In the United States, the technology boom in the 1990s brought an abundance of money. With so much money at their disposal, banks started lending almost for free to whoever wanted them. People started buying houses and land with the loans, and real estate prices were artificially inflated. Around 2005-07, the entire real estate market in the US crashed. People were thrown out into the streets from their houses that they could never have afforded in the first place if not for reckless loans from banks.
The exact scenario is unfolding in Nepal. We have experienced a growth in remittance income. Banks are overflowing with remittance deposits, and have no idea what to do with it. Brokers are being given house and land loans at very low interest rates. ‘Plotting’ has become a popular vernacular, and real estate is being bought and sold at artificially inflated prices. This real estate bubble in Nepal will burst; it’s only a question of when. We will not be able to handle such a crisis as our savings are low and most of the remittance money
has gone into unproductive sector. Once the bubble bursts, millions of Nepalis will see their entire life savings vanish in thin air.
One good thing about remittances is that it gives people some capital. Some use it to send their children to school and some invest it. However, most of the remittance money that enters Nepal has been spent on consumption of goods and services, and does not contribute much to the economic and social growth. Thus, for the nation as a whole, our labour going overseas for employment and sending back remittance money is not desirable for many reasons.
Nations all over the world have been feeling the impact of globalisation, and most are struggling to provide jobs to their citizens. Nepalis who go to work overseas should know that they are going there as a cheaper substitute of the local labour force. There have been news reports, and issues have been raised about Nepalis workers being treated unfairly in some Middle Eastern countries. Nepali workers have complained that their passports get taken away. In many instances, the workers have not been paid for months, and have returned with no savings at all.
The fact that we have a system geared for remittance inflow at the expense of health and dignity of our citizens raises ethical, moral and legal questions. Also, we should understand the reason why many Nepalis migrate. Although highly educated andhigh-skill people have also left Nepal, the focus here is not on exceptions but on the majority. Most of Nepali labour force is uneducated (or undereducated) and low-skilled (or un-skilled). We have a difficult time finding them well-paying jobs in Nepal because of these shortcomings. Until these shortcomings are addressed via regular and vocational education and training, we will always have to find them places overseas in labour-intensive jobs. This is not a desirable outcome for Nepal.
We also have a labour force that is mostly employed in agriculture. The agricultural labour force is the most uneducated and unskilled out of all sectors in our economy. Most of this labour force lives in rural areas, and therefore, lacks basic education, training and healthcare. Public spending on education and health has not increased since 1990. As a result, our labour force has low education, low skill and poor health. Until the government increases its efforts and expenditure on educating and training, Nepalis will always be looking for low skilled jobs overseas.
We still rely on animal and human labour while others use technology in farming and irrigation. In this situation, agriculture in Nepal cannot compete with advanced agricultural practices in countries like US, Australia and China. Our crops and grains are never going to fetch us profitable prices in the market due to heavy competition.
Declining sales and productivity in agriculture has resulted in falling agricultural contribution to GDP, and high unemployment among the agricultural labour force. An average agricultural labourer’s skills are not easily transferable. As a result, most Nepalis who seek jobs overseas are agricultural labourers who have become unemployed.
As nationalistic fervor heats up in many countries in the wake of worldwide increasing unemployment rates, inflation, and sagging economic growth, the pressure in most foreign countries is sure to mount against employing foreign labour. Some countries like Malaysia and Singapore are already feeling the heat, and have reduced the number of Nepalis employed there. Iraq and Afghanistan have been attracting and employing many Nepali workers these days.
But the wars and reconstruction efforts in those countries are surely going to end some day. In addition, Dubai and Qatar will eventually complete their massive construction efforts, and the Nepali labour will not be needed anymore.
Nepalis will, eventually, have to return to their own country. Job creation in Nepal is the only surefire way of keeping the Nepali labour force employed in the long run. There is a widespread belief that remittance income is beneficial to the society, that it lowers poverty and reduces inequality. While remittance income has encouraged an increased consumption and expenditure on education, studies have shown that it does not contribute to lowering poverty or inequality, nor help in job creation.
Remittance has already exceeded 20 percent of GDP, and while this statistic is easy on the eyes (and our pockets), it’s bad news overall. Remittance income depends on foreign workers, and foreign workers depend on demand of workers in the respective countries. If a large destination country suddenly decides that it does not need Nepali labour, we’re in trouble. That is the main problem with foreign employment: the demand for our labour is uncertain and could end any time.
Despite the criticisms, we should be thankful to the remittance income for sustaining our economy during the time of intense crisis in the last few years. If it were not for remittance income, our economy would have collapsed during these turbulent times. However, remittance income has not created jobs, and has made no significant impact in lowering poverty and inequality. It is stupid to let remittance become the largest contributor in our GDP because it is uncertain and volatile.
We cannot afford to lose our laborers in their prime and productive years to some other country. Sending our laborers to other countries because they lack skills, training and education is not a healthy option in the long run. Shouldn’t the government be responsible for the health, education and training of its citizens? Such issues need to be addressed quickly, and solutions need to be found. The best way forward is to educate and train our labour force, and create jobs at home. Otherwise, few years down the road, the country is likely to find itself in hot waters.
The author is an economist at the Institute for Integrated Development Studies (IIDS)