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Remittances to the rescue

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M Ziauddin

Worldwide there are an estimated 258 mil
lion people living abroad, and many are respon
sible for supporting their families back home. Significant numbers of these people face difficulties and dire consequences that go well beyond predatory financial fees. Despite these challenges, remittance volumes are poised to grow further due to their essential (if often underappreciated) role in the global economy. The World Bank estimates (Press release, April 8, 2019—Record High Remittances Sent Globally-2018) that officially recorded annual remittance flows to low- and middle-income countries reached $529 billion in 2018, an increase of 9.6 percent over the previous record high of $483 billion in 2017. Global remittances, which include flows to high-income countries, reached $689 billion in 2018, up from $633 billion in 2017.
Regionally, growth in remittance inflows ranged from almost 7 percent in East Asia and the Pacific to 12 percent in South Asia. The overall increase was driven by a stronger economy and employment situation in the United States and a rebound in outward flows from some Gulf Cooperation Council (GCC) countries and the Russian Federation. Excluding China, remittances to low- and middle-income countries ($462 billion) were significantly larger than foreign direct investment flows in 2018 ($344 billion). Among countries, the top remittance recipients were India with $79 billion, followed by China ($67 billion), Mexico ($36 billion), the Philippines ($34 billion), and Egypt ($29 billion).
In 2019, remittance flows to low- and middle-income countries are expected to reach $550 billion, to become their largest source of external financing. People working abroad sent more money home to low- and middle-income countries in 2018 than ever before. According to John Letzing, Digital Editor, Strategic Intelligence, and Andrew Berkley Project Lead, Data Science and Analysis, both from World Economic Forum (A visual guide to remittances, the lifeblood of developing economies—04 Oct 2019) the biggest individual chunk went to India: a total of $79 billion, equal to nearly 3% of the country’s GDP. However, according to the Commonwealth Human Rights Initiative, between 2012 and mid-2018, 117 Indian workers died in Gulf countries for every $1 billion remitted home.
The Philippines, meanwhile, received an equivalent of about 10% of its GDP in remittances. Excluding flows to China, remittances to low and middle-income countries in 2018 were significantly larger than the $344 billion in total foreign direct investment flows that year. This year, these remittances are poised to grow even further, to $550 billion – making them the single biggest source of external funding for recipient economies. This year, the Philippines led an effort to adopt a UN General Assembly resolution marking the International Day of Family Remittances as a tribute to the roughly 10 million Filipinos working overseas (of a total population of roughly 107 million). The bulk of remittances to the Philippines tends to come from the US, Gulf states such as the United Arab Emirates and Qatar, and Asian countries like Singapore and Japan.
The global average cost of sending $200 remained high, at around 7 percent in the first quarter of 2019, according to the World Bank’s Remittance Prices Worldwide database. Reducing remittance costs to 3 percent by 2030 is a global target under Sustainable Development Goal (SDG) 10.7. Remittance costs across many African corridors and small islands in the Pacific remain above 10 percent. Banks were the most expensive remittance channels, charging an average fee of 11 percent in the first quarter of 2019. Post offices were the next most expensive, at over 7 percent. Remittance fees tend to include a premium where national post offices have an exclusive partnership with a money transfer operator. This premium was on average 1.5 percent worldwide and as high as 4 percent in some countries in the last quarter of 2018.
Remittances to South Asia grew 12 percent to $131 billion in 2018, outpacing the 6 percent growth in 2017. The upsurge was driven by stronger economic conditions in the United States and a pick-up in oil prices, which had a positive impact on outward remittances from some GCC countries. Remittances grew by more than 14 percent in India, where a flooding disaster in Kerala likely boosted the financial help that migrants sent to families. In Pakistan, remittance growth was moderate (7 percent), due to significant declines in inflows from Saudi Arabia, its largest remittance source. In Bangladesh, remittances showed a brisk uptick in 2018 (15 percent).
According to an October 30, 2018 Khaleej Times report (Pakistan remittances may hit $22 billion in 2018-19) Pakistan is expected to receive remittances worth a record $22 billion in financial year 2018-19 as the government has offered an incentive package to overseas workers to attract more money through official banking channels, experts said. Analysts said remittances from more than 8 million overseas Pakistanis are likely to post double-digit growth over $19.62 billion received in 2017-18. The country received remittances worth $19.91 billion, an all-time high, in 2015-16.
Latest data from the State Bank of Pakistan (central bank) showed that remittances rose 13.14 per cent in the first quarter of fiscal year 2018-19 as overseas workers remitted a record $5.42 billion during July-September 2018 compared to $4.79 billion in the same period last year. The country is expected to receive $22.19 billion worth of remittances if the similar trend continues in the remaining three quarters, experts said. Prime Minister Imran Khan in a recent tweet expressed his willingness to facilitate overseas Pakistanis to boost remittance inflows up to $40 billion in coming years. “Insha Allah by removing hindrances, we will be able to increase remittance flows from $20 billion to at least $30 billion and perhaps even $40 billion through banking channels,” Khan’s tweet said. 
One only hopes that the PM’s promise to increase the inflows of remittances to $30-$40b and that too through banking channels comes true sooner than later as the annual income from this source is becoming more and more vital for keeping our trade balance from going steeply negative as our exports sector continues to lag behind by billions compared to the annual import bill. The PM has expressed his determination to remove all hindrances in the way of increased inflow of remittances without, however, identifying these hindrances. On the face of it, the biggest hindrance stagnating remittances seems to be a serious lack of skilled manpower in demand in the host countries. According anecdotal stories heard on the official grapevine, once on a visit to Kuala Lumpur, former Prime Minister Shaukat Aziz broached the issue of manpower export with the Malaysian PM who is said to have told the former that his country was in need of a huge number of trained gardeners and would be only too glad to import them from Pakistan properly trained gardeners, having done certified courses in the trade. But we did not have any who had done certified courses in gardening.
Like-wise, the UAE rulers are said to have expressed willingness to import from Pakistan bellboys for the Emirates’ up and coming chains of hotels. But unfortunately, we don’t have in Pakistan any training institution for bellboys. Similarly, we are likely to find it hard to meet the up- coming demand for trained plumbers, masons, electricians, low-tech mechanics, carpenters etc. for CPEC projects despite our so called youth bulge because of lack of institutions that offer certified courses in these trades.
Also, our population of freelance IT freelancers is said to be no more than meagre 100,000 compared to 600,000 in Bangladesh. Here too we need to make diligent efforts to profit from the expanding markets for soft-and hard-ware products. We also need labour force trained in technologies required for producing low to medium-tech products in demand globally rather than continuing to depend on low value added textile products which are likely now to be manufactured in the rich countries using automation which is rendering imports from distant poor and developing countries costlier.
— The writer is veteran journalist and a former editor based in Islamabad.

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