Professional Documents
Culture Documents
Chandan Sapkota
The views expressed are solely those of the author. The presentation is based on Remittances in Nepal: Boon or Bane? published in The Journal of Development Studies. http://dx.doi.org/10.1080/00220388.2013.812196
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Presentation Outline
Introduction Migration of Nepalese Workers Remittances in Nepal Impact of Remittances Conclusion Productive Use of Remittances
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Introduction
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Significance of Remittances
Remittances, ODA and FDI Top remittance recipients in 2011 (% of GDP)
50 45 40 35 30 25 20 15 10 5 31 47
29
27 23 22 21 21 18 18 17 16 16 14
13
Remittances inflows are far higher than ODA. o USD 401 billion in 2012 (e) o USD 515 in 2015 (f)
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Push factors
Lack of job opportunities Unfavorable investment climate More influential since 2000
7 6 5
Pull factors
Relatively high wages High demand for labor in low to medium skilled sectors
Manufacturing Construction Hotel/catering
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1000
800
600
560
400
200 6 0
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100,000
Remittances in Nepal
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450
25
20
15
10
Migrants (thousand)
Remittances (% of GDP)
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Remittances (% of GDP)
20
FY1996
15
Share of GDP
10
FY2001
ODA: 4.3% FDI: 0.01% Remittances: 10.7%
0 1974/75 1976/77 1978/79 1980/81 1982/83 1984/85 1986/87 1988/89 1990/91 1992/93 1994/95 1996/97 1998/99 2000/01 2002/03 2004/05 2006/07 2008/09 2010/11
FY2013
ODA: 4.2% FDI: 0.5% Remittances: 25.5%
-5
Remittances
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Aid
FDI
10
Sources of Remittance
Remittance inflows from overseas account for over 80% of total household remittance inflows.
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11
8,000
7,000
40
6,000
30 32 5,000
4,000
20 23 3,000
10
2,000
1,000
2,100
0
1995/96 2003/04 2010/11
Impact of Remittances
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14
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Remittances contributed between one-third and one-half of overall reduction in poverty between 1995 and 2003. Corroborated by the latest MPI analysis based on NLSS III.
Boosted per capita consumption of households in the poorest deciles. Over half of the contribution to GDP growth from services sector, supported by consumption of imported goods financed by remittances.
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400
350 300
70% 60% 50% 40% 30% 100 20% 10% 0% 50 0 250 200 150
Remittances
Tourism
Investment
Exports
Diplomatic
Aid
Misc
Share of GDP
10 0
1991/92
1993/94
1995/96
1974/75
1975/76
1976/77
1977/78
1978/79
1979/80
1980/81
1981/82
1982/83
1983/84
1984/85
1985/86
1986/87
1987/88
1988/89
1989/90
1990/91
1992/93
1994/95
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
-10
-20 -30
Merchandise export
Merchandise import
Remittances
Trade deficit
Merchandise imports are surging and are financed primarily by remittances. FY2000 Exports: 13.1% Imports: 26.2% BOT: 13.6% Remittances: 3.3% FY2013 Exports: 5.1% Imports: 32.2% BOT: 27.1% Remittances: 25.5%
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2010/11
18
40 CAB, BOP (% GDP) 4 30 2 20 0 FY2003 -2 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 10
70% 60% 50% 40% 30% 20% 10% 0% 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 0 5 10 15
Customs
Consumption
Land-house
Income
Remittance (%GDP)
Revenue performance hinged to remittances-fueled consumption demand of imported goods. Very weak relation to GDP growth. Consumption tax + customs duty = 72% of total tax revenue
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Remittances (% of GDP)
T/NT production
Remittance (% of GDP)
1.8E-05 25 20 15 10 5 0 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00
25
Tradable/Non-tradable
Spending effect High remittance inflows = high HH income and expenditure > output and productivity capacities. (+ve income elasticity) Rise in wages in T and NT sectors = loss of competitiveness. T/NT shrinks.
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Resource movement effect Labor and capital attracted to high income sectors, i.e. overseas migration Further creates shortage of workers and puts pressures on wages in both T and NT sectors.
21
T/NT production
REER
Regulatory quality
45
Regulatory quality
40 35 30 Rank 25 20 15 10 5 0
-0.6
-0.7 -0.8 -0.9
Vicious policy cycle: High remittance inflows, low pressure to improve policy weaknesses, inadequate investment climate reforms, low investment, low job opportunities, high overseas migration,
High remittance inflows lower governance performance.
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Conclusion
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Supported GDP growth (esp through services sector growth) Supported achievement of development objectives, including some MDGs High revenue mobilization Financed imports Maintained external sector stability Increased GNS Boosted forex reserves
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Use of remittance depends on economic, social and legal environment. Improvement of investment climate is necessary. Enhancing financial market efficiency. Diaspora bonds (successful launch in Israel and India) Matching funds (3x1 matching fund in Mexico and El Salvador) Promoting remittances as collateral for private loans Encouraging productive investments Purchasing agricultural equipment Building house/business Purchasing land Improving farm mechanization Subsidization by government Education and business loans for family members of migrants (remittance as collateral) Tax breaks on imported capital goods Financial literacy
28
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Thank You!
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Migrants from poor HHs (mostly FWDR and MWDR) prefer India.
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A decrease (increase) in REER indicates real appreciation (real depreciation) of Nepali currency. Remittances have more appreciative effect than other variables such as foreign aid.
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