Remittances from GCC to South Asia may decline

Remittance flows from the Gulf Cooperation Council states to the South Asian countries could decline amidst fears that cheap workers will be become redundant as the region’s take a hit from global financial crisis, recruitment agents say.

Millions of families in India, Pakistan Bangladesh, Nepal and Sri Lanka rely on remittances from relatives working in construction or as domestic servants in booming southeast Asian and Gulf countries.

Unskilled workers can often save in a month what they could in a year back home, helping prop up shaky balance of payments in their domestic economies.

But recruiters say this is now under threat after oil prices fell to a near two-year low of $61 per barrel and as the worst global financial turmoil since the 1930s grips the developed world.

“The honeymoon seems to be over for us,” said Golam Mostafa, President of the Bangladesh Association of International Recruiting Agencies. “Oil prices have tumbled which will sharply slow down demand for our workers in the Gulf’s booming construction industry in coming months. Other jobs will also take a hit.”

Bangladesh sent a record 832,000 people abroad in 2007, many of whom landed jobs in Gulf countries after sky-rocketing crude prices led to a construction boom in the Middle East.

Singapore and Malaysia also took in many Bangladeshi workers as they experienced strong economic growth. In the past financial year, migrant workers pumped $8 billion into the Bangladeshi economy, accounting for 12 per cent of its gross domestic product.

“Prospects in Malaysia and Singapore look bleak. Export-oriented industries, which employ hundreds of thousands of our workers, have been hit hard by recession fears in the US and Europe,” Mostafa said.

Bangladesh started sending workers abroad in the 1970s, but a boost came in 2007 when spiralling oil prices dramatically increased demand for cheap labour in the Middle East.

Official figures show five million Bangladeshis are temporarily working abroad, but the number is estimated to be nine million if illegal workers are included.

At home, some 40 per cent of its 144 million people still live in poverty, but studies by the World Bank show that number has been dropping by nearly two per cent a year thanks largely to the flow of remittances into rural areas.

“Remittance is the lifeblood of Bangladesh’s economy. It has changed the country, with districts that have sent more people abroad now far richer than others,” said Mosharraf Hossain, an MP-turned-recruitment agent.

In neighbouring Nepal, 2.2 million overseas workers contribute about one billion dollars a year to the economy, according to the Department of Labour, which says the economic crisis has already hit its remittances inflow.

“Our preliminary reports say that there has been a drop of between five to 10 per cent in the numbers going abroad in September and October,” department spokesman Shsyam Khatri Chetri said. “We are anticipating a further fall in the numbers leaving.”

In Kathmandu, recruiter Binod Karki has been sending around 100 workers to Malaysia every month for the past five years, but cutbacks have started to bite. “Since the crash, demand for factory workers has completely dried up,” said Karki.

In Sri Lanka, overseas workers sent home $1.97bn from January to August this year, 23 per cent up on the same period last year. Central Bank Governor Nivard Cabraal said the crisis was yet to affect Sri Lanka’s remittances and he was hopeful Gulf economies would be shielded from problems in the US and Europe.

In Bangladesh, the World Bank’s senior economist Zahid Hussein was also hopeful remittances to poor nations would weather the current economic storm.

“We’re monitoring the situation closely,” he said, adding that remittances remained fairly robust during economic downturns in 2001 and the early 1990s.

“If this recession is as bad and as deep as people are saying then I would expect the strong growth in remittances seen in the last few years to slow.”

 

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