Increasing remittance from Non-Resident Bangladeshis | The Daily Star
12:00 AM, February 06, 2008 / LAST MODIFIED: 12:00 AM, February 06, 2008

Increasing remittance from Non-Resident Bangladeshis


Over the past few decades, remittances from non-residents (NR) have become an increasingly important source of external funding for many developing nations, including Bangladesh. While migrants have always been sending money home to their families, only recently has this remittance begun to play an important role in the economies of these countries, and scholars have begun to pay attention. Numerous issues relevant to NR remittance, such as the process of remittance, its influence and effects on national economy, skills-building institutions for increased remittance, etc. deserve close attention.
This article explores some figures on international remittances, identifies the relative importance of NRB remittances on Bangladesh's national economy, and examines specific ways to improve these remittances to promote economic and social growth. We also wish to explore the effects of remittance on our national economy and potential for economic and social growth, how, and what kind of, skills-development institutions should be built, and which countries should we try to send our work-force to if Bangladesh wants to increase the volume of remittance.
A. International and non-resident remittance.
It is often difficult to get accurate data on remittances since a good amount of it is sent via informal routes, such as through mail, or through a friend and/or a family member. The official data is quite encouraging for the developing nations. The table below gives an overview of the remittances to all developed nations, and to Indonesia, Thailand, Bangladesh and India.
As we can see in the Table above, the remittance from non-resident Bangladeshis (NRBs) has seen phenomenal growth; in the last 12 years, it has grown almost six times, from $1.1 billion to $6.4 billion. While Thailand's growth remained minimal during these years, all three other countries have gone through remarkable growth; Indian remittance grew almost four times, and while less than India in volume, and far less than India in gross volume, the growth of remittance in Indonesia and Bangladesh has been almost six-fold. According to the World Bank, in 2001 NRB remittance was around 2% of Bangladesh's national GDP; in 2007, it stood at an impressive 8.8%! In comparison, remittance in Indonesia, Thailand and India stand at 0.6%, 1% and 2.8% respectively.
In 2001, the top ten countries where the remittances came from were the following, with the amounts noted in billions: United States ($28.4), Kingdom of Saudi Arabia ($15.1), Germany ($8.2), Belgium ($8.1), Switzerland ($8.1), France ($3.9), Luxembourg ($3.1), Israel ($3.0), Italy ($2.6) and Japan ($2.3). Kuwait, Oman, Bahrain -- where NRBs reside in substantial numbers -- fall to 12th, 13th and 15th places, respectively. During that same year, the top ten developing nations which received remittances were the following: India ($10.0), Mexico ($9.9), Philippines ($6.4), Morocco ($3.3), Egypt ($2.9), Turkey ($2.8), Lebanon ($2.3), Bangladesh ($2.1), Jordan ($2.0), and Dominican Republic ($2.0).
These numbers have led the analysts to conclude that the growth of money sent from abroad has exceeded the development assistance provided by the foreign governments and private capital flows. The implication of this phenomenon is enormous; if the remittances can be harnessed to grow at this rate, individual governments may not have to be dependent on foreign aid! The analysts have also established that these remittances now account for almost a third of global external finance. Furthermore, the real figures of remittances are considered to be considerably higher than the numbers mentioned above, since a large amount is delivered through informal channels.
For Bangladesh, it is more important to recognise that remittances can dramatically increase the national gross domestic product (GDP) by a significant percentage and, hence, will play a vital role in shaping the economic progress of the nation. In numerous countries around the world remittances constitute a large percentage of national GDP. According to IMF Yearbook, in 2001 remittances from the non-residents of Tonga, Lesotho, Jordan, Albania and Nicaragua constituted 37.3%, 26.5%, 22.8%, 17.0% and 16.1% of their national GDPs respectively. And, The World Bank data suggests that in 2004, remittances accounted for approximately 31%, 25%, and 12% of GDP in Tonga, Haiti, and Nicaragua.
B. Ways to increase the flow of remittance.

Based on the numbers above, it is conceivable that Bangladesh can increase its remittances as well. While the NRB remittances will reach, at the current rate of growth to an approximately $10-12 billion dollars a year by the year 2012, the government can play a pro-active role to accelerate this growth in a number of ways. Analysts suggest that with appropriate measures taken, the remittances can grow substantially higher than what they are now.
In order to achieve the goal of increasing remittances, the government will have to tackle 4 major management tasks: (1) Increase the number of people working in the countries where most of the remittances come from; (2) Build skills-building institutions, train and send skilled workers to earn, sometimes, two to three times more than the unskilled work-force; (3) Create and increase a desire among the NRBs to send money home; and, (4) Create sufficient, capable and, most importantly, reliable infrastructure to facilitate remittance.
In an article titled "Promoting NRB Investment," (in The Daily Star, February 25), the author Mr. Dewan Sadek Afzal, hit the nail on the head. The government needs to create an NRB secretariat to look into the issue, learn from those who already have the experience (e.g. India) and from the NRBs on the ground, formulate policies, and create a mechanism to help accomplish the dream of the NRBs. However, this is only one part of the whole picture; the government must also create the infrastructure to send larger numbers of skilled workers abroad and allow them to send larger amounts of money home, using cheap, easy, quick and reliable methods.
Given the significant benefits of improving the efficiency of the remittance system, a governmental forum (consisting of Canada, France, Italy, Japan, Russia, the US, and the UK), in cooperation with the World Bank, came up with a set of recommendations published in a report titled "General Principles of International Remittance Services." This document provides a set of security measures, and some excellent recommendations to improve banking and other issues. However, the following are some important and immediate recommendations the government can begin to work on:
(1) Reduce remittance costs: Cost is a significant factor for small, individual transfers. The IDB estimated that the total cost of sending money to Latin America and the Caribbean amounted to almost $4 billion in 2002, approximately 12.5% of the total remittances to the region! The World Bank also noted that reducing costs allows the remitters to have more disposable income, resulting in more remittances;
(2) Establish as many remittance centers as possible: Set up remittance points at as many places as possible, with employees speaking the language of the remitters. Often, because of the language barrier, workers do not use the official channels; make it simple, quick and welcoming for those who want to send money;
(3) Negotiate with the governments of the countries: This will help to increase the volume of money that can be sent legally; alternatively, negotiate for more frequent legal remittances.
(4) Establish faster and safer methods of transferring money to the recipients: Often, the long delays in receiving the money, perhaps because of the local postmaster's negligence, the distance to the local banks, insecurity of traveling with money, etc. discourage remitters from sending money through legal channels, and the government loses the opportunity to use valuable foreign currency. The government needs to eliminate these obstacles, real or imaginary, as soon as possible by establishing centers with prompt and safe services.
The World Bank and IMF have reported that the efforts to reduce remittance costs through creating competition have paid off, and the cost has declined considerably for many countries. For example, in US-Mexico corridor, in 1991 the cost of sending $300 from the US to Mexico was $26; in 2005, it dropped to $11! These institutions are hoping to report that the reduced cost as well as efficient and safe transfer of money will result in a much larger volume of remittance. Bangladesh can easily follow this path, and, with other measures taken, hopefully the remittances in the coming years will be far more encouraging!

Dr. Halimur R. Khan is a NRB in the United States for the past 25 years. He works for the US Defense Department, and teaches Russian Area Studies and Leadership at the US Air Force Academy in Colorado Springs, Colorado. Dr. Khan is also a Governor of Serve Foundation (SF), a Bangladeshi-USA registered not-for-profit organization dedicated to the cause of nation building; he serves as a Member of the Executive Committee of Bangladesh Development Institute (BDI), and is a WAIS Fellow (The World Association of International Studies) at Stanford University.

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