Remittances facilitate economic development

I was going through my old press clippings and came across some interesting numbers. I found that total disbursement of foreign aid during July to December, 2005 was about US dollar 488.51 million compared to US dollar 814.9 million during the corresponding period of the previous fiscal year. On 14 June, I came across another news item that indicated that the country had received US dollar 829.728 million in foreign loans till April of the fiscal year 2005-06. An answer given in the Jatiya Sangsad by the Finance Minister also revealed that Bangladesh had paid Taka 9489.50 million (about US dollar 135 million) as interest for loans during this period. So, in effect, net inflow of assistance was about US dollar 695 million for ten months.

These statistics were depressing. Nevertheless, in my own way, I was happy that foreign aid and loans were coming down. For me, it is more important to be self-reliant and for our economic development to be spurred on through our steady growth in exports and the satisfactory rise in inflow of remittances from our expatriate workers abroad.

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The figures splashed in our newspapers on 14 June were really encouraging. Inversely, it appeared to be a direct result of the global fight against terrorist financing through shadowy channels. Instead of using 'hundi' and other informal channels, our expatriate population seem to be taking advantage of regular financial institutions.

It has been announced by the Bangladesh Bank that remittance inflow crossed a record US dollar four billion in the first eleven months of financial year 2005-06. In fact, the exact figure was US dollar 4386 million, almost US dollar 884 million more than what came in during the same period in the previous fiscal year. Analysts are now hoping that by end June, this figure would reach near about US dollar five billion. The exact figures would be available in the later part of July. I thank God for this development.

This increased remittance inflow has helped to keep the country's foreign exchange reserve at over US dollar 3.1 billion. This has been possible despite a severe fall in foreign assistance. It has also helped to maintain the balance of our payments despite our growing adverse balance in trade.

Analysis carried out by government agencies and the financial institutions have also indicated some interesting information about the background of the people who are sending these remittances. Within the overall figure, the share of the professionals was about seven per cent, of the skilled workers about 30 per cent and that of unskilled labour about 54 per cent. It would be useful to note here that according to our government agencies, there are at present about 19,100 professionals, 81,900 skilled and about 172,000 unskilled workers working in over fourteen countries of the world (Saudi Arabia, UAE, Kuwait, Oman, Malaysia, Qatar, UK, USA and Singapore being the most prominent in this regard).

This 22 percent growth in remittances coupled with almost 19 percent growth in exports over the first nine months has definitely helped us meet our international obligations. It has, in more ways than one helped to steady the ship in troubled waters, where turbulence has been generated from high oil prices. It has shored up out Taka against the US dollar. It might have depreciated otherwise even more.

This surge in remittances will also help the steady expansion of the economy in industry and services. It will also aid in recovery in the agriculture sector, despite external pressures. This trend has led the Asian Development Bank to suggest that the country's economy might grow by about 6.5 per cent in 2005-06. This forecast made in the first week of May has since been slightly revised downward because of the troubles that have crept into our RMG industrial sector over the last few weeks.

The influence of remittances, coming in through direct and indirect channels into Bangladesh is immense. Economists have stated that in addition to the regular banking channel, there is also almost another 60 percent coming in through the informal unofficial channel. It has been estimated that the total inflow is nearer to US dollar seven billion.

The Bangladesh Bank Governor has suggested certain reasons why expatriates continue to use the informal channels sometimes. Official channels in many cases are cumbersome, slow and sometimes expensive. At times they are also inefficient, with remittance eventually arriving in the designated address after two weeks. The alternative 'hundi' system on the other hand, usually takes only three to four days. Another hurdle facing those sending money through financial institutions is, at times, the high banking charge of remittance.

The Bangladesh Bank has also identified that lack of easy access to banks, corruption and unfavourable investment atmosphere within the country are discouraging higher amounts of remittance through formal channels. In this context, it has been correctly pointed out that branches of Bangladeshi banks and exchange houses abroad, also sometimes fail to create an investment friendly environment to encourage Non Resident Bangladeshis to send more remittances. It has also been suggested that there should be one flat rate for remitting any amount of money through these financial institutions.

It is vital that our present and future governments pay more attention towards streamlining of the remittance procedure. We must not forget that transactions undertaken informally enter the underground system and leave no trace. They are used to finance international smuggling, unofficial cross border trade in narcotics and arms movement (with direct consequences for terrorism). All these elements, at the end of the day undermine good governance.

We must understand that in addition to the expatriate population who are currently abroad and are working for a fixed term as 'migrant labour', there are also a growing number of people of Bangladeshi origin who have immigrated abroad -- to Canada and the USA. We have to target them as well and encourage them to participate in our economic dynamics, be it in the stock market or in the manufacturing sector. We need to learn in this regard from what is happening next door in India and the way they are treating their Non Resident Indian population.

It would help if each of our Embassies abroad, particularly in the countries where we have a large expatriate presence, open up web sites and request Bangladeshis living abroad to give their views on how the government can improve its services in this sector. These suggestions could then help us to streamline the procedures and reduce the volume and complexity of required documentation. This, I am sure, will help increase our remittances.

The government should also seriously try to discover and identify other countries where we can send our semi-skilled and unskilled workers. We could also play a more active role in the context of Mode 4, Trade is Services within the WTO structure. There seems to have been little progress in this regard. The SAARC region could be the first step and then it could be the G-77 group of countries. We could also set up in each district, with government subsidy, institutes that could impart training in semi-skilled and skilled areas that would fit in with the services sector. There could also be institutes for teaching foreign languages in a functional manner -- in English, Arabic, Malaysian, French or Italian.

I am confident that if we approach this entire issue with sincerity, we can, in the next five years, increase our remittances to over US dollar ten billion. It could be for us the ticket that would permit us to get out of our present dependency on foreign aid and loans.

Muhammad Zamir is a former Secretary and Ambassador who can be reached at mzamir@dhaka.net