Download Wealth Creation through International Migration

Wealth Creation through International
Migration – the Bangladesh Story
Najmul Hossain
Friedrich Naumann Stiftung/Data International Ltd.
Bangladesh
EFN Asia 11th Annual Conference
Jakarta, Indonesia
October 7, 2010
Presentation Outline
Types of International Migration
Places and Volume of Migration
Flow of Remittance
Wealth Creation
Direct Beneficiaries of International Migration
Bottlenecks of Migration Process and their Impact
Conclusion and Policy Considerations
Types of International Migration

In earlier times (18th and 19th century) focus of wealth
creation or development gains through migration was the
receiving states

Since mid-20th century, looking at both receiving and
sending countries

Presentation to address for a sending country –
Bangladesh

Two types of voluntary migration:

industrialized west

middle eastern and southeast Asian countries
International Migration from Bangladesh
Note: 1 = United States and Canada; 2 = Western Europe; 3 = Australia; 4 = Middle east;
5 = Malaysia, Singapore; 6 = Japan and South Korea
 Migration to the west: permanent residents, work permit holders and professionals
(1.5 million Diaspora)
 Migration to middle east and southeast Asia – typically for short period (6 million)
Selected socioeconomic indicators

Population: 146.6 million

Population density: 993 per square kilometer

GDP per capita: $621

GDP per capita (purchasing power parity): $1,600

Adult literacy rate: 58.3%

Human Development Index Rank (out of 182 countries):
146

Bangladesh a densely populated country with “surplus”
labor
Table 1: Outflow of Migrants from Bangladesh,
1977-2009
Year
1977
1980
1985
1990
1995
2000
2005
2006
2007
2008
2009
Number of Migrants
(Thousands)
17
38
78
97
181
213
286
564
981
650
427
Source: Statistics Dept. Bangladesh Bank: Economic Trends, various issues

Short-term migration to middle east started in late 1970s

Outflow peaked in 2007.Total stock of migrants is around 7.5 million
Figure 1: Outflow of Migrants from Bangladesh,
1977-2009
Number of Migrants (Thousands)
1,200
1,000
800
600
400
200
1977
1980
1985
1990
1995
2000
Year
2005
2006
2007
2008
2009
Table 2: Remittance Inflow, 1977 - 2009
Year
Remittance
Million US$
1977
102
1980
381
1985
556
1990
764
1995
1,217
2000
1,882
2005
4,802
2006
5,978
2007
7,915
2008
9,689
2009
10,987
Source: Statistics Dept. Bangladesh Bank: Economic Trends, various issues

Remittance increased from $1.9 billion (2000) to $9.7 billion (2008); $11
billion (2010)
 Bangladesh targets $31 billion remittance by 2015
Figure 2: Remittance Inflow, 1977 - 2009
12,000
10,000
Million US$
8,000
6,000
4,000
2,000
0
1977
1980
1985
1990
1995
2000
2005
2006
2007
2008
2009
Year

Around 20% average annual growth over past three decades

Inflow of remittance primarily from Saudi Arabia (31%), United Arab
Emirates (17%), United States of America (13%), Kuwait (9%) and United
Kingdom (8%)
Informal Flows of Remittance

In 1990s 40% through formal channel; 46% through Hundi
(“illegal” overseas transfer), and also through relatives and
friends

Improved banking services, technological advances, policy
changes (global surveillance) have reduced informal means
of money transfer

Total remittance in earlier years hence were higher than
officially reported
Wealth creation

Around $11 billion remittance through formal channel

It constitutes 11% of GDP

Remittance is around 56% of total export earnings

Almost 9 times the Foreign Direct Investment (FDI) inflow

Almost 4 times more than total foreign aid received

Assist in maintaining balance of payment, despite trade
imbalances and stagnant FDI inflow

Global financial crisis did not slow down inflow of remittance

Creates jobs for many – Bangladesh a labor surplus economy

World Bank study (2006) claims remittance cut poverty by 6%
Are Migrant Workers Sole Direct
Beneficiaries?

A look at migrant workers only; not the professionals
based in western countries

Host of rent seekers, within the country and outside,
extract considerable amount of economic rent

These include public officials employed to facilitate and
promote overseas employment, private recruiting agents
and brokers, and others
Recruitment Process

It is complex – involves host of persons, institutions and
agencies. Government, non-government institutions
involved. Varied intermediaries, some official and formal
and others clandestine and dubious

A Bangladeshi worker goes to the Middle east through:



friend or relative who procures work permit
private recruiting agency connected with an
overseas contact
government agency – Bangladesh Overseas
Employment Services Limited (BOESL)
Private Recruiting Agencies

Around 700 recruiting agencies, dominated by a few large
ones – oligopoly structure

Bangladesh Association of International Recruiting
Agencies (BAIRA) – Protects and rights and privileges of
its members

Multiple agencies owned by single firm

Several Members of the Parliament (past and present) run
“successful” recruiting agencies; have diversified their
business portfolio and entered into politics

Collusive behavior prevalent between recruiting agencies,
with government bodies, and even with overseas recruiting
companies
Role of Public Sector

Ministry of Expatriates Welfare and Overseas Employment
(MEWOE)

Directorate of Ministry of Labour and Employment –
regulates all activities leading to departure of a migrant worker.
Offers training, and registers complaints. It is a regulator and
promoter (facilitator)

Executive organ of MEWOE is the Bureau of Manpower
Employment and Training (BMET)

BMET is understaffed, poorly governed, not accountable,
which further harbor rent seeking activities

Bangladesh Overseas Employment Services Limited (BOESL)
– recruitment and placement
Cause of Exploitation
Exploitation most acute amongst unskilled and less
educated workers

Lack of information, complex regulations, strong
political and economic power of special interest groups

A long list of rules and regulations, and varied
implementing and overseeing institutions

Less than 50 cases filed in the labor court (over past 15
years)

Very few NGOs working on migrant workers
grievances, mostly on criminal cases (e.g. sexual abuse)

High Cost of Migration (Individual)
 Often
a worker has to pay 4 months salary upfront as a
fee; other costs added
 Returns
to investment much lower – takes several years
to recoup initial cost
 Risk
of fraud high (false visa, lower payment than
promised, stricter terms and conditions)
 Moonlight
(additional work) or even illegal activities to
makeup for high cost of migration
High Cost of Migration (Economy)
Redistribution of income – gains of public and private
facilitators and regulators at the cost of migrant workers –
inequity, unfair

Inefficiency – resources used by rent seekers to maintain
their status quo; migrant workers use time and money to
clear hurdles

aversion of recruiters to send professionals, skilled
workers – loss of potential foreign earnings


Professionals can boost demand for Bangladesh labor
Longer and illegal stay causes social and economic
problems for the workers at home and abroad

Potential to send more workers and higher remittance
compromised

Conclusion and Policy Considerations

Considerable wealth created through international
migration – especially from low skilled migrant workers

Macro benefits of migration includes poverty reduction,
balance of payment improvements, increase in GDP

Rent seeking activities galore at the expense of migrant
workers

Greater awareness creation and information sharing with
potential and current migrant workers
Conclusion and Policy Considerations
(contd.)
 Avail
of the Right to Information Act, 2009 to make
government agencies more accountable

Simplify complex regulations
Government entities created to serve; instead they extract
rents – reduce their power, make them more accountable

More wealth and equitable distribution possible through
improved governance and facilitating role of the government

Thank you