006). Studies on Impact of International Labor Migration and Remittances on Poverty in Bangladesh found that migration households experienced enormous expansion of their income base during the post migration period. Bangladesh has witnessed a modest poverty reduction rate of around one percentage point a year since the early nineties. The percentage of population living in poverty fell from over 70 percent in 1970 to about 50 percent in 2000. A decline of nearly 10 percentage points occurred in just the first half of the nineties. The poverty Gap (P1) measures the average distance the poor are from the poverty line and the Poverty Severity (P2), the square of the Poverty Gap, investigates the distributional characteristics of the poor. Changes in these measures suggest that the average distance from the poverty line had decreased for the poor between 1991/92 and 2000 from 17.2 percent to 12.9 percent, and the rate of decline in P1 and P2 measures was faster than that of the head count rates (World Bank, 2006).

Gradually more women are migrating on their own as principal wage-earners. They tend to take jobs in what are familiar to the female occupations so their experience is gendered as well. Many women who migrate find themselves at risk of gender-based violence and exploitation.

Socio-Economic impact of migration and Remittance

Benefits accrued through migration from Bangladesh have manifolds impact on the economy. Migration from Bangladesh facilitates the following socio-economic benefits of the migrants: It reduces the unemployment problem leading to poverty alleviation. 10

Remittances enhance the economic condition of the migrants ensuring the economic development of the country. It is the highest amount of real foreign currency earning for the economy. It helps reducing the frustration among the man and women at young age, social problems, etc. It develops the capability of investment for self-employment and entrepreneurship. For movement of migrant workers, business related to hotel, traveling, transportation, etc. gets momentum in the country. It enhances the financial capability and purchasing power of the migrant workers. It enhances transfer of technology through technical knowledge and expertise acquired by the migrant workers working abroad. It creates motivation and develops awareness of the migrant workers towards cleanliness, hygienic environment, importance of literacy, discipline, and up lift the standard of living.

Impact of Remittance on balance of payment, investment, and national savings

The most important macro-economic impact of financial flow arising from international labor migration is on the balance of payments and through that on the economy as a whole. A major benefit of labor export is the balance of payments support provided by remittance. In a situation of foreign exchange shortage, remittance inflows could promote investment and capacity utilization if most of the remitted foreign exchange is used for importing capital goods and essential inputs. Alternatively, increased foreign exchange availability may lead to a relaxation of controls on luxury imports. It may also lead the government to choose the easier short-run options instead of taking measures designed to strengthen the economys structure and reduce its import dependence in the longer run.

Challenges faced by migrant workers

The migrant workers of Bangladesh have been contributing immensely to the economy with strong positive impact on growth, employment, foreign reserve and balance of payments. The countrys imports would have to be drastically cut down or its current account deficit rose to highly unsustainable levels without foreign remittance. But these migrant workers are regularly facing various types of problems within and outside the country. The following problems are facing by Bangladeshi migrants within and outside the country:
1. The people who want to go to abroad for job are suffering from information problem because most of

these people are illiterate and they dont know from where they can collect more authentic information in this regard. 2. The people who want to go to abroad for employment are suffering from financial problem because most of these people are poor and they dont have ample resources. However, the non-government cost of migration is very high in Bangladesh and it is almost impossible to bear by these poor people. 11

3. The people who want to go to abroad for doing job are suffering from efficiency problem because most of the migrant workers of Bangladesh are unskilled and low-skilled. That is why, they cant perform their assigned task & duties with effectively & efficiently like the migrant workers of other countries in the world. 4. Bangladeshi migrants are suffering from training problem. They dont get any training from the private and government recruiting agencies before pre departure. 5. The migrant people of Bangladesh are regularly facing passport collection problem because with the introduction of machine readable passport people are compelled to travel all the way from their village and wait a week to get their passport. 6. Migrant workers of Bangladesh often face emergency problems like cheating, frauds and so on within and outside the country. 7. Migrant workers of Bangladesh are regularly encountering various problems in sending remittances, especially to the remote areas of the country, through formal channels because the process of sending remittance through banks is slow and complicated. 8. Bangladeshi migrants are regularly harassed and sometime physically oppressed in the various airports of the country. 9. Migrant workers of Bangladesh are regularly facing investment problem because of chaotic political environment. 10. The present pre-departure legislation of Bangladesh is quite vague and complicated and it creates tremendous problems for migrants.

Productive use of remittance

At least 29 percent of the countrys remittance is used for investment purposes, a finding that scatters misunderstanding that migrant workers earnings typically go to non-productive uses. On average, an overseas migrant invests $609 of his/her yearly remittance earning of $2,105, a recent survey by BRAC found. However, the study found that food, house construction and ceremonies still took up majority of the expenditure: food accounted for about 37 percent, house construction and repair 12 percent and social and religious ceremonies 8 percent. In 2012 around $14 billion remittances came in Bangladesh, which is 11 percent of the gross national income. Migrant workers generally buy land on remittance income due to unavailability of secure investment in the country and consider land as a safe and secure investment.

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Recommendation
Bangladesh is one of the important remittance earning countries in the world. Moreover it is increasing persistently. No doubt, we want to solve our unemployment problem and working of Bangladeshi residents in different countries is a great opportunity to reduce the prevailing unemployment rate. But actual impact of remittance on the economy of migrant sending countries depends on how the remittance is being used. We have seen that various policies and activities have been undertaken to increase remittance flow in formal way. But, lesser effort has been taken for the development of effective utilization of remittance. So it is recommended that proper policy measures be formulated to manage this sector considering the following issues carefully.

1. Proper information about job opportunities in the overseas countries has to be spread all over the country timely and job security should be ensured in the foreign countries. 2. Remittance concerned information centers have to be setup and arrangement to be made for provision of proper knowledge regarding administrative activities, passport and visa processing etc. 3. Training centers are to be setup for the people who want to go overseas countries for employment opportunities. 4. Moreover, all types of migration related activities should be completely free from corruption. Quick processing system of issuing passport and visa should be developed and bureaucratic problems should be solved within very short time. 5. Reasonable costs should be ensured by the concerned authority. 6. Influence of the middlemen and their interest should be controlled and problems created by them should be checked. 7. Inspirations to go abroad and other favorable influences have to be provided to the migrant workers and employees. 8. It should be ensured by the embassies in the overseas countries that any problem faced by the migrant workers will be taken care of as early as possible and the Ministry of Foreign Affairs will have to take every responsibility to take care of the native manpower. The Bangladeshi embassies in foreign countries should also help the native migrants in searching for new job opportunities in the overseas countries. 9. Government has to make a close relationship with the concerned overseas countries to search job opportunities in those countries. 10. Remittance sending procedure should be developed to make it secured, quick and effective. Available formal channels for sending money to the native country have to be reorganized to take as short time as possible. Moreover the remittance sending process should be liberalized so that irregular emigrants can also send remittance through regular channels. 11. Charges on sending money should be very favorable for the migrant workers. 12. All information regarding migration should be preserved by the concerned authority.

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Conclusion
Contribution of expatriate workers (remittance) is one of those important instruments, which helps to solve our financial crisis by strengthening the economy. Migration is such a process, which helps to reduce unemployment, increases reserves and helps to make the balance of payment favorable and also helps immensely in other socio-economic aspects. Unemployment situation is one of the most alarming economic indicators of a country; migration and consequent remittance is mainly related with employment and earning of foreign currency. So, Contribution of expatriate / remittance is a vital issue for over-populated countries like Bangladesh. It also helps to increase foreign reserves, national savings and investments. From socio-economic point of view it uplifts living standard, social status and help ensuring basic needs. Therefore, it is very vital for the acceleration of economic growth in Bangladesh. The government, concerned authorities and the people of Bangladesh have to take proper care about those who will bring remittance in our economy to reduce poverty and help us to create sound / stable economy.

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References
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Bangladesh Bank, website: www.bangladesh-bank.org Bangladesh Bureau of Statistics, website: www.bbsgov.org Board of Investment, website: www.boibd.org Bureau of Manpower, Employment and Training (BMET), website:http://www.bmet.org.bd De Bruyn & Kuddus (2005), Dynamics of Remittance Utilization in Bangladesh, International Organisation for Migration, IOM Migration Series, Number 18, Geneva, Switzerland Economic Relations Division, Ministry of Finance, Government of Bangladesh, website: http://www.mof.gov.bd Export Promotion Bureau, Government of Bangladesh, website: www.epb.gov.bd Federation of Chamber of Commerce & Industries (FBCCI), Bangladesh website: www.fbccibd.org Migration, The World Bank, Washington DC. Ministry of Expatriates' Welfare and Overseas Employment, website: www.probashi.gov.bd Ministry of Finance, Government of Bangladesh, 1Economic Trends and Bangladesh Economic Survey 2005, website: www.mof.gov.bd National Board of Revenue (NBR), website: www.nbr-bd.org

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