Remittances not rising fast enough

[Neo]

Remittances not rising fast enough​

By Mohiuddin Aazim



In fiscal year 2006, Bangladesh’s workers’ remittances at $4.8 billion were higher than Pakistan’s $4.6 billion. The trend continued in fiscal year 2007 as well. Whereas overseas Bangladeshis sent $6 billion back home, emigrant Pakistanis repatriated an estimated $5.5 billion. (In eleven months of FY07 Pakistan received $4.99 billion remittances).

Since 9/11, Pakistan’s home remittances have been on the rise and from FY02 to FY07, the country has received roughly $24.8 billion or more than $4.1 billion per year..

As the impact of 9/11 on home remittances of Pakistan is more direct than in case of Bangladesh, the growth in BD’s remittances has more to do with its policies and efficient banking system.

It indicates that Islamabad has not been doing enough to grab its due share of workers’ remittances in the international market.

Based on the end-2006 data, Pakistan was receiving an average of 1.5 per cent share in all countries’ home remittances of $276 billion and two per cent in $206 billion flowing towards developing countries. Table below lists the top 10 recipients.

So, Bangladesh has not only beaten Pakistan in generating home remittances in the last two fiscal years, it has also become the 10th recipient of these remittances, leaving no place for Pakistan.

Up till FY06, home remittances were the second biggest source of foreign exchange earnings for Pakistan after exports. The trend changed in the last fiscal year and foreign investment exceeded remittances.

However, these remittances are undoubtedly a more preferable source of foreign exchange earning than foreign investment. The foreign investment that comes into the stocks is vulnerable to the vagaries of the market. And in the case of foreign direct investment, substantial foreign exchange flows out of the recipient country in the shape of profits and dividends repatriated abroad.

Unlike that home remittances are usually a dependable source of foreign exchange earnings and they do not necessitate forex outflows afterwards. Besides, the impact of home remittances on poverty alleviation is more direct than that of foreign investment.

So, there is a need to draw a comprehensive strategy to ensure a handsome growth in home remittances with clearly set targets.

One way to ascertain the adequacy of home remittances could be the per person remittances. The government must have real-time data about the number of overseas Pakistani workers to calculate how much each one of them is sending home on an average.

Moreover, country-wise breakup of emigrant workers and their occupation-wise details can be taken into consideration to set targets for getting home remittances from a particular country.

Then comparisons could be drawn between average remittances per Pakistani from a particular place with the average per person remittances of other nationalities from the same location. And finally the results may be analysed and investigated carefully and corrective measures taken to boost the remittances from a particular country.

If Pakistan continues to delay on drawing up and implementing such a strategy, the growth rate of remittances might stagnate at the current level of 20 per cent or so. A much faster growth rate is required to keep the combined foreign exchange inflows through exports, remittances and foreign investment at a decent level in the backdrop of a very slow growth in exports. In eleven months of the last fiscal year, exports grew just 3.6 per cent.

In the last two fiscal years, Bangladesh (BD) has not only outdone Pakistan in home remittances, it has also achieved a faster growth rates in exports. In FY06, BD exports grew 21.6 per cent against Pakistan’s 14.3 per cent. And in ten months of FY07 its exports’ growth of 18 per cent far exceeded Pakistan’s 3.4 per cent.

Since 9/11, Pakistan has been receiving the highest amount of home remittances from the US. Out of the total remittances of $24.8 billion received between FY02 and FY07, $7.2 billion or 29 per cent came from America. During this period, remittances from the UAE, Saudi Arabia and the UK totalled $4.18 billion (16.8 per cent ), $3.9 billion (15.7 per cent ) and $2 billion ( eight per cent) respectively.

In other words, Pakistan attracts roughly 70 per cent of home remittances from the above-named four countries and the remaining 30 per cent from the rest of the world. Since most overseas Pakistanis reside in these countries, the concentration of remittances in these countries is quite understandable.

But one needs to investigate how many of 7.5 million expatriate Pakistanis live across the world other than these four countries and why their combined contribution to home remittances is only 30 per cent.

“Whereas remittances from some centres are showing nominal annual growth, the inflow of foreign investment from there has accelerated,” said president of a large local bank. “In some cases, overseas Pakistanis are now sending part of their income back home as remittances and part of it as foreign investment. This is true particularly in foreign investment in the stock market.”

Portfolio investment, the bulk of which represents the foreign investment in bourses touched an all time high of $978 million in the last fiscal year.

Two factors affect the remittances’ growth more than anything else does. First is export of manpower and second, the efficiency of banks in collecting and delivering home remittances.

The Bureau of Emigration & Overseas Employment says that in the last seven years, more than 271,000 Pakistanis left abroad for employment. Which means, on an average, over 38,700 Pakistani workers set foot on foreign soils every year. Officials do admit that the number is low and Pakistan needs to export at least 60,000 workers every year to compete effectively with countries like Bangladesh, Sri Lanka and the Philippines—the countries that are fast outnumbering Pakistanis in the Middle East.

Lately, National Vocational and Technical Education Commission has contacted Pakistan’s ambassadors in eight Middle Eastern countries including the UAE and Saudi Arabia and sought their views on how to increase manpower export to these countries.

Besides, the Commission is taking measures to produce skilled manpower for exports and has already produced a hundred thousand skilled workers. But finding them overseas jobs is not an easy task.

Bankers claim that on an average banks don’t take more than 48 hours to deliver home remittances to the beneficiaries anywhere in Pakistan. But people still complain of much-delayed deliveries by almost all banks particularly in remote areas of the country.

Another issue related to home remittances is the need to find more avenues for their most profitable use in the economy. The remittances are adding Rs245-250 billion every year through the creation of their rupee counterpart but so far the most efficient way of using this money has not been found..

In March this year, Pakistan arranged the first-ever Overseas Pakistanis Investment Conference in Islamabad.

Prime Minister Shaukat Aziz, who presided over the concluding session of the two-day conference, invited overseas Pakistanis to invest in the real estate, oil and gas, manufacturing, engineering, cement and car making industries. The Prime Minister said these were some of the potential areas where 7.5 million overseas compatriots could make profitable investment and contribute to overall growth of the economy.

However, some senior local business leaders who attended the conference say so far no follow-up action has been taken to facilitate overseas Pakistanis in investing in the areas identified by the PM. “They have not even removed the bottlenecks in the way of investment in the real estate and construction sector—that may have the best spill-over impact on the economy,” said a business leader.

http://www.dawn.com/2007/07/16/ebr3.htm

 

[Neo]

Overseas remittances hit record of over $5.493 billion​

KARACHI: Pakistan received a record amount of over $5.493 billion as workers' remittances during the last fiscal year. The previous record was $4.6 billion.

In the recently concluded fiscal year 2006-07, Pakistan received an amount of $5,493.65 million as against $4,600.12 million in the preceding fiscal year of 2005-06, showing an increase of $893.53 million or 19.42 percent.

During last month (June 2007), Pakistani workers remitted an amount of $505.55 million, up by $41.68 million or 9 percent when compared with an amount of $463.87 million sent home in June 2006. The level of remittances is quite close to what the economic managers of the country had expected. They had said towards the end of the last fiscal year that the country might receive $5.5 billion through remittances during the year. Economists believe if economic growth continues to show strength, the inflows of foreign exchange like remittances could set new records for fiscal 2007-08.

However, they criticised the government's policy of relying too much on foreign direct investment and remittances for foreign exchange. They say the government has been meeting the demand for dollars by the importers through the remittances and FDI inflows instead of enhancing exports. Besides, the inflows are causing the problem of more than required money supply in the economy. The central bank has admitted that increased foreign exchange inflows have resulted in a huge growth in money supply. This is fueling inflation and neutralising the central bank's tight monetary policy. The inflow of remittances in the July 2006 to June 2007 period from USA, Saudi Arabia, UAE, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $1,459.64 million, $1,023.56 million, $866.49 million, $757.33 million, $430.04 million and $149 million, respectively as compared to $1,242.49 million, $750.44 million, $716.30 million, $596.46 million, $438.65 million and $119.62 million, respectively in the July 2005 to June 2006 period.

Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during the fiscal year 2006-07 amounted to $804.91 million as against $724.07 million in the fiscal year 2005-06, showing a rise of 11.16 percent or $80.84 million.

The monthly average remittances for the July 2006 - June 2007 period was $457.80 million as compared to $383.34 million during last fiscal year, registering an increase of 19.42 percent.

The inflow of remittances into Pakistan from most of the countries of the world increased last month as compared to June 2006. According to the break up, remittances from USA, Saudi Arabia, UAE, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $140.17 million, $96.47 million, $95.39 million, $68.16 million, $37.45 million and $12.47 million, respectively as compared to $123.15 million, $79.51 million, $80.76 million, $59.07 million, $38.65 million and $9.70 million from these countries during June 2006.

Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during June 2007 amounted to $55.33 million as compared to $72.04 million during June 2006, recording a negative growth of 23.23 percent.

The record amount received during the last year includes $2.68 million received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs).

http://www.dailytimes.com.pk/default.asp?page=2007\07\17\story_17-7-2007_pg5_2