Social Science Baha


Diversifying Diaspora and Remittances

Nepal must come up with strategies to ensure remittances are repatriated by all, not just labour migrants.

Sanjit Shrestha
16 January 2024
The Kathmandu Post

The popular understanding of Nepal’s outmigration stems from the belief that it results in a considerable brain drain, emptying the country of young people. However, remittances are also keeping the country economically afloat.

The contention is exacerbated by the distress Nepali labour migrants face in their destination countries. In reality, the multifariousness of outmigration is inadequately acknowledged. The dystopian association with dead bodies returning in caskets may apply to “labour” migration from Nepal as they face accentuated levels of abuse and exploitation. However, it does not reflect the experiences of student migrants who originate primarily from middle- and high-income households. They invest a considerable sum in their migration journeys and enjoy better livelihoods in the destination countries. Such conflation undercuts the differences between the two, engendering characterisation issues and policymaking difficulties.

Disentangling the diaspora

Although Nepal’s labour migration is primarily concentrated in the Gulf Cooperation Council countries, Malaysia, India and, recently, eastern Europe, student migration takes place in much higher proportions in the English-speaking countries: Australia, the United Kingdom and the United States. Around 60 percent of the Nepali diaspora in Australia is highly educated; the corresponding figure for Malaysia, another country falling under the Organisation for Economic Cooperation and Development, is less than two percent. A similar pattern is seen in occupations: 33 percent of Nepali migrants who were naturalised or obtained permanent residency (PR) in the United States in 2018 were engaged in managerial or professional jobs; labour migrants, on the other hand, are recruited predominantly for low-skill occupations.

Moreover, the two groups of migrants also face different legal regimes in their destination countries. Nepali labour migrants are imposed temporary stints as their host countries deny them permanent residency and citizenship. Conversely, for Nepali student migrants, the possibility of a permanent stay is achievable, and obtaining PR in the developed world becomes a status symbol back home. Such differences impinge on work circumstances, the challenges faced, the fruitfulness of migration and migrant behaviours.

The nature of remittances

Over the last decade, remittance was equivalent to nearly 25 percent of the country’s gross domestic product every year and has become a mainstay of the economy, helping to ameliorate the poverty rate and maintain foreign exchange reserves. Although the importance of remittances remains foregrounded in the national discourse, the transfers being predominantly sent from major destination countries for labour migration are less discussed. The bulk of remittances are transferred to Nepal by labour migrants, with Nepali migrants in other countries contributing much less. Considering the differences in educational attainment and occupations between the two groups, even after keeping in mind the cost of living in the destination country, a higher contribution by the Nepali diaspora other than those who have gone abroad with labour permits would have been expected. However, despite being counterintuitive, the outcomes are perfectly consistent with the theorised nature of remittances.

Because labour migrants belong mainly to low-income households, the remittances they repatriate are primarily spent on consumption by their families. Without the transfers, these left-behind family members may likely struggle to feed themselves. The imperviousness of remittance transfers to crises and disasters, as illustrated during the Covid-19 pandemic, can be explained through this compulsion. This isn’t the case for student migrants, who mostly come from Nepal’s middle- and higher-income households with stable incomes.

Returning back home is an inescapable facet of the migration process for labour migrants, so they have an inherent incentive for capital accumulation in their origin country. This doesn’t apply to student migrants as they have a good opportunity to obtain citizenship in the destination country. Unless the Nepali government incentivises these groups of migrants to transfer their remittances, they are unlikely to follow what the labour migrants have done. Notably, remittances from student migrants are less likely to be utilised for consumption expenditures and thus freer for investment in productive sectors.

Repatriating remittances

The recently introduced non-resident Nepali citizenship goes a long way in encouraging remittances from the diversifying Nepali diaspora who are becoming foreign citizens. Obtaining the aforementioned confers economic rights, increasing their incentive to repatriate remittances for Nepal’s development and investments. However, it is pertinent that these non-resident Nepali citizenship holders will have the option to invest in their host country as well, meaning the Nepali government faces intense competition in attracting investments. Even though such measures are essential, this will not be our panacea; the country must show its economic viability and offer higher returns.

Faced with this predicament, the Indian government introduced legislative changes to the Persons of Indian Origin classification for its diaspora, evoked their attachment to the country and conferred, through rhetoric, enhanced status to non-resident Indians. The Nepali government might also have to employ manifold “diaspora strategies” to ensure that remittances are repatriated by all, not only labour migrants, who require minimal incentivisation in the first place.

The days of remittances being low-hanging fruits for Nepal might be over. Although the absolute value of remittances repatriated continues to increase, the diversifying Nepali diaspora and its implications mean the country faces novel challenges in the future. However, it also provides potential for productive remittances, unfettered by consumption needs.


Share Via: