Nepal’s remittance bonanza

Nepalis working abroad earn more hard currency for their home country than all exports, tourism and foreign aid put together.

Most articles on Nepal by foreign correspondents would begin: "Nepal, one of the poorest countries in the world…" It is true, the country´s per capita income is among the lowest in the world, it has a poor industrial base, and agricultural production is lagging behind population growth. They all point to an economy going nowhere. Yet, when a commercial bank recently made an initial public offering of shares worth NPR 175 million (USD 1 = NPR 69), it was oversubscribed within a week to the tune of NPR 1.4 billion. Nepal, the poorest country in the world, seems to be awash in cash.

The domestic job market, too, is a paradox. Nepal´s economic growth rate had once reached 8 percent sometime in the mid-1990s, enough to absorb the 300,000 or so people who enter the labour force every year. By 1998/99, however, it had slowed down to 3 percent, which meant only 100,000 new jobs were created. With a population of 23 million, 200,000 unemployed youth would have formed a large enough group to create social imbalance or political upheaval.

But nothing of the sort. In fact, banks in remote districts report difficulty in keeping up with interest payments, so huge has the savings become. Nepal´s per capita income grew by NPR 1500 (about USD 20) in 1998/99 compared to the previous fiscal year. Balance of payments rose by 100 percent to reach NPR 9 billion in Nepal´s favour. The government´s current account, which had been in the red in previous years, also showed a surplus last year, and foreign currency reserves marked a 1 6 percent increase to reach NPR 75 billion. And although imports from India doubled, Nepal´s banks still have convertible and Indian currency reserves to cover a whole year´s imports. Where is all this money coming from? The only way this can be explained is by taking into consideration remittances from Nepalis working abroad, an amount that is now larger than the money generated by exports, tourism, and foreign aid put together.

Worker profile
It has been nearly 200 years since Nepalis began seeking work outside the country in significant numbers. It started with the 1814-1816 Anglo-Gorkha War when some of the defeated soldiers, rather than face humiliation at home, sought employment in the army of Ranjit Singh of Lahore. Soon after the War, the British themselves recruited their former adversaries into their forces. This is a tradition that has continued to the present day in the British, and then, after 1947, in the India army as well. Currently, there are 3400 Nepali citizens serving in the British army and 48,0 00 in the Indian army.

Perhaps by virtue of this long history, the only figures the government has of remittances from outside the country are what the British and Indian governments pay their former soldiers. And this has been substantial. Ti ll as late as 1971, the earnings of British Gurkhas were the highest source of foreign currency for Nepal. (Tourism, and then exports, took up the top spot later.)

The contribution of British and Indian soldiers to the country´s economy is still considerab le. Besides the serving soldiers, there are 26,000 British army pensioners, while ex-Indian servicemen number 105,000. According to the government´s Economic Survey 1999, the pensions paid to these two groups amounted to NPR 6.2 billion in the first eight months of 1998/99 alone. With the recent British decision to raise Gurkha pensions by 100 percent or more, this amount will rise even more.

What the government hasn´t kept track of are the earnings of other Nepalis who work in India and elsewhere. There is no data on the number of people working outside the country at any given time, although estimates run into hundreds of thousands. The only known study on Nepalis working abroad was conducted by British scholar David Seddon with his Nepali counterparts Ga nesh Gurung and Jagannath Adhikari, for the British aid agency, Department for International Development (DFID).

According to the study which was made public late in 1999, a sum of NPR 35 billion came into the country in 1997 as remittance from 392,000 Nepa lis (out of a national population of 22 million) working in nearly 20 countries around the world (see table). But because the figures mentioned in the DFID study are three years old, they do not tell the complete story.

The number of Nepali workers in the Gulf has risen dramatically since. A Labour Ministry official in Kathmandu says the number of Nepalis in the Gulf has already crossed 200,000 (more than twice the number given in the study), with almost 100,000 in Saudi Arabia alone. The number of Nepalis in Qatar has also risen rapidly, especially since new regulations formulated by that Gulf state providing working visas only to Nepali nationals from South Asia.

Even the profile of workers going to the Gulf has been changing over the years. While Nepalis earlier went as labourers, drivers, or brick layers, in recent years, college graduates have been making their way over to the oil-rich countries. Today, it has become common to see Nepali stewardesses in Gulf airlines, managers in hotels and other profes sionals. par The DFID figures need revision for Hong Kong as well. Whereas the study put the number of Nepalis in all of East Asia at 34,000, a British Gurkha office in Kathmandu has a tally of some 70,000 Nepalis working in Hong Kong alone. Most of them are ch ildren and relatives of former Gurkhas who are granted Hong Kong IDs since they were born in this former British colony in the years when the British Gurkhas were stationed there.

There are an estimated 50,000 or so Nepalis working (legally and illegally) in other countries of Southeast and East Asia. Of these, around 2000 (mostly former British Gurkhas) are employed as security officers in Brunei and Singapore, and sources say their annual per capita savings on average amounts to more than NPR 1 million. There are thousands more scattered about in Japan, Taiwan and South Korea. In 1998, there were 2173 Nepalis working legally in Japan and an estimated more than 10,000 working illegally.

In the case of India, the DFID calculation included only those Nepalis in the Indian army and those working for the public sector. If the unorganised/private sectors were to be taken into account, the study believed there could be as many as one million Nepalis working in India. Due to the open border the actu al number Indians or Nepalis living/working in each other´s country can at best be guesstimates.

Hundi
Based on the national living standards survey by Nepal Rashtra Bank, it is estimated that Nepalis working in India were sending back NPR 40 billion annually. But even such an estimate is lacking in terms of money coming from other countries.

The preferred mode for money transfer for Nepalis in countries other than India is hundi, which entails payment in rupees within Nepal for a premium on hard currency deposited abroad. The foreign currency then comes into the country in kind, the bulk as gold. Based on the declarations of gold imports at the Kathmandu airport, and the fact th at there is no record of any bank having provided foreign currency for the import of gold, it is believed that all the money used to purchase this gold is hundi money. However, says chief financial adviser at the Nepal Rashtra Bank, Yuvaraj Khatiwada, this amount cannot officially be called "Remittance", and the central bank places under Transfer Net and Service Net.

The amount under these two headings during 1998/99 totalled NPR 35 billion. By this reckoning alone the total annual remittance is NPR 75 billion. (For comparison, Nepal´s annual budget for 1999/2000 is NPR 78 billion.)

But surprisingly, there is still no official acknowledgement of the substantial role that this money from outside plays in keeping the country´s economy afloat. Analyses of Nepal´ s economy whether by government, academics or donors, do not recognise this contribution. Only in recent years has the Nepali government been taking note of the importance of foreign employment for Nepali economy. Even then, it views it more as a safety v alve to relieve the pressure of unemployment rather than as a source of income.

And neither has there been any attempt from the state to regularise entry of cash through banking channels. With such huge remittances coming into the country, making an obvious difference to its economy, perhaps even sustaining it, it sure does not pay to ignore this economic lifeline.