The Importance of Migrant Remittances in a Globalized World - The case of Nepal

By: Sydney Grad

Migrant remittances are an important part of the political economy of many less-developed countries in our globalized world. No longer can countries develop in complete isolation, oftentimes developing nations are forced to seek outside capital and become reliant on wealthier countries, reinforcing hierarchies and power imbalances. Nepal is a great example to use when looking at the effects of globalization and the emergence of remittances as in 2018, Nepal was ranked within the top 5 countries with the highest remittances as a share of GDP at 28%.

Nepal is especially reliant on migrant remittances as its share of GDP through remittance inflows far outpace official development assistance and foreign direct investment. Those that live abroad send remittances, which are transfers of money back to their families in Nepal. These remittances constitute an important element in household income and to the local village economy. Nepal has experienced a rapid growth in foreign labor migration and remittances during the past few decades. Nepal experienced a decade-long Maoist insurgency (1996–2006) and the difficult political transition has disrupted the development process in Nepal, resulting in low economic growth and high unemployment. As a result, many sought employment overseas and the inflow of remittances became a hugely significant portion of the country’s economy. People were and are continually forced to search for jobs in other countries in order to support their families. The number of migrant workers employed abroad has increased tremendously, with thousands of unemployed leaving Nepal every day and over 10% of its population living abroad.

Remittances have played a large role in Nepal’s economy and have shifted the traditional nature of work away from rural agriculture. Agriculture, although still the dominant sector in the Nepalese economy, has declined in relative importance over the last decades. During the 1980s, agriculture accounted for approximately 50 percent of Nepal’s GDP, but this proportion fell progressively during the first half of the 1990s, to 41 percent of GDP in 19961997 and an even smaller proportion now. This change is due both to the slow rate of growth in agriculture itself and to the rapid growth of the non-agricultural sectors of the economy in which families try to send migrants abroad where they can earn higher wages. Foreign employment has been encouraged by the Nepali government as an active labor market strategy with remittances evolving as a major source of income for households, communities, and the nation today.

But it was not until the economic liberalization of the mid-1990s, and the increased demand for low-wage migrant labour in the Middle East and East Asia, that Nepal’s Ministry of Labor and Employment begin to issue foreign labour permits to allow Nepalese to work outside Nepal, India and Britain (as Nepal already had agreements in place with India and Britain).

Internationally, many countries in the Middle East and East Asia have witnessed a massive surge in economic growth necessitating workers for their factories, farms, and facilities in various capacities. Demand for low wage labour also increased in the West as the rising cost of living caused domestic labour to be more expensive.

Nepal has been reliant on the exportation of workers and the sending of foreign remittances as a fundamental and sizable portion of its GDP. There has been little to no economic growth or stability in the country itself and thousands of young workers leave every day. Nepal’s economy is centered around remittances and government programs encourage such activities.

Together with the lack of domestic opportunities there has been a sizable shift away from rural agriculture. This shift towards a diversified income strategy is vital as while there is some domestic work completed by those left behind, foreign inflows and remittances provide security and a reliable income for many families who in the past would have been relying solely on crop yields and agricultural work. The reliance on remittances and migration have become the only option for younger generations in order to provide for their family. This begs a larger question of globalization and our interconnected lives and the economies of both sending and receiving countries being structurally dependent on immigrant labour and remittances.