expatriate workers of bangladesh

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[Contribution of Expatriate Workers of Bangladesh]


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Contribution of Expatriate Workers of angladesh


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Contribution of Expatriate Workers of angladesh

Submitted by

Mohammad Towhidul Islam 13374020Mahfuzur 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 theglobal labour market. The country has a long history of migration and it is one of the major labour-exporting countries in the world. Each year a large number of people of this country voluntarily migrateoverseas for both long- and short-term employment. Despite countrys long history of migration, increasein oil price in 1970s opened up vast scope for Bangladeshi migrants in the Middle East which was later onexpanded to the newly industrialized countries of South East Asia. Labour migration from Bangladeshwas geared furthermore for the government of Bangladesh promoting international labour migration aspart of an overall development plan. With the passage of time international migration became part of theeconomic, social and political fabric of the country. Remittances flow is one of most visible attributes ofinternational migration.

Remittances sent by overseas migrants contribute a lot to the economic development of the countrythrough 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 BangladeshiGovernment to create employment opportunities for all of its manpower, international migration wouldthe best possible option for these Bangladeshi migrants. However, it can be turned into a majordevelopment enhancing process which can reduce poverty and be an important livelihood strategy of thepoor Bangladeshi.


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ContentsIntroduction .................................................................................................................................................. 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


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Introduction

An expatriate (sometimes shortened to expat) is a person temporarily or permanently residing in a countryother than that of the person's upbringing for the purpose of working. Expatriates can be skilled or semi-skilled or even unskilled workers.

International migration is one of the most significant features of globalization. Nearly 200 million peopleor 3 percent of the world population live outside their countries of birth and worldwide remittance flowsare 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 ofprofessional, skilled, semi-skilled and less-skilled labor force. Local wage employment cannot absorb thehuge low skilled and less educated workforce. This large volume of workforce needs to be engaged inemployment to ensure their participation in the economic development of the countries as well to improvetheir 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 migrationtakes place in the Middle East and Malaysia. Libya, Qatar Saudi Arabia, UAE, Kuwait, Oman, Malaysiaand Singapore are some of the major countries of destination.

Cash remittances to Bangladesh from its global Diaspora of migrant workers the countrys second-largest source of foreign exchange behind the garment industrycontinue to slide. The Bangladesh Bank,the countrys central bank, reported that in January, such remittances totaled $1.25 billion, a 5.8 percentdecline from the year-earlier period, and the sixth consecutive month of falling inflows. From July 2013to January 2014, the first seven months of the current fiscal year, remittances amounted to $8 billion, a 9percent drop from the comparable year-ago period.

Bangladeshi officials attribute the steady drop in remittance income to the reduced number of migrantworkers journeying to the Middle East. Only about 450,000 Bangladeshi migrants found jobs overseas in2013, 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 fromeither 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 countrybillions of dollars of remittances in the past few decades have helped push up Dhakas foreign exchangereserves above $18 billion, Reuters reported. Bangladesh, a state of some 160 million people, has anestimated 9 million migrant workers in the Middle East, Europe, North America and elsewhere; they senta 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 increasethe skills of migrants and to improve incentives for such workers overseas to remit funds back home forthe purposes of investments.

Bangladeshs chaotic politics may also be hurting remittances . In early January, parliamentary electionsdeteriorated into turmoil and violence after the opposition Bangladesh National Party and its Islamistallies boycotted the polls, thereby giving a fragile and disputed victory to the ruling Awami League. The


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central bank noted that uncertainty over the elections likely dissuaded investments into the countrybothby 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 theindustrialized west and the other to Middle Eastern and South East Asian countries. Voluntary migrationto the industrialized west includes permanent residents, immigrants, work permit holders andprofessionals. They are usually perceived as long term or permanent migrants. Migration to Middle Eastand South East Asia are usually for short term and that migrants return home after finishing theircontracts 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 asprofessionals. Manufacturing or garments workers are considered as skilled; while tailor, mason, etc. assemi-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. Sincethen the growth of migration and remittance inflow from these migrated workers is in increase. The yearto year change in both of these figures is shown below:

Year No. of Labor Migration

2003 254190

2004 272958

2005 252702

2006 3815162007 832609

2008 875055

2009 475278

2010 300702

2011 568062

2012 575389

Figure: Trend of migration from Bangladesh

The above table shows that the flow of labor migration in Bangladesh has been increasing until the year2008. 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 todecline over the next two consecutive years because of global financial crisis. Due to the global financialcrisis, the owners of business organizations in the Middle East countries are bound to close their businessoperations. In addition to Middle East countries, the owners of other countries in the world are also boundto close their business operations because of global economic crisis. As a result, the flow of labormigration in Bangladesh has been declining drastically in the years 2009 and 2010. Again, the flow oflabor migration has been increasing in the years 2011 and 2012. Thus, the government should find out thenew-new labor markets to enhance the export of labors in the upcoming years.


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Year Remittance (in billion USD)

2003 3.18

2004 3.56

2005 4.25

2006 5.48

2007 6.57

2008 9.01

2009 10.72

2010 11.00

2011 12.17

2012 12.87

2013 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 flowof 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 variousinitiatives such as pre-departure training (language, culture, custom, value system, rules & regulations ofthe host countries), monitoring (within and outside the country) and diplomatic & high profile discussionwith the government and private owners of the host countries. Through these activities, the governmentand private recruiting agencies can send more people abroad which will increase the remittance income ofBangladesh.

In Bangladesh, female migrants make up a low proportion of labor migrants. Officially the flow of femalemigration is started in 1991. Until 2003, only 1% of Bangladeshi labor migrants were female. Thisnumber has increased to 3% in 2011 but it is still represent a small proportion in relation to overallBangladeshi 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 andMalaysia. 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 counterpartbecause they remit on average 72% of her income to the home against the men who remit 45% to 50% of


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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 asin the national economy.

Country wise-migration source

Bangladesh exports manpower mostly in Middle East countries. The Kingdom of Saudi Arabia is themost important source of remittances. Its share is about 29 percent of the aggregate remittances receivedin Bangladesh. The US, accounts for the second largest source nearly 15 percent of the total. Remittancefigure attains 11.14% of GDP and 6 times of Overseas Development Assistance (ODA) and 12 times theForeign 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 itreduces unemployment and secondly migration results in remittance flows for the country. The migrationhas shown steady growth over the year that is constructive to the development of Bangladesh; as inflowof 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 toenrich foreign currency reserve. It also has a great contribution in Gross Domestic Product (GDP) of thecountry. Migration is gradually being considered as the development alternative to the family level ofworkers particularly the illiterate and un-skilled workforce.

Remittance has a considerable contribution to ease foreign exchange constraint, stabilizing the exchangerate and allowing Bangladesh to import much needed raw materials, intermediate goods and capitalequipment. Comfortable reserves of foreign exchange have also contributed to overall macro stability and


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have reduced aid dependency. Remittance increases with the expanding migration process andaccelerating movement of people for overseas employment market.

Remittances from migrants have positive impacts on poverty reduction and development in Bangladeshsubstantially contributing to the achievement of the Millennium Development Goals. These positiveimpacts 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 transfersneed to be addressed in order to harness opportunities for development and poverty reduction, includingthrough easing financial transfers, setting appropriate incentives, improving policy coherence in migrationand remittance polices, and facilitating the temporary movement of people.

Migration can indirectly help alleviate poverty by raising the productivity, education and health of theirfamilies. Success of a migration depends on the positive gains and benefit accrued for the familymembers particularly to the children of women migrant workers. With the increasing importance ofmigration, government wants to maximize the contribution of manpower export for economic growth andpoverty 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; overallMacroeconomic benefits of remittance and Microeconomic benefits at household level. The migration ofworkers in search of economic opportunity has enormous implications for development. It has significantpositive impacts on household well-being and economic growth through improved income and increasedintegration in the global economy (World Bank 2006). Studies on Impact of International LaborMigration and Remittances on Poverty in Bangladesh found that migration households experiencedenormous 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 theearly 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), thesquare of the Poverty Gap, investigates the distributional characteristics of the poor. Changes in thesemeasures suggest that the average distance from the poverty line had decreased for the poor between1991/92 and 2000 from 17.2 percent to 12.9 percent, and the rate of decline in P1 and P2 measures wasfaster 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 inwhat are familiar to the female occupations so their experience is gendered as well. Many women whomigrate 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. Migrationfrom Bangladesh facilitates the following socio-economic benefits of the migrants:

It reduces the unemployment problem leading to poverty alleviation.


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Remittances enhance the economic condition of the migrants ensuring the economic developmentof 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. getsmomentum 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 themigrant 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 migrationis on the balance ofpayments and through that on the economy as a whole. A major benefit of laborexport is the balance of payments support provided by remittance. In a situation of foreign exchangeshortage, remittance inflows could promote investment and capacity utilization if most of the remittedforeign 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 measuresdesigned to strengthen the economysstructure 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 strongpositive impact on growth, employment, foreign reserve and balance of payments. The countrys importswould have to be drastically cut down or its current account deficit rose to highly unsustainable levelswithout foreign remittance. But these migrant workers are regularly facing various types of problemswithin 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 ofthese people are illiterate and they dont know fromwhere they can collect more authentic information inthis regard.

2. The people who want to go to abroad for employment are suffering from financial problem becausemost of these people are poor and they dont have ample resources.However, the non-government cost ofmigration is very high in Bangladesh and it is almost impossible to bear by these poor people.


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3. The people who want to go to abroad for doing job are suffering from efficiency problem because mostof the migrant workers of Bangladesh are unskilled and low-skilled. That is why, they cant perform theirassigned task & duties with effectively & efficiently like the migrant workers of other countries in theworld.

4. Bangladeshi migrants are suffering from trainingproblem. They dont get any training from the privateand government recruiting agencies before pre departure.

5. The migrant people of Bangladesh are regularly facing passport collection problem because with theintroduction of machine readable passport people are compelled to travel all the way from their villageand wait a week to get their passport.

6. Migrant workers of Bangladesh often face emergency problems like cheating, frauds and so on withinand 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 airportsof the country.

9. Migrant workers of Bangladesh are regularly facing investment problem because of chaotic politicalenvironment.

10. The present pre-departure legislation of Bangladesh is quite vague and complicated and it createstremendous problems for migrants.

Productive use of remittance

At least 29 percent of the countrys remittance is used for investment purposes, a finding that scattersmisunderstanding that migrant workers earnings typically go to non-productive uses. On average, anoverseas migrant invests $609 of his/her yearly remittance earning of $2,105, a recent survey by BRACfound. However, the study found that food, house construction and ceremonies still took up majority ofthe expenditure: food accounted for about 37 percent, house construction and repair 12 percent and socialand religious ceremonies 8 percent.

In 2012 around $14 billion remittances came in Bangladesh, which is 11 percent of the gross nationalincome. Migrant workers generally buy land on remittance income due to unavailability of secureinvestment 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 increasingpersistently. No doubt, we want to solve our unemployment problem and working of Bangladeshiresidents 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 remittanceis being used.We have seen that various policies and activities have been undertaken to increase remittance flow informal way. But, lesser effort has been taken for the development of effective utilization of remittance. Soit is recommended that proper policy measures be formulated to manage this sector considering thefollowing issues carefully.

1. Proper information about job opportunities in the overseas countries has to be spread all over thecountry 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 forprovision 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 employmentopportunities.

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 bureaucraticproblems 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 willhave to take every responsibility to take care of the native manpower. The Bangladeshi embassiesin foreign countries should also help the native migrants in searching for new job opportunities inthe overseas countries.

9. Government has to make a close relationship with the concerned overseas countries to search jobopportunities 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 takeas short time as possible. Moreover the remittance sending process should be liberalized so thatirregular 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 tosolve our financial crisis by strengthening the economy. Migration is such a process, which helps toreduce 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 andconsequent 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. Italso helps to increase foreign reserves, national savings and investments. From socio-economic point ofview it uplifts living standard, social status and help ensuring basic needs. Therefore, it is very vital forthe acceleration of economic growth in Bangladesh. The government, concerned authorities and thepeople of Bangladesh have to take proper care about those who will bring remittance in our economy toreduce poverty and help us to create sound / stable economy.


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References1. Bangladesh Bank, website: www.bangladesh-bank.org2. Bangladesh Bureau of Statistics, website: www.bbsgov.org3. Board of Investment, website: www.boibd.org4. Bureau of Manpower, Employment and Training (BMET), website:http://www.bmet.org.bd5. De Bruyn & Kuddus (2005), Dynamics of Remittance Utilization in Bangladesh, International

Organisation for Migration, IOM Migration Series, Number 18, Geneva, Switzerland6. Economic Relations Division, Ministry of Finance, Government of Bangladesh, website:

http://www.mof.gov.bd7. Export Promotion Bureau, Government of Bangladesh, website: www.epb.gov.bd8. Federation of Chamber of Commerce & Industries (FBCCI), Bangladesh website: www.fbcci-

bd.org9. Migration, The World Bank, Washington DC.10.Ministry of Expatriates' Welfare and Overseas Employment, website: www.probashi.gov.bd11.Ministry of Finance, Government of Bangladesh, 1Economic Trends and12.Bangladesh Economic Survey2005, website: www.mof.gov.bd13.National Board of Revenue (NBR), website: www.nbr-bd.org
http://www.mof.gov.bd/http://www.mof.gov.bd/http://www.mof.gov.bd/

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