Mainstreaming Migration into National Development Strategies. Migration, Remittance and Economic Development

Transcription

1 Mainstreaming Migration into National Development Strategies Migration, Remittance and Economic Development

2 Understanding the contribution of remittances at the macroeconomic and household levels and exploring how these transfers could be better leveraged 1 for development in Bangladesh Abstract Aminul Arifeen Background: Migrants foreign remittances are the single most important source of foreign exchange, especially for labour exporting countries like Bangladesh. Statistics shows remittances could ease foreign exchange bottlenecks, mitigate development finance, improve balance of payments and alleviate pressures on external borrowing and supplement to household consumption and investment. The inflow of remittances to Bangladesh is, however, affected by various macro and micro factors. Methods: This paper attempts to see the contribution of migrants remittances to Bangladesh socioeconomic development both at macro and micro economic perspectives by using various relevant literatures published by different organizations. The macro economic base mainly focuses on Gross Domestic Product (GDP), i.e., foreign reserve and balance of payment, capacity of importing goods, etc.; while the micro economy focuses utilization of remittances for family social security, i.e., consumption and investment at the household and community level. Results: Remittances through international migrants are a relatively stable form of income. In the last thirty one years, increased remittance flow has been contributing to the economic development of Bangladesh. It is evident that remittances not only increase household income, but also have the potentiality to increase local and national economic growth. However, some major challenges are considered as impediments to further socioeconomic development of Bangladesh. Conclusions: Proactive measures through collaborative initiatives to promote migration and address efficient transfer of remittances through formal channels that lead to increase saving with investment, which in turn, would become an important tool for sound socioeconomic development. Keywords: International migration, remittance, macro-economy, micro-economy, socioeconomic development. September 2013, International Organization for Migration, Dhaka Bangladesh 1 This background paper has been prepared for a consultative workshop titled Mainstreaming Migration into National Development: Developing a Roadmap for Bangladesh Vision Formulation Workshop, Dhaka, 4-5 September Former UNFPA and UNICEF M&E and C4D Specialist. 1

3 Tables of Contents Abstract 1 1: Background, Global Trends in Migration and Remittance and Objective of the Study 4 2: Migration and Remittances Bangladesh Perspective 7 3: Migration and Remittances Socioeconomic Situation in Bangladesh 11 4: Recommendations 23 References 27 List of Tables 2.1 Projected labour force aged 15+ years by sex and residence (in million) 7 2.2: GDP and remittance as a percentage share of GDP Remittance and current account balance (in USD million) : Remittances spent as a proportion of household expenses by type of expenses 12 List of Figures 1.1: Model of Migration and Remittance linkages with macro and micro level determinants 6 2.1: Skill composition of Bangladeshi migrant workers Change in Remittance and GDP impact on poverty, TFR, and population growth Changes in Labour Force Percentage (Age 15 years and above) from : Remittance and Expenditure by Category in : Migrants choice of destination : Percentage distribution of employment by category : Reasons for remittances : Migrates Awareness on remittance channels (%) : Remittance as a percentage of overall household income : Average Remitted Amount by Country : Percentage distribution of remitted amount by migrants : Cost of migration by male and female : Remitters household income from different source (%) : Change in consumption patterns : Children s Education : Enhancement of specific educational opportunities : Change in use of health services (%) : Medical expenses met with remittance money : Migration and Change in yearly household income 22 2

4 Abbreviations and Acronyms BB Bangladesh Bank BAIRA Bangladesh Association of International Recruiting Agencies BBS Bangladesh Bureau of Statistics BMET Bureau of Manpower Employment and Training BOESL Bangladesh Overseas Employment and Services Limited BRAC Bangladesh Rural Advancement Committee FDI Foreign Direct Investment FY Fiscal Year GDP Gross Domestic Product GOB Government of Bangladesh GNI Goss National Income HDI Human Development Index ILO International Labour Organization IOM International Organization for Migration KSA Kingdom of Saudi Arabia MEWOE Ministry of Expatriate Welfare and Overseas Employment MDGs Millennium Development Gaols MFIs Micro Finance Institutions NCB National Commercial Bank NGO Non-Governmental Organization NIPORT National Institute of Population Research and Training RMMRU Refugee and Migratory Movement Research Unit SDC Swiss Development and Cooperation Agency SVRS Sample Vital Registration System TFR Total Fertility Rate UAE United Arab Emirates UK United Kingdom UN United Nations UNDP United Nations Development Programmes US or USA United States or United States of America WB World Bank 3

5 1. Background International migration and remittances are quite broad and complex issues, especially when viewed as tools for economic development. (Avato et al, 2009). In other words, remittances and migration are interrelated as their relevancy to the social, economic, and environmental dimensions of sustainable development (World Bank, 2010). Globally 3% of the world s population live and work elsewhere from outside their countries of origin. The number of international migrants in the world rose from 76 million in 1960 to 82 million in 1970, then more than doubled to million in 2000 (Page and Plaza, 2005), and according to the United Nations (UN, 2013) new estimates, 232 million people, or 3.2 percent of the world s population, were international migrants, compared with 175 million in 2000, and 154 million in The new 2013 estimates showed that developed countries, is home to 136 million international migrants, compared to 96 million in the developing countries. Most international migrants are of working age (20 to 64 years) and account for 74% of the total. Globally, women account for 48% of all international migrants. UNDP (2009) reports that one in seven people in the world are at present in some form of migratory state in the world, and six out of every 10 international migrants (128 million) reside in developed countries, and majority of them (74 million) originated in developing countries. In the coming decades, demographic forces, globalization and climate change will increase migration pressures both within and across borders (World Bank, 2010). The Sixth Five Year Plan of Bangladesh Government has enunciated that migration and remittances as important and integral part of national economic development (GOB, 2011). The Global Migration Database estimates that 6.8 million Bangladeshi are currently living abroad, which is fewer than 5% of the total population and fewer than 10% of the total labour force (IOM, 2010), while BMET reports up to September 2013, in total 8.62 million Bangladeshi migrants were remitted foreign exchange in Bangladesh. The figure of female migrant workers was 261,000 during this time, which is 3% of the total migrant workers remitted foreign exchange in Bangladesh 2. International migration allows workers to remit their income to their families, which resulted in reduced level and severity of poverty, typically leading to higher human capital accumulation, greater health and education expenditures, better access to information and communication technologies, improved access to formal financial sector services, enhanced small business investment, more entrepreneurship, better preparedness for adverse shocks such as droughts, earthquakes and cyclones and reduced child 2 4

6 labour (World Bank, 2013). The links between international migration and remittances are self-evident and considered as important aspects of economic development (Hein de Hass, 2007). According to the study (World Bank, 2010), the amount of remittances is an estimated three times the size of official development assistance and provides an important lifeline to millions of poor households and a vital contribution to the national economy, mainly in two ways. Firstly, migration reduces unemployment, and secondly, it increases foreign exchange, business and investment, which in turn contributes to substantial economic gains both for remittance sending countries as well as receiving countries. Yet, until recently, the impact of migrants remittances in socioeconomic development of recipient and sending countries was highly under-researched, mainly due to scarcity of data. Objective, data, methodology and limitations: Bangladesh as part of the global project on mainstreaming migration into national development strategies, implemented by UNDP in collaboration with International Organization for Migration (IOM) and with the support of the Swiss Development and Cooperation Agency (SDC). A workshop in the pilot phase has been proposed to discuss the migration and economic development issues in Bangladesh with ways of improving the management of the migration process and embedding it more effectively into national policies and development objectives. Bangladesh is a densely populated resource constraint developing country with a population of over 160 million (BBS, 2012). The working age population captures a big space in the population pyramid, and the population will continue to till mid-21 st century (BBS, 2005). As a resource constraint country, Bangladesh is not able to provide adequate employment opportunities for its surplus manpower. Under current scenario, the surplus human resources are combination of professional cum skilled, semi-skilled, less or low-skilled and non-skilled labour forces. This large volume of workforces needs immediate employment in order to improve the living standard of their families, which in turn, contribute to country s economic development. 3 Considering the fact that foreign remittance has greater impact on national development, in recent years, Government of Bangladesh (GOB) has taken various measures in this regard to involve various departments in the process. Currently, five key ministries/departments (Ministry of Finance, Ministry of Foreign Affairs, Ministry of Expatriates Welfare and Overseas Employment, Bureau of Manpower, Employment and Training, and Bangladesh Bank) including Prime Minister s office are now instrumental in promoting labour migration. The Bureau of Manpower, Employment and Training (BMET) is the key executing agency of Ministry of Expatriates Welfare and 3 Increase: Gross Domestic Product (GDP), foreign reserves through remittance, capacity of balance of payment, investment, industrialization and business. 5

7 Overseas Employment MEWOE in respect to processing the labour migration, while Bangladesh Overseas Employment and Services Ltd. MEWOE, and in collaboration with MEWOE and other agencies of Bangladesh Government is responsible for carrying out the recruitment functions (Siddiqui, 2005). The main objective of this paper is to define the contribution of migrants remittances to Bangladesh socioeconomic development. The macro-economic base mainly focuses on Gross Domestic Product (GDP), i.e., foreign reserve and balance of payment, capacity of importing goods, etc.; while the microeconomy focuses utilization of remittances for household security, i.e., consumption and investment at the family and community level. This study also intends to identify some challenges that need to be addressed in future. This study defines the term international migration as labour migrants for international employment who remit their income in regular intervals using both formal and informal channels, it does not include refugees, exiles, or people who leave their homes under compulsion. 4 International migration and foreign remittances have both positive and negative connotation, however, this background paper is a snapshot of the current state of migration and foreign remittances with an attempt to provide some understanding about the positive contribution of remittances to Bangladesh s socioeconomic development. The study utilizes secondary data from multiple sources: household remittance data, International Organization for Migration (IOM), macro-economic and social data from UN agencies, World Bank, Bangladesh Bureau of Statistics (BBS), Bangladesh Bank and MEWOE, where deemed applicable and necessary. A literature review has also been conducted using extensive internet search, relevant articles, newspapers, research studies, and other relevant published documents mentioned in the footnotes and references. Figure-1.1: Model of Migration and Remittances linkages with macro and micro level determinants International Migration and Remittances Macroeconomic Impact Raise Foreign Reserve Foreign Direct Investment (FDI), Export and Import Impact on GDP, Poverty, and Population Microeconomic Impact Increase income Increase consumption Improve living conditions (Health, Nutrition and Education) 4 See Migration and Development Section 2.3. Topics: Perspective on Migration and Development Remittances Diaspora and Development, and New Policy Directions. Essential of Migration Management. Volume Two: Developing Migration Policy. IOM. 6

8 2: Migration and Remittance - Bangladesh Perspective The Bangladesh economy, over the last decade, has made remarkable progress for example, GDP over the last three years has registered a consistent growth at above 6 per cent per annum, considered as one of the stable -performing economies in Asia (World Bank, 2013b). Per capita Gross National Income (GNI) was estimated at $930 in (GOB, 2013). 5 The country s Human Development Index (HDI) value was 0.543, placing it in the category of medium human development countries. Bangladesh struggles to emerge from poverty, and ranks 112 th among 135 countries on the Human Poverty Index (HPI). Despite these successes, nearly one-third (32 per cent) of the population is living below the poverty line (BBS, 2011) and 40 per cent is underemployed (BBS, 2011). The unemployment rate fell from 5.1 per cent in 2009 to 4.8 per cent in 2010, and is expected to continue to fall (GOB, 2011a). Bangladesh Monitoring of Employment Survey 2009 reveals agriculture is the single largest producing sector of the economy: contribution around 22 per cent of the Gross Domestic Product (GDP); and employs around 44 per cent - a proportion of 78 per cent of the total labour force participation rate aged 15 years and above (BBS, 2010). Labour migration is an important and beneficial livelihood option for Bangladesh, and BMET s data-base on migration and remittance shows that in , approximately 691,000 migrants went abroad and remitted US$ billion. In addition to temporary labour migrants, it is estimated that 5.6 million expatriate Bangladeshis are living permanently in developed and developing countries 6. Migration has not only reduced domestic unemployment, it has also encouraged socioeconomic development possibilities at the national, community and individual levels. Table-2.1 shows the size of labour force estimation for next 10 years ( ). This indicates about 29.5% increment in total labour force that will create huge diversified migration in coming future. Table 2.1: Projected Labour Force 7 Aged 15 Years and Over by Sex and Residence (in million) Year Bangladesh Urban Rural Both Male Female Both Male Female Both Male Female Source: BBS, 2005 The pressure to migrate arises from the push and pulls factors where economic, social or political issues make migration attractive, however the propensity to migrate is related to individuals ability and willingness to bear the costs of moving (Pritchett, 2006). Bangladesh has been a major source country of 5 Source: Finance Minister s budget speech at National Assembly in June Source: Bureau of Manpower, Employment and Training (BMET) database. The figure is for registered migrants. 7 Source: See Seven Sectoral Projections, Edit. Arifeen. A. et al., Bangladesh Bureau of Statistics. 7

9 migrant workers since 1980s but it is highly dependent on the Middle East countries and a comparative distribution of labour by category indicates the demand of labours have been increased in four categories, however, the figures have shown prominent in skilled and low skilled categories as corresponding figures indicates bulk labour demand increases more in two categories from 25% to 34.4% and from 53% to 62% during one decade ( ) respectively (Figure 2.1). The ten highest labour migration destination countries for Bangladeshi labour are: Saudi Arabia, UAE, Qatar, Bahrain, Kuwait, Libya, Iraq, Singapore and Malaysia hold 96.9 per cent of total labour supplied from Bangladesh for last 31 years (United Nations, 2003). Figure 2.1: Skill composition of Bangladeshi migrant workers Low Skilled 62% 25 Skilled 34% 16 6 Semi-skilled 3% Professional 0% Source: Bureau of Labour and Manpower Remittance is considered as the single most important source of foreign exchange for Bangladesh to ease the balance of payment and alleviate pressures on external borrowing with an implication to poverty alleviation (Ratha, 2003). Expressing remittances as a share of GDP, it exceeds 10% of GDP in 22 developing countries; the top recipients of officially recorded remittances in 2012 were: India ($69 billion), China ($60 billion), the Philippines ($24 billion), and Mexico ($23 billion). Other large recipients included Nigeria, Egypt, Pakistan, Bangladesh, Vietnam, and Lebanon (World Bank, 2013). Globally, migrants pay an average cost of 9% to send money to their home countries. Reducing the average remittance price to 5 per cent, in line with the G8 and G20 targets, could save migrants up to $16 billion a year. Reportedly, 50% of remittances are sent through informal channels, doubling the official estimate (Cecilia, 2010). Bangladesh as a huge labour surplus country, on average, it exports about 225,000 migrant labours annually (Siddiqui and Abrar, 2003). The UNCTAD report said that the worldwide average cost of remitting money is 9 percent but it is 12 percent for the least developed countries, including Bangladesh. Bangladesh migrants paid the world average charge, it would have received an additional US$ 380 million to its fiscal receipts of US$ 12.8 billion 8. One study found that on average a 10 per cent increase of international remittances in a country s GDP will lead 8 8

10 to a 1.6 per cent decline in the number of people living in poverty (UNFPA, 2005). The World Bank (2009) medium term economic growth projections anticipated that in the coming decades, despite demographic forces, globalization, climate change and other confounding factors, the increased migration pressure both within and across borders, however, will boost trade, Foreign Direct Investment (FDI) and aid to least developed countries with the indication of a fastest rate of GDP growth. If this is the case, then remittances would emerge as a growing macro-microeconomic policy concern for Bangladesh policymakers. Figure shows a combination of five interrelated macro-micro level determinants, which contributed to Bangladesh s socioeconomic growth over the last decade as GDP increased from above 4 per cent to above 6 per cent due to the substantial share of remittances which more than doubled, reducing the poverty gap, the total fertility rate and the population growth rate of Bangladesh. Figure 2.2 Change in Remittance and GDP impact on poverty, Total Fertility Rate (TFR), and population growth in Bangladesh, Remittance as % of GDP GDP Growth Rate TFR Squared Poverty Gap Population Growth Rate 1.36 Source: NIPORT, 2011; BBS, 2010 & 2011; and Bangladesh Bank, 2013 Remittances from international migration also play a significant role for a positive current account balance of Bangladesh as, the World Bank (2012) reported Bangladesh was the seven largest economy of remittance receiver (US$ billion) in Fiscal Year (FY) A substantial part of remittances has been used for export-related businesses and brought diversification in the national budget over the last four years (MOF, 2013). The Bangladesh Bank s treasury management wing estimates the total remittance figure to cross the 14 billion mark prior to the closer of FY , which is per cent higher than remittances received five years ago. Of the amount, two-thirds came from Middle Eastern countries alone. Bangladesh Bank statistics also show that remittances as a percentage of GDP (Table 2.2) has increased over the years until FY when it was recorded at However in FY , the amount of remittance flow in the country amounted to Tk. 89, crore while the amount of remittances as a percentage of GDP went down to 9.98 and the percentage change in remittance was 8.27, and again projection shows an increase at 11 per cent in However, the decrease in 9

11 percentage share of the GDP does not reflect a reduction in remittances, but instead it reflects an increase in other sectors GDP input. Table 2.2: GDP and remittance as a percentage share of GDP Fiscal year Remittance (in crore taka) % change in remittance Remittance as % of GDP , , , , , , ,03, Source: Bangladesh Bank data Generally Bangladesh is considered a trade deficit country but statistics show current account balance during FY to remained positive due to high remittance inflow, which in turn indicates that remittances play a significant role in Bangladesh economy (Table 2.3). Table 2.3: Remittance and current account balance (in USD million) Fiscal year Current deficit Current transfer Remittance Current account balance ,849 85,51 7, ,810 10,226 9,689 2, ,872 11,596 10,987 3, ,080 12,075 11, Source: Bangladesh Bank The progresses in macro-economic indicators indicate that the Bangladesh economy is rapidly moving towards market economy. Over the past 40 years, the real per capita income has increased by more than 130 per cent; poverty rate reduced by 60 per cent, which contributes towards Bangladesh achieving most of the millennium development goals (MDGs) by The economy today is lot more flexible and resilient, as indicated by the ability to withstand the global financial crisis along with natural disasters with minimum adverse effects. Despite all this progress, Bangladesh is still burdened with substantial poverty, inequality and deprivation. To date about one third of the population are living below the poverty line and most of the labour force is engaged in informal and low income jobs (Figure 2.3). The poorer segment is severely disadvantaged in terms of ownership of assets and access to institutional finance as well as to basic constitutional rights including quality education, healthcare, 9 Projected figure 10

12 water and sanitation. Considering all these aspects, the Government of Bangladesh has adopted the Vision 2021 and associated Perspective Plan , which have set solid development targets for Bangladesh by the end of In achieving the development targets by 2021, the implementation of vision 2021 has been started through sixth five year plan Figure 2.3: Changes in Labour Force Percentage (Age 15 years and above) from Non-agriculture Agriculture Source: National Employment Survey, BBS,

13 3. Migration and Remittances Socioeconomic Situation in Bangladesh 10 Bureau of Manpower Employment and Training (BMET) 2013 online data shows that Bangladesh has sent more than 8.62 million workers to over 157 countries and the process started since mid-1970s. There are two major patterns in international migration from Bangladesh: migration to the highly industrialized countries that includes United Kingdom, United States, Canada and Australia; and the other to developed countries in Asia. Most of the migration occurred temporarily to work in Middle East and South-east Asia particularly to Malaysia and Singapore the major source of foreign remittance for Bangladesh. Remittances sent by migrants play an important role in reducing the incidence and severity of poverty of Bangladesh. It is also associated with increased household investments in education, entrepreneurship, and health all of which have a high social return in most circumstances (Figure 3.1). In poorer households, remittance may finance the purchase of basic consumption goods, housing, and children s education and health care. A total of 43 per cent of remittance receipt is spent on food consumption nationally while only 19.2 per cent is spent on cash savings, 6.4 per cent on investment in business. The percentage share of expenditure on consumption goods is higher than that of capital goods. As a result, higher growth rate of remittance may affect the rate of inflation. Figure 3.1: Remittance and Expenditure by Category in Cash savings Education related Health related 8.1 Food consumption Housing related 3.4 Consumer durables Investment in business Livestock purchase 43.0 Others Source: Adopted from Policy Research Working Paper-5018, World Bank. IOM (2010) household remittance data 2009 were broken down into two categories: disposable goods and services and durable goods and services (Table 3.3). An average household was found to have spent TK. 109,130 of remittance money towards 63 per cent of its total household expenses (durable and disposable) in the year before the survey. There were little variations in the proportion of household 10 Study uses data from Bangladesh Household Remittance Survey 2009: Summary Report, IOM, Dhaka, Bangladesh 12

14 expenses met with remittances money, by level of household expenses. Data showed that remittances have led to improvements in the consumption of food among the majority of migrant households. There were clear indications of remittances having a positive impact on the level of surveyed households mentioned using remittances to buy books, papers, and other learning materials for their children. Most migrant households used some portion of their remittances towards procuring medical treatment, and medicines. About 72 per cent used it to obtain treatment and another 60 per cent used it to purchase medicines. Table 3.1: Remittances spent as a proportion of household expenses by type of expenses Remittances spent as a proportion of household expenses by type of expenses Types of expenditures Disposable goods and services Durable goods and services Total amount spent (BDT) Amount of remittances spent (BDT) Amount of remittances spent as a percentage of total amount A B C D=(C/B)* ,337 76, ,947 32, All expenses 172, , Source: IOM, BHHRS, 2009 Increased financial resources can also lead to the reduction of child labour 11, and help households to be better prepared for adverse environmental shocks such as droughts, earthquakes, and cyclones. 12 Bangladesh policy papers 13 emphasises on exploring the nature of migration, context and place of migration as these are vital for shaping up the context and harness the beneficial effects of migration and mitigate the negative consequences. For current Bangladesh perspective, given the complex nature 11 The term child labour is often defined as work that deprives children of their childhood, their potential and their dignity, and that is harmful to physical and mental development. In its most extreme forms, child labour involves children being enslaved, separated from their families, exposed to serious hazards and illnesses and/or left to fend for themselves on the streets of large cities often at a very early age. Whether or not particular forms of work can be called child labour depends on the child s age, the type and hours of work performed, the conditions under which it is performed and the objectives pursued by individual countries. The answer varies from country to country, as well as among sectors within countries (Whilst child labour takes many different forms, a priority is to eliminate without delay the worst forms of child labour as defined by Article 3 of ILO Convention No. 182) 12 World Bank website, Migration and Remittances, March 2012, /MigrationandDevelopmentBrief18.pdf 13 For Bangladesh, the Sixth Five Year Plan , PRSP 2015, Perspective Plan 2016, and Vision 2021, Bangladesh Planning Commission, General Economics Division, Ministry of Planning. 13

15 of the inter-relationship of migration and development the most appropriate way is to ensure mainstreaming migration 14 in country s development frameworks. IOM household data 2009 was collected on the background and characteristics of the migrant households. The reasons behind the international migration were: unemployment and poverty; therefore, migrants search for employment with a higher salary to ensure their family s basic needs are met, i.e., food, clothing, education, health, and housing/land, is the major concern of the migrants. The study revealed that the Middle East is the major destination for unskilled or less skilled migrants from Bangladesh. Seventy three per cent of Bangladeshi migrants included in the survey went to a country in the Middle East. Figure 3.2 shows two major destination countries in the Middle East are the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE). All other Middle Eastern countries together accounted for 15 per cent of migrants destination. Malaysia accounted for the third highest proportion of Bangladeshi migrating to a country after KSA and UAE, accounting for 15 per cent of the surveyed migrant population. Figure 3.2: Migrants choice of destination Middle East 21.9 Asia Excluding Middle East Europe Canada/USA 72.7 Africa Australia Source: IOM, BHHRS, 2009 Figure 3.3 shows percentage distribution of employment by category, and it is found that the overwhelming majority of the migrants were employed as low skilled or semi-skilled labourers in factories, agricultural sites, and construction sites. An average migrants were found to be earning an income of Taka 21,363 per month and saving taka 13,210 per month. 14 The mainstreaming migration in development planning may be defined as the process of assessing the implications of migration on any action (or goals) planned in a development and poverty reduction strategy. This means mainstreaming migration and development concerns into legislation, policies and programmes at all levels (local, national, regional, and international level, wherever necessary if applicable). It also means integrating migration and development concerns at all stages of development planning, including design, implementation, and monitoring and evaluation (Global Migration Group (GMG) Mainstreaming Migration into Development Planning A Handbook for Policy Makers and Practitioners. Denmark. 14

16 Figure 3.3: Percentage distribution of employment by category Unemployed Fishermen Doctor/Engineer/Teacher Student Barbar Domestic help Business Butcher Gardener Driver Construction worker Private company job Shepherd of sheep/camels Source: IOM, BHHRS, 2009 Over 80 per cent of respondents mentioned that meeting family expenses was the primary purpose for which migrants sent remittances. This indicates huge burden of monetary responsibility the respondents had before migration (Figure 3.4). The following major reasons for sending remittances were: paying off debts and celebration of Eid festival (Muslim religious festival). This was followed by the medical treatment and education of children (21-22%). Ultimately, the study data shows that households did spend remittances for the purposes intended by migrants. 15

17 Figure 3.4: Reasons for remittances Others Lending money to sister Buying of rice Purchasing of cattle Sending brother abroad For running a business Marrying off brother/sister Savings Purchase of land/property Mortgaging of land Construction/repairing of house Education of children Medical treatment Celebration of Eid festival Paying off debts For family expenses Source: IOM, BHHRS, 2009 The data collected also shows that remittances were mostly sent through formal channels, mainly banking institutions. Out of the total amount of remittances received by the surveyed households during the year before the survey, 73 per cent was received through banks and another 8 per cent through formal money transfer agencies. Only 18 per cent of the total remittances were sent through informal channels. However, it is that the money sent through informal channels was somewhat underreported in the survey due to the invisible nature of transfer and the sensitivity surrounding receiving money through informal channels. The data demonstrates that female migrants were less likely to use informal channels than their male counterparts. Female migrants sent only 7.5 per cent of their remittances through informal channels while the proportion was higher at 19 per cent for male migrants. More than 90 per cent of the respondents receiving remittances through a formal channel reported having received it within 15 days. On the other hand, recipients on average had to wait less than 5 days to receive money that was sent through informal channels. There were little variations in the time taken to receive remittances among the six administrative divisions of the country. From the data, it is evident that a respondent was more likely to require making at least two visits to receive a payment from the bank or the post office. On the contrary, recipients receiving remittances through informal channels mostly received it during one visit. Most of the recipients mentioned that they did not have to pay any fees to collect the remittances. 16

18 Formal channels Informal channels Nevertheless, 10 per cent of the recipients receiving money through bank and post offices mentioned that they had to pay informal extra money to the officers for disbursing their payments. Safety and security were the main reasons behind using formal channels of transfer whereas receiving money faster and on time were the reasons given for opting for informal channels Figure 3.5). Figure 3.5: Migrates Awareness on remittance channels (%) (Multiple responses) Don't know of any channel Others Hundi/intermediary 6.8 Individuals 38.7 Post office 26.4 Money transfer agency 51.7 Bank 94.7 Source: IOM, BHHRS, 2009 Among the migrant households that received remittances in the year before the survey, as many as 8,712 were found to have at least one bank account, while 1,400 reported having no bank account. From the analysis of the data, it is clear that there is a strong association between receiving remittances through formal channels and having a bank account. Among households having bank accounts, 83 per cent were found to have received remittances consistently through formal channels and only 6 per cent always through informal channels. In contrast, among households having no bank accounts, 65 per cent were found to have received remittances always though informal channels and only 27 per cent always formal channels. The above two figures (Figure 3.6) indicate that formal channels are predominant in sending remittances and impact on overall household income with a range from 46 per cent who remitted more than Tk 300,000 annually to 70 per cent in Tk.50,000-75,000 cohort. 17

19 Figure 3.6: Remittance as a percentage of overall household income > < Source: IOM, BHHRS, 2009 The study also explored the relationships between the average amount of remittances sent and the different countries of destination, types of jobs, levels of education and duration of their stay. The data shows that the average amount of remittances sent from Middle Eastern countries were higher than those from Malaysia and other Asian countries. Nevertheless, the amount sent was highest for those migrants living in North America, Australia and New Zealand. The amount of remittances also increased with the duration of stay of the migrant. The migrants who sent comparatively more remittances (on average between Tk. 116,694 to Tk. 169,483) were investors in small businesses; working as doctors, engineers, or teachers; doing government jobs and working as caretakers/guards (Figure 3.7). Furthermore, there was a positive relationship between the amount sent and migrants levels of education. Migrants with more education sent more money in one year before the survey. But the variations did not appear to be pronounced unless migrants had education beyond grade IX. It is important to note that the positive relationship between levels of migrants education and the amount they remit only holds to be the case for male migrant workers. 18

20 Figure 3.7: Average Remitted Amount by Country Australia/New Zealand Canada/USA Europe Africa Other Asian Countries South Korea India Pakistan Maldives Singapore Malaysia Asia, excluding Middle Other Countries Bahrain Qatar Oman Kuwait UAE KSA Middle East 36,780 76,387 89, ,125 91,961 50, ,166 61,989 72,432 68,267 71, ,637 65,545 94,230 70,572 88,300 81, , , ,920 Source: IOM, BHHRS, 2009 Remittances sent by migrants are major source of income for their households in Bangladesh, and figure 3.8 shows that nearly half (48%) of the migrants sent their money ranging between 50,000 and Tk. 150,000 to their households in the year period prior to the survey. The average corresponding figure was Tk. 81,710 reported in the survey. There were marked differences in the amount of money sent by male and female migrants. Only 40 per cent of female migrants sent more than Tk. 50,000 compared to nearly 60 per cent of male migrants. One of the reasons for this could be that female migrants on average earned a lower salary than their male counterparts. 19

21 Figure 3.8: Percentage distribution of remitted amount by migrants Sent no Remittances < Source: IOM, BHHRS, 2009 In terms of overall cost of migration, 75 per cent of the migrants reported having spent a total amount ranging from taka 100,001 to taka 300,000. About 10 per cent of migrants reported having spent over taka 300,000 (Figure-3.9). The cost of migration varied with the country of destination. For instance, migrants who went to a country in the Middle East spent on average taka 199,844. This average was much higher (Taka 228,100) for those who went to an Asian country outside the Middle East. It was highest for those who went to North America, Australia or New Zealand. The migration costs included: payments for governments fees, recruiting agency fees, fees for visas and airfare. It also included payments to intermediaries and other middlemen. 20

22 Figure 3.9: Cost of migration by male and female Male Female All < Cost borne by others Source: IOM, BHHRS, 2009 An average migrant household was found to have an income of only 27,141 from agriculture. The average annual income per migrant household from enterprise/business was calculated to be only taka 14,188. Furthermore, it was found that an average annual income per migrant household from wages/salaries was taka 16,146. Average annual income from other sources (leasing of pond, agricultural land, interest from savings, etc.) in the year before the survey was taka 6,979. After accounting all sources of household income mentioned above, the average annual total income per migrant household in the year before the survey was taka 64,455. However, this average masks the large variations that each migrant household had in their own income. An average migrant household was found to have received a total of taka 98,708 as remittances in the year before the survey, with about one-third (34%) receiving an amount of taka 50,000 or less and another one-third (33%) receiving between taka 50,001 and taka 100,000. The overall annual income of an average migrant household including remittances was taka 163,163 in the year before the survey. On average, remittances made up 61 per cent of the overall household income in the year before the survey (Figure 3.10). 21

23 Figure 3.10: Remitters household income from different source (%) < > Source: IOM, BHHRS, 2009 Remittances have led to improvements in the consumption of food among the majority of migrant households. The figure 3.11 shows over 9 in 10 (89%) acknowledged that as a result of remittance income, recipients families could afford to have various kind of food and they enjoy more diversity in their diet. Figure 3.11: Change in consumption patterns Eat more often Eat larger quantity of food Have more diversity in diet Other Source: IOM, BHHRS, 2009 There are clear indications of remittances having a positive impact on level of education in the migrant households. Thirty five per cent of respondents mentioned using remittances for buying books, papers, and other learning materials and 28 per cent mentioned using it to pay tuition fees/exam fees/transportation costs for their children (Figure 3.12). 22

24 Figure 3.12: Children s Education Buying of books, papers and other learning materials Paying of tuition fee/exam fee/transportation costs Buying of uniform/clothers Paying for private tutors Others Source: IOM, BHHRS, 2009 Nearly 9 in 10 respondents acknowledged that remittances enhanced educational opportunities, and figure 3.13 shows that 74 per cent stated that they could now afford to provide their children with adequate learning materials, while 48 per cent mentioned they were able to afford private tutors for their children. Figure 3.13: Enhancement of specific educational opportunities Others 0.5 Able to afford adequate learning materials 73.7 Able to employ adequate private tutor Able to give children proper education Can send children to better school 33.8 Source: IOM, BHHRS, 2009 IOM 2009 survey asked the respondents about the sources from migrant households seek medical treatment, and 59 per cent reported visiting pharmacies, while 58 per cent visited a qualified physician (Figure 3.14). 23

25 Figure 3.14: Change in use of health services (%) Others Chemist/Pharmacy Traditional healer Homeopath Rural health practitioner Qualified doctors Clinic NGO hospital Govt. hospital Source: IOM, BHHRS, 2009 Most migrant households used some portion of their remittances towards medical treatment and promoting medicines. Seventy two per cent obtain treatment and more than 81 per cent purchased medicine through remitted money (figure 3.15). Figure 3.15: Medical expenses met with remittance money Treatment Medicines Didn't spend it Others Source: IOM, BHHRS, 2009 Foreign remittances have significant contribution towards yearly household income (Figure 3.16) as respondents of migrant households (more than 54%) reported having increases in between 1000 to 150,000 taka as a significant contribution by remittances towards household income. 24

26 Figure 3.16: Migration and Change in yearly household income Source: IOM, BHHRS, 2009 IOM (2009) study findings showed that remittances increase: household income and consumption, which in turn, family nutritional status, investment in health and education, loan repayment and increase assets, and use of formal channels. All these microeconomic issues at the household level have some significant impact on macroeconomic consequences. For example, Ratha and Mahaptra (2007) state that remittances may share reduced the share of poor people in the population by 6 percentage points in Bangladesh, where Raihan et al (2009) further show that a 1.7 percentage point reduction in headcount ratio measure of poverty level in between can be attributed to the growth in remittances. Furthermore, it is important to recognise that even though remittances receiving households may not directly invest the money, however, the increase in consumption itself work its way through multiplier effect on the aggregate demand and therefore should contribute positively to growth. 25

27 4: Recommendations Migration and remittances have received increase attention in recent years in Bangladesh. However, it may not be possible to pinpoint the impact of remittances on broader context until household level panel data, and macro data integrated in national database are available. Most of the studies on migration and remittances were context-specific and descriptive. It is therefore, difficult to draw a conclusive line concerning the impact of remittance flows on income distribution and economic development, until completing the total observation process on relevant aspects. However, following recommendations may deliver some pointers to the policy makers: Remittance through formal channels and options: Bangladesh migration and remittance dynamics identified that three categories of migrants use four types of transfers of remittances to their family members on a regular basis. Though foreign remittance is important for country s economic growth, despite its limitations (both positive and negative) and impact differently in meeting the basic needs of families including supplement to investment and other costs as a principal or additional income source. The policies and initiatives 15 implemented to enhance the impact of remittances are mainly aimed at encouraging the sending of financial transfers through official channels, and when proposing new measures, it must be kept in mind that remittances are private money flows. Therefore, the government should focus on enabling migrants to send and use their remittances in the most effective ways, according to their own needs. The Bangladesh Bank has to consider National Commercial Banks (NCBs) to have branches with adequate preparation for harnessing and disbursing migrants remittances; the opening of branches outside of Dhaka by private banks would lead to a healthy competition and probably contribute to an increased flow of remittances. Address use of information channels through research: Bangladesh Bank has initiated several mechanisms and ways of addressing remitters and receivers needs by engaging a number of financial institutions, hence, government, NGOs and research institutes need to review the existing systems and try to explore new ways of addressing remittance. A research programme may be worth taking up to 15 Transfer of remittance takes place through demand draft issued by a bank or an exchange house, telegraphic transfer; postal order; account to account transfer. Government as well as private sector has undertaken various strategies to make remittance transfer easier and hassle free. Now, the Nationalized Commercial Banks (NCBs) have some overseas branches/remittance wings for transferring remittances. The private commercial banks (PCBs) also become aggressive in transferring remittances by providing quick and reliable services. Some of the PCBs also have established oversees branch or correspondence relationship with Banks/Exchange Houses. Recently, illegal transfer of money slid down drastically, as Bangladesh Bank (BB) has stepped up monitoring of such transactions at home. BB so far gave license to 660 exchange houses to set up offices abroad to facilitate remittance. Local banks are now able to deliver money to recipients in weeks. 26

28 study in more details and could assist the Bangladesh Government in its search for effective measures. A large segment of hundi money (estimated more than one billion US$) is channelled into finance smuggling. It is necessary to undertake a review of under-invoicing of imports, another factor contributing to hundi. Awareness campaign and strengthen foreign missions: Bangladeshi banks overseas should periodically launch campaigns to encourage the Bangladeshi migrant population overseas to open bank accounts. Bank officials should be trained, regularly informed and motivated about the importance of migrant remittances. There is much room for improvement in the functioning of Bangladeshi missions abroad with respect to remittances. Missions need to act promptly on queries about opening new branches and corresponding relationships, and procedural delays should be minimized by fixing specific time frames. Encourage private institutions/organizations, agencies, NGOs, and strengthen the existing public and private organizations to carry out preventive awareness and sensitization campaigns, on all aspects of migration; collect all relevant information on the extent of the migration problem; strengthen the mechanisms to combat smuggling and trafficking in human beings including the elaboration of legal instruments; integrate migration and remittance issues with employment and poverty alleviation and the MDGs and mainstream migration in development plans. At the same time, Bangladeshi embassies need to explore the potential employment opportunities as well as the appropriate skill level mix indicated as the country s goal in development plans in order to sustain high migrant growth for a longer period in different destinations and provision of better employment opportunities in organized industries and capture greater share of labour market in destination countries. On the other hand, the Bangladesh mission abroad should have capacity and plan for migrants preparedness as because they have an important role to play in ensuring the welfare of the migrants in the host countries. BMET must make provision of receiving regular migrants reports both from migrants and employer, where mission will play important facilitation role on the basis of reporting. Investment on migrants education, welfare and create more opportunities: Educational background and skills are the most crucial aspects for the migrants in new settings. Bangladesh could respond by arranging skill-based specialised training at the secondary and tertiary level with certification. This is required due to a large percentage of migrants and their families are less educated and the number of migrants in skilled and professional categories has declined over the last decade. Due to lack of education, they are not familiar with formal institutions and are not aware of the benefit of having a bank account. People intending to go overseas should therefore be encouraged to open accounts before 27

29 their departure. Before issuing the migrant s clearance certificate, BMET can check whether the migrant has opened a bank account. Pre-departure training for labour migrants is not only important to reduce the human and economic costs of migration; it can also be a powerful tool in raising awareness about remittance methods and utilization. The involvement of a variety of actors (international institutions, migrant associations, NGOs and governmental bodies) may be instrumental in the success of these initiatives. The government needs to commit adequate resources to the migration sector. In order to ensure migrants welfare, a wage earners welfare fund already in place, however, MEWOE may review its utilization and use the lessons learned for further programming. Government may give migrant workers the right to import goods that can be considered as remittances in kind, which may be exempted from custom duties or low custom duties. Create investment opportunities: Considering the extensive network of microfinance/microcredit in Bangladesh a link between remittance and microcredit may ensure an effective investment and impact on overall community development and reduce inequality in other way, may balance social and economic equity. On the other hand, considering the need for special savings schemes for migrant families and the absence of services in all areas of the country, the government could give special permission to a few tested MFIs to engage in managing non-members savings. Strengthen intersectoral and multisectoral engagement in migration mainstreaming and programming: Bangladesh Government adopts a policy on international migration for the labourers; however, considering the importance of remittances in national economic development, now is the prime time to translate the policy into action plans including the cost of implementation in the next budget cycle. A central body may be needed to manage and mitigate the migration, remittance, information, accountability, good governance and rights including legal issues (deepen cooperation in issues of the reciprocal integration of migrants and the protection of their rights; and improve the intersectoral (within relevant departments) and inter-ministerial and multisectoral (public and other sectors involved in migration and remittance process) coordination and initiate the dialogue and negotiation process. Engagement of different organizations also important for migration programming to address the social and human rights conditions of the migrants (before, during and after migrating). Comprehensive and complimentary polices on international migration, work permits, terms of conditions of jobs; recruitment and processing costs through private channels; involvement of the ministries, agencies, organizations related to international migration and remittance, measuring performance by rating of the concern agencies; and provision of protection and rights of migrant 28

30 workers guaranteed by clauses and legal supports (under bilateral, regional and international legal instruments) throughout the service period: recruitment, deployment, and return are also important part in mainstreaming the migration. Data for Development and Decision Making (D4D): Steps like efficiency in information systems on manpower export and remittances inflow through digitization process and electronically connecting the databases maintained by agencies involved in the overseas deployment system, could improve exchange of vital information on migrant stocks and flows including communications between home agencies and overseas offices. In addition, this system will help for authentication of various documents needed to process the applications including other services and thereby enhance the deployment process, save the money and man-hours. There is a need to enhance sex-disaggregated data collection on regular basis by geographical locations of both sender and recipient countries, its analysis monthly basis in consistency with Bangladesh Bank and other relevant organizations, and dissemination on regular interval advocacy for either by meeting the press for extensive consultation and strengthen the public opinion, or receiving policy level guidance on crucial aspects. It is obvious that sending migrants in 157 destinations is quite cumbersome, messy and highly risky if whole process of migration is not managing efficiently. The MEWOE along with BMET, BAIRA and Banks to use a central data bank to make the migration process more organized and thereby reduce the system risks. Making the process more organized, cheap, reliable, reasonable and transparent is vital to attract other funding agencies to invest capital on this ground. The insurance companies also need to enter this industry in a leading form. 29

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