A Study on World Economic Meltdown (2007-2009); Impact on Bangladesh Workforce and Remittance Earning. Chapter -1 Introduction Remittance is one of the most important economic variables in recent times as it helps in balancing balance of payments, increasing foreign exchange reserves, enhancing national savings and increasing velocity of money. For about two decades remittance has been contributing around 35% of export earnings. Moreover, it is greater than foreign aid and thus helps in lessening dependence on foreign aid. Remittance gets momentum in recent time in Bangladesh and is the second largest sector of foreign exchange earnings after the garments sector. If cost of imported raw materials is deducted from the foreign exchange earning of the garments sector, remittance becomes the single largest sector of foreign exchange earnings. Remittance earning is increasing day by day but at a lower rate than the increase in emigration from Bangladesh due to the increasing share of unskilled or semi-skilled labors than the professionals in international migration. The share of remittance in GNI (Gross National Income) is increasing day by day. It affects almost all the macro-economic indicators of a country positively. Though there are also negative sides of remittance earning e.g. brain drain, its overall contribution to Bangladesh economy is very much effective. Appropriate and timely government policies and initiatives can boost up the amount of remittance and can rectify the problems related to it. Remittance has created a new dimension in the economic development of Bangladesh. We have to properly unlock the potentialities of remittances and utilize it properly to make it an indispensable tool of the economic development of Bangladesh. 1.1 Statement of the problem The impact on global economic meltdown (2007-2009) has predominantly been four areas, which includes: a) reduced overseas employment for Bangladeshi labour; b) return of Bangladeshi workers employed abroad; c) enforcement of restrictive immigration policies in destination countries; and d) effects on remittance flow. The paper all find out some issues why Bangladeshis are dependent on remittance? What is the condition of flow of remittance? How government has responded to overcome this adverse impact? What should government do to solve this adverse impact in future? 1.2 Objectives of the study To explore about the impact of remittances on economic condition. Comparative analysis of remittance earning in the FY 2006- 2009. To identify about the stability of remittance earning. 1.3 Current status of Bangladesh Bangladesh is an important labour sending country. The number of migrants leaving averaged around 250,000 persons a year between 2001 and 2005. It rose to almost 400,000 in 2006 and doubled further to 832,600 in 2007. Approximately 900,000 (875,055) workers left in 2008 and it is estimated that there are approximately 5.5 million Bangladeshi workers currently employed in developed and developing countries worldwide.1 1
Data from BMET website www.bmet.org.bd, last accessed 26.04.10
Although foreign workers from Bangladesh make up just 2.8% of its population, they contribute to more than 13% of gross domestic product (GDP). Remittances are Bangladesh's second-biggest source of foreign income after ready-made garments and in 2008, the country earned a total of USD 9019.60 million in remittances. According to the World Bank, Bangladesh is one of the top 10 remittance recipient countries globally. Majority of migrants from Bangladesh (i.e. approximately 63%) are less skilled and semi skilled labour migrants, who go abroad on a temporary contractual basis. The Middle East is the largest destination for Bangladeshi migrant workers (i.e. approximately 80%), however, Southeast Asia is also emerging as an important destination. 1.4 Definition of Terms Study A detail investigation into a subject or situation. Economic meltdown when economy slows down and the factors for growth of worlds states like exports and imports, employment, trade deficit, banking activites, development activities are threatened by an invisible hand is economic meltdown. Workforce The Bangladeshi laborers work in abroad to generate the economic growth of the country. Remittance It is the sum of money that is sent to somebody in order to pay for something or it is the act of sending money to somebody to pay for something. It generally means money sent by migrant workers in foreign countries to their former homes. Actually, remittance is a much broader concept. It has many dimensions and categories. 1.5 Scope of the study Assessment of the reliance of remittance and its flow in national economy. To show some data about the condition of the Bangladeshi workforce in different countries. Draw some pragmatic steps to develop the condition of workforces. 1.6 Limitation of the study It is very difficult to work on the topic because it deals with some global and national phenomenon like remittance and workforce and its negative impacts on Bangladesh economy. Due to lack of available primary data, I have to work on secondary data. There is no observation here but the work only is based on the data from various sources. I could not focus many of the national issues and policies regarding Bangladeshi laborforce in this paper. 1.7 Research Methodology Based on the nature of the study the researcher will focus on available secondary data. The information gathered helped to develop the findings, implication, and recommendation for tackling and improving the foreign currency reserve in Bangladesh.
Newspaper study World migration report of 2007-2009 The magazine Economic review Manpower and employment bureau Bangladesh bank statistics International organization for migration Bangladesh research publication journal Searching from Internet regarding different web page Ministry of foreign affairs (labor wing) Chapter-2 Remittance 2.1 Importance of Overseas Migration Remittance earning in different FY Fiscal Remittance No Year (Million Of USD) Expatriates (â€˜000) 2000 1949 248 2005 3848 250 2007 5979 564 2008 7915 981 2009 9689 650 2010 10987 427 2011 11650 439
Cumulative No of Expatriates (â€˜000) 2865 4051 4906 5887 6537 6964 7403
Remittance per cent of Total Total Total Export Import ODA
33.9 45.6 49.2 56.2 62.2 67.8 50.8
17.8 21.8 25.1 27.2 10.8 11.0 10.5
99.1 131.3 117.8 128.7 129.7 102.2 108.6
3.0 1.9 3.3 4.5 43.0 46.3 34.6
362.0 565.7 745.4 683.4 524.5 507.7 655.5
Source: BB and BMET In the context of prospects of future remittance flows to Bangladesh, a number of factors including gender and skill mix of migrant workers, cost of migration, catering to the demands in the global labour market, and impact of the crisis in the Middle East and North Africa (MENA) have emerged as major concerns in recent times. Bangladesh needs careful investigation for labour export in MENA countries to avoid adverse impacts on the remittance earning. Remittance earning in different FY from 2000 to 2011
Source: Bangladesh Bank In the chart it is shown that the remittance earning is increasing. Due to global meltdown there is no negative impact on remittance earning. The earning level is going up day by day. Reliance on remittances In a developing country like Bangladesh, remittance is mostly consumed by needy people. It is seen that a family member â€“ a father or son has gone abroad to work and his earnings alone supports his entire family with food, healthcare and education not only for his wife and children, but also for his parents and any other person who may be dependent on him. He also uses part of the remittance funds to pay off his migration cost. Some of it goes for investment and some are saved to meet contingencies. Often remittance is also utilized for social development projects. In the rural areas, many Mosques and Madrasas are often built with the monetary aid sent by expatriate workers. Remittances hence not only contribute to the economy but also to the better livelihood of needy people. Remittance has resolved foreign exchange constraints, increased foreign currency reserves, decreased dependency on foreign aids, improved balance of payments, increased dependence on the global economy, and also has helped increase supply of national savings, boosted up GDP and acts as a stable form of external finance, which increases during crisis. 2.2 Comparative analysis of Remittance Earning in the year 2006-2009 Bangladeshi nationals working abroad continued to play a supporting role in strengthening the current account. Receipts on this sector increased by 24.5 percent to USD 5978.5 million in FY 07 from USD 4801.9 million in FY 06. The underlying reason was that Bangladesh Bank made vigorous efforts such as expansion of remittance threshold has been fixed up amounting to USD 3.0 million for each USA-based exchange houses, GBP 2.0 million for UK-based exchange houses and 2.5 million for Canadian exchange houses. For these
measures, remittances recorded a substantial increase by 24.5 percent to USD 5978.5 million during the year under report. Remittances as percentage of GDP increased by 1.08 percentage point to 8.83 Source: Bangladesh Bank in FY 07 from 7.75 in FY 06. The shares of major source countries in the remittance receipts of FY 06 and FY 07 are shown in figure.
Remittance earning has been increased from year 2007 to year 2008. Receipts on this sector increased by 32.4 percent to USD 7914.8 million in FY 08 from USD 5978.5 million in FY 07. It is to be mentioned that, drawing arrangements have been made between 39 Bangladeshi banks and 270 foreign banks/exchange houses situated throughout the globe. Furthermore, annual remittance threshold has been refixed up amounting to USD 3.00 million for each USA-based exchange houses, GBP 2.00 million for UK-based exchange houses, EURO 2.00 million for Italy-based exchange houses, USD 2.5 million for Canadian exchange houses, USD 3.00 million each for KSA, UAE, Kuwait, Qatar, Oman and Bahrain based exchange houses and USD 1.5 million for each all other country exchange houses. For these measures, remittances recorded a substantial increase by 32.4 percent to USD 7914.8 million during the year under report. Remittances as percentage of GDP increased by 1.3 percentage point Source: Bangladesh Bank to 10.02 in FY08 from 8.72 in FY07. The shares of major source countries in the remittance receipts of FY07 and FY08 are given in the figure. Receipts on this sector increased by 22.4 percent to USD 9689.3 million in FY09 from USD 7914.8 million in FY08. In this year remittances have recorded a substantial increase by 22.4 percent to USD 9689.3 million under report. Remittances as percentage of GDP increased by 0.89 percentage points to 10.84 in FY09 from 9.95 in FY08. The shares of major source countries in the remittance receipts of FY08 and FY09 are given in the figure. Chapter-3 Workforce in Abroad Outflows of Bangladeshi workers in different years
Though there was recession in worldwide the number of workers were high in the subsequent year. From 2006 to 2008 the migration of the workers in the major countries were remarkable. The data from the graph is shown that the condition of overseas migration is upward. Number of Bangladeshi immigrants in industrially developed countries from independence to now. These people are contributing a lot in influencing GDP growth of our country. Country Number of Immigrants UK 500000 USA 500000 Italy 70000 Canada 35000 Japan 22000 Australia 15000 Greece 11000 Spain 7000 Germany 5000 South Africa 4000 France 3000 Netherlands 2500 Belgium 2000 Switzerland 1400 Total 1178400 Siddiqui 2004 Based on the educated guess made by Bangladeshi govt. officials who have firsthand experience with the immigrant community. Chapter-4
Economic meltdown and Impact on Workforce and Remittance While there has not been any assessment in Bangladesh to measure the effects, some signs of the impact have been evident over the year, particularly in the countryâ€™s export sectors and overseas employment. It is important to note that there is contradictory information coming out from different sources, which indicates a lack of a more organized and systematic assessment being done of the situation. The impact has predominantly been four pronged, which includes: a) reduced overseas employment for Bangladeshi labour; b) return of Bangladeshi workers employed abroad; c) enforcement of restrictive immigration policies in destination countries; and d) effects on remittance flow. Reduced overseas employment for Bangladeshi labour The trend of outgoing workers has been lower, compared to the flow during the same period, one year back. In 2008, a total of 875,055 persons left Bangladesh for overseas employment, i.e. going at an average of 72,921 persons per month. In comparison, a total of 475,000 persons left in 2009, bringing the average down to 39,584 per month 2. The trend in 2010 has not shown much improvement: in February around 27,000 Bangladeshis secured jobs abroad compared to about 44,000 in the same month, a year ago, falling by nearly 39 percent. This has been the worst fall in five years.3 Certain sectors, namely construction, manufacturing and financial sectors have been hit hardest. Due to this, outflow to the GCC countries has declined by around 16% from 2008 to 2009. The recession is also reportedly affecting new Bangladeshi job-seekers in Europe, where jobs fell by 36.7% in Italy and 2.1% in UK in 2008. 4 Enforcement of restrictive immigration policies in destination countries Some restrictive immigration measures were enforced on migrant workers by certain destination countries. For example, Singapore, Malaysia, South Korea, Saudi Arabia and Kuwait temporarily stopped issuing new work permits. This has lead to a reduced number of migrants leaving for these destinations. For example, approximately 131,762 people left for Malaysia in 2008, which fell to 12,402 in 2009. Similarly, migration to Saudi Arabia was also hit hard with only 14,666 persons migrating there in 2009 compared to 132,124 in 2008. The numbers to Kuwait fell from 319 in 2008 and to only 10 in 2009. It was further enforced by some countries that if needed, foreign workers will be laid off first instead of their local counterparts. South Korea also announced subsidies to companies that would hire local workers over foreigners. Return of Bangladeshi workers employed abroad Increasingly, there have been growing cases of retrenched workers being returned, as evidenced through media reports of returns principally from the Gulf countries. Many construction projects were shelved in the Gulf countries and it has been reported that real estate projects worth approximately $260 billion have been delayed or shelved in UAE alone, resulting in thousands of foreign workers returning home. Furthermore, there were reports of migrant workers from Bangladesh being deported from Kuwait and Saudi Arabia during August 2008, following protests against wages lower than what their employers had initially agreed to pay. 5 An additional 8,022 migrant workers came back home on strict enforcement 2
Ibid Bangladeshi overseas job recruitment falls sharply, 27 April 2010 4 â€œRemittance growth slows,â€? Star Business, The Daily Star, April 6 2009 5 http://www.upiasia.com/Human_Rights/2008/08/26/bangladeshi_migrant_workers_mistreated/2593/ 3
of immigration rules and layoffs or long vacation by the employers in the Gulf region, mainly United Arab Emirates and Saudi Arabia. 6 Effects on remittance flow Although, remittances to Bangladesh have continued to record positive growth in 2009, where remittances have increased 19 percent since the previous year (i.e. 2008), the rate of growth have slowed down. Remittances from Bangladeshi migrants have been seen to grow at an average rate of 17 percent since 2001. It surged by around 37 percent to reach $8.9 billion in 2008. The inflow continued, but the rate of growth slowed down to around 19 percent to reach a record high of approximately $10.7 billion in 2009. This is around 11 times higher than the total inflow of Foreign Direct Investment ($941 million) and approximately five times that of the Official Development Assistance ($2.06 billion) for Bangladesh. Other impacts on economy There are some other impacts of recession thus created some majors problem in economy of our country: Devaluation of currencies and assets Price hike Decline in international trade and production. Decrease in foreign aid and remittance. Rise in inflation level. Fall in stock indices worldwide. Increased level of unemployment throughout the world. Fall in investments and decline in commencement of new projects Stringent credit conditions Slowdown in GDP growth 4.1Government response in economic meltdown The then caretaker government has worked a lot to change the condition and to tackle the hazards for national interest. All the organs of government and labor wings in the high commissions jointly work to handle the situation. As an immediate response to the global economic crisis, the GoB formed a national task force to analyze and deal with the impact of the recession in Bangladesh. The government had also proposed a financial stimulus package for the global economic crisis; however the overseas employment sector was not identified as a priority in that. The GoB’s response has also been quite reactive. Following the Malaysian crisis, where 55,000 authorized visas were canceled by the Malaysian Government in March 2009, a delegation from Bangladesh, comprising of the Foreign Minister and the Minister, Ministry of Expatriates’ Welfare and Overseas Employment, went to Malaysia to negotiate with the Government of Malaysia. They were successful in ensuring that Malaysia continues to take workers from Bangladesh in selected sectors not affected by the crisis. Similar bilateral negotiations took place with UAE and Saudi Arabia. The Hon’ble Prime Minister visited Saudi Arabia in April 2009 and received assurances from the Saudi government regarding the status of the Bangladeshi workers, notably on the issue of transfer of the workers’ ‘akama’ 7 from one country to another. The GoB has also been exploring alternative options, such as new markets, diversification of skills, etc to cope with the likely impact of the financial crisis. In this regard, they have 6 7
The Daily Star (Business): Global Recession ,Bleak days ahead for migrants Published On: 2009-03-08 Refers to the legal permission for a migrant worker to work in a particular company.
started working on setting up additional vocational training centers in different parts of the country. To explore new markets for Bangladeshi workers, high level visits have been undertaken to Romania, Iraq, Mali and Libya to mention a few. The Government is also opening Bangladesh missions in some of these prospective countries. Similar efforts are also underway with other East European and Central Asian countries as well as less conventional markets in Africa and North America. Furthermore, the government has also started exploring and diversifying into new sectors, such as care giving, nursing and other medical professions, as well as actively promoting women labour migration. In terms of policy, some measures are being undertaken by the government, including a review of the existing â€œ Emigration Ordinance-1982 to incorporate workersâ€? rights and address the current needs of migrant workers. Lastly in efforts to reduce migration costs, facilitate migration loan and encourage (remittance) investments, a migrantsâ€™ bank will be set set up. Chapter -5 Findings There are some negative impacts on economy and workforce exports but remittance earning was stable. Remittance earning increased and in coming year it is also increasing. Chapter-6 Recommendations There are both immediate as well as long term initiatives needed for Bangladesh to deal with the global financial crisis, especially targeted towards retrenched migrant workers or returnee migrants. 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. 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. The issues are: 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. Remittance concerned information centers have to be setup and arrangement be made for provision of proper knowledge regarding administrative activities, passport and visa processing etc. Training centers are to be setup for the people who want to go overseas countries for employment opportunities. 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. Reasonable costs should be ensured by the concerned authority.
Influence of the middlemen and their interest should be controlled and problems created by them should be checked. Inspirations to go abroad and other favourable influences have to be provided to the migrant workers and employees. 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 Ministry of Foreign Affairs will have to take every responsibility to take care of the native manpower. Government has to make a close relationship with the concerned overseas countries to search job opportunities in those countries. 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. Charges on sending money should be very favourable for the migrant workers. All information regarding migration should be preserved by the concerned authority Mobilizing GOB support Micro credit to help the workers to go abroad Involvement of the private sector Explore new markets opportunities Skills development Stronger enforcement of regulatory mechanism Strengthening of exiting overseas employment infrastructures and mechanisms within the GOB Facilitating overseas migration from poverty prone regions Taking SFYP-Plus measures for the overseas migration sector Finalizing a comprehensive migration policy Strengthening Bilateral, Regional and Multilateral collaboration WTO-GATS and Bangladeshâ€™s Opportunity Conclusion Recommendations, based on the findings, if implemented will enable the Government of Bangladesh to deal with adverse economical conditions when remittance inflow will decrease. Policies will need to be implemented and proper formulation of the activities should be done to achieve the target as laid down in this paper. Hence, decrease in remittance will not have a major importance in least developed countries like Bangladesh. Despite the risks of a lagged response to a weak global economy, Bangladesh has fared quite positively during the heart of the crisis. In the overseas employment sector, there has not been a mass return of workers from abroad and the inflow of remittance also did not register a sharp decrease. Remittances are also expected to remain more resilient than private capital flows and are forecast to become even more important as a source of external financing in many developing countries. Policy response could involve efforts to facilitate migration and remittances to make these flows affordable, safer and more productive for both the sending and receiving countries.