Economic Contribution of Migrant Workers in Bangladesh

Introduction Bangladesh is located in South Asia. It is the seventh most populous country in the world and is mostly densely inhabited. The poverty level, however, has fallen by more than 20%, helped by its prominent agricultural sector. The Bangladeshi economy is helped by its big garment sector, which contributes more than two-thirds of the country’s trade. The major challenge to prosperous growth is the vulnerability of the land to cyclones and floods. However, even with such challenges, Bangladesh has experienced a growth rate of 5% since 1990.This growth has been helped by remittances from expatriates as well. Since 1975, there has been a two-fold increase in the per-capita GDP. During the 2008 global economic recession, Bangladesh managed to stay flexible. According to the Bangladesh Bureau of Statistics (BBS), there was an increment of $62 in the per capita GDP in FY2009 from US$559 at the end of FY2008. Fiscal 2009 registered per capita income of US$621. About 25% of t he country’s GDP in 2009 came from remittances of expatriates, totaling $9. billion and garment exports worth $12. 3 billion. The increasing foreign direct investment highlights the growth rate of the Bangladesh economy and remittances from overseas Bangladeshis, totaling $11 billion in FY10, accounted for almost 12% of GDP. Scenario of migrant workers in Bangladesh is given below throw a chart. [pic] Economic Contribution of Migrant workers in Bangladesh Remittance is the life line of Bangladesh economy. Some 4. 5m nonresident Bangladeshis are working abroad, and sending home hard earned foreign currencies.It is believed that the actual number of Bangladeshi migrants, both legal and illegal, would be close to 7. 5 million. In the first 10 months of FY 2006-07, number of manpower export stood at 0. 42m, showing 83. 14% rise, compared to 0. 25m in FY2004-05. In FY2005-06, the number stood at 0. 29m, current year to year growth is around 16%. In addition to achieving higher exp ort earnings, the country witnessed a 44 percent growth in remittance earnings during the first quarter of 2008-09 fiscal year compared to the same period of the previous fiscal year.The other records of remittance earnings in a single month are $820. 71 million in July and $808. 72 million in March of year 2008. A total of 9,81,102 Bangladeshi people went abroad in 2007-08 fiscal year which is about 74 percent above the previous fiscal year figure. According to the statistics, on monthly average basis more than 81,000 Bangladeshis went abroad in 2007-08 fiscal year. The figure was 46,000 in the previous fiscal year. Non-resident Bangladeshis (NRBs) sent $2. 45 billion to Bangladesh between July and September of 2008, according to the Bangladesh Bank statistics. Meanwhile, private bank officials said the global economic slowdown, mainly in the US and European countries, is yet to impact the remittance inflow. They, however, apprehend that if the crisis continues it may have a negati ve impact on the inflow. The remittance market of Bangladesh has been showing a steady growth in terms of incoming remittance volume.Considering the current macro-economic indicators, it seems that this growth run will continue in the coming years. Central Bank predicts that our annual incoming foreign remittance will touch $10 billion in the next 3 years. The reasons for such robust growth can be summarized as: †¢ Stable macro-economic indicators including GDP growth, †¢ Steady growth in manpower export specially in the middle east †¢ Substantial devaluation of the local currency †¢ Rapid urbanization Development of new remittance corridors in Australia and part of Europe and Africa †¢ Increased focus of Central Bank and the Government to channel funds through formal channels †¢ Increased competition among financial institution to grab market share †¢ Aggressive marketing policy adopted by Banks to increase their share of wallet †¢ Expansion of branch network of various commercial banks †¢ MFIs involvement in channeling remittance funds in remote areas †¢ Participation in the UN peace keeping missions Anti-Money Laundering rules and regulations came in force However, the market is still far from perfection in terms of service quality, cost structure, and transaction risk aspects. Among all, the biggest impediment is the speed of transactions and cost of transaction. In cases, it takes more than a week to send a foreign remittance to beneficiary. Average cost is 20 SAR for a remittance from Saudi Arabia to Bangladesh. Banks drives the legal channel for remittance mobilization.Top 3 remittance receiver banks in market are given in Table 1. 1. Table 1. 1 Monthly Inward Remittances | |Sl. |BANK |August, 2008   (in USD Million) | | | |1 |Sonali Bank |104. 700 | | | |2 |Agrani Bank |66. 091 | | | |3 |Janata Bank |64. 50 | | Whilst data on Non Resident Bangladesh (NRB) remittances coming into Bangladesh are readi ly available, projections for local remittances are difficult to determine. The figures in USD given in the Table 1. 2 are approximate. Table 1. 2: Local and Foreign Remittance Comparison in USD | |07-08 (No. ) in USD |2008-9 (No. ) in USD |2009-10 (No. ) in USD | |NRB Remittances |7 million |8. million |10 million | |Local Remittances |14 million |17 million |20 million | Most of the remittances sent to our country are for various livelihood purposes, such as disbursement of Small loans, living expenses, business start up costs, medical treatment and funds for asset purchases. This highlights the importance of fast disbursement of money that e-Remittance System promises to deliver. The system will help attract new un-banked customers who have previously depended upon informal channels.At present, only a fraction of remitters send their money through banking channels. The e-Remittance system will also provide the right platform for handling the substantial market for within country remittances. Source Countries of Remittance From Saudi Arabia, over a million workers sent $1,312 million during July-March period of 2007. In the same period The United Kingdom came out as the second biggest source of remittance with Bangladeshi Diaspora sending home $657 million to their relatives at home, closely followed by $656 million from the United States of America.Non-resident Bangladeshis remitted $559 million from the United Arab Emirates and $494 million from Kuwait in July-March period of 2007. Economic Benefits Remittance has economic benefit both at macro and micro level. In 2004, the formal remittances contributed 6% of GDP. If informal channels were included this contribution reaches 9-10% of GDP. In 2004-2005 fiscal year remittance was 44. 47% of export receipt. The proportion of foreign aid was only 38. 74% of remittances in 2004-2005 fiscal year and foreign direct investment was only 13. 58% of remittances in 2003-2004.The remittance has significant macroeconomi c impact at household level. The majority of Bangladeshi migrants abroad is unskilled, and originates from rural areas and poor community. The poorer the household, the more impact or benefits remittance income can have alleviating poverty. Remittances allow the poor people to increase expenditures on both durables and non-durable products, and provide them with protection against negative income shocks. Statistics between growth of migrant workers and growth of remittances are mention bellow. [pic] Migrant workers drive economyBangladesh's economic development largely depends on remittance sent by migrant workers, which is one of the sources of earning foreign currencies. A third of the 18 lakh people who enter the job market a year go abroad for work, adding that remittance inflow will increase significantly if the figure can be increased to 10 lakh in five years. We hope the remittance inflow would cross $14 billion mark this year. The incumbent government sent about 2 million Ba ngladeshis from January 2009 to October 2012 and the country received around $44. 22 billion in remittances during the period.Expatriates' contribution to the national GDP (gross domestic product) is 11 percent. Over 30,000 female workers go abroad a year to work, and the government has been working to transform them into skilled hands to create more jobs. The government has also taken some steps, including rehabilitations of the returned migrant workers and scholarships for their children, to ensure better facilities for the expatriates and their families. Around 25 percent of the total employment comes from overseas employment, which should be increased to 50 percent in five years. Conclusion According to the World Bank, Bangladesh has achieved a growth rate of 5. % in FY2009. The country has registered significant expansion in its middle class. The consumer industry has grown considerably. The increasing foreign direct investment highlights the growth rate of the Bangladesh econo my. At present situation when political imbalance of our country, violation of law in every sector, corruption, price hiking, lack of electricity, gas etc creates thousands of problem in economy of Bangladesh, and in this situation contribution of migrant workers strengthen the growth rate of Bangladesh economy. That’s why Bangladesh's economic development largely depends on remittance sent by migrant workers.