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Remittance, Entrepreneurship and Employment

Kuvera Chalise is the Editor of Karobar National Economic Daily

Kuvera Chalise is the Editor of Karobar National Economic Daily

Written By

Kuver Chalise

Kuver Chalise

11 Jun 2018

Kuber Chalise is the Editor of articleSearch.

Kuber Chalise, Kathmanu | Remittance is earning sent by migrant workers from abroad especially Malaysia, Gulf nations, the USA, Japan, England, Canada, South Korea, Australia, Israel in Nepal’s context. Nepal government has opened some 110 countries for foreign employment. However, Malaysia is the first choice for Nepali migrant workers followed by Qatar. Due to lack of employment opportunities back home, most of the Nepali youth are forced to migrate. The migration also became a necessity due to a decade-long conflict in the country that gave the industries no room for expansion squeezing the opportunities for the employment in the country. Lately there has been a heated debate on either remittance is good or bad. One group of economists claim that Nepal has fallen into the remittance trap, popularly known as Dutch Disease, while other group claims that it is the lifeline of the economy. Remittance kept the economy afloat even during the decade-old Maoist insurgency. According to the World Bank, the 10 per cent increment in remittance inflow can reduce 3.5 per cent poverty, whereas the International Monetary Fund’s research claimed to reduce 1.5 per cent poverty. However, it is evident in Nepal that the reduction of poverty in the country in the last decade is due to increased remittance inflow. According to the first group of scholars, migration has led the country to shortage of manpower in various sectors like agriculture and labour intensive industries. Migration has also created social problems in the society and their social cost could be huge compared to the remittance the country is receiving at present. It is not only tearing our social fabric but also making families, especially the children more unsecure. Likewise, remittance income has fuelled consumption that has made the country import-economy and dependent. According to the Central Bureau of Statistics-NLSS, some 78.9 per cent of remittance is used in consumption, followed by loan payment and only 2.9 per cent of remittance is used for capital formation. Likewise, the bureau reported the national savings below 10 percent in the fiscal year 2013-14. But, there are some positive changes also that the migrant workers have brought back home. They have brought new sets of skills, culture and knowledge, apart from remittance. Some of the migrant workers have started their own business back home and creating employment opportunities. In the last fiscal year 2013-14, the migrant workers sent home back Rs 1.48 billion per day in an average.

 

 

 

543.29 billion that is Rs 26.05 billion more than the budget – Rs 517.24 billion – of the fiscal year. Likewise, increased consumption also creates opportunities for domestic industries as they have enough room for production and market expansion. The increased production of domestic industries will lead to more demand of labour force, meaning more employment could be generated in the country. Remittance also encouraged internal migration to suburban and urban areas from the rural areas leaving the agricultural land barren and unattended.

 

Budget and Remittance Comparison Since last two fiscal years, the country started receiving more remittance than budget. In the fiscal year 2012-13, the country had received Rs 434.58 billion remittance against the budget of Rs 404.82 billion. Likewise, in the last fiscal year 2013-14, the country received Rs 543.29 billion in remittances compared to Rs 517.24 billion budget. The trend shows that the country will continue to receive more remittance than budget in the current fiscal year and the following fiscal years too.

 

However, according to the Nepal Rastra Bank, still 34 percent of remittance enters into the country through informal channel, and only 66 percent of remittance enters into the country through formal channel. If Rs 543.29 billion is 66 percent, then more than Rs 270 billion is still out of formal channel. The total remittance – through formal and informal channel – if added could be more than Rs 813 billion in the last fiscal year. The remittance inflow could also increase, if the government can assure quality employment and encourage migrants to use formal channel to send remittance back home. The government and Nepal Rastra Bank should encourage the migrants to send remittance through formal channel to use it in the productive sector and create employment in the country. If the government brings proper policy to bring the remittance into formal channel, the youth, in next five years, need not migrate in search for employment.

 

Migration Trend The decade long civil unrest in the country squeezed the economy forcing many industries to close and loss of employment opportunities in the country. Lack of employment opportunity in the country forced most of the youth to migrate in search of greener pasture in the Gulf and Malaysian deserts. Lack of entrepreneurship and work culture in our society also fuelled the migration. Desperate and jobless youth outflow has almost doubled in two years. In the fiscal year 2011-12, some 384,665 youths migrated, whereas in 2013-14, some 527,814 youth migrated, according to Department of Foreign Employment. However, the number would be more as the department has no records of youth migrating from Indian capital.

 

Youth Employment The government has formed Youth and Self Employment Fund to help Youth to be self employed with an aim to make 50,000 youth self employed every year. It is providing Rs 2 lakh per youth and up to Rs 50 lakh for a group of 25 youth. However, due to politicization of the Fund, it has failed to address the problem. Till date it has made only 25,206 youth from 73 districts self employed, according to the Youth and Self Employment Fund. According to International Labour Organization (ILO), Nepal needs to create 600,000 jobs annually by 2016. There are only two sectors – government and private sector – that create employment in the country. But the government has limited scope of new job creation. Likewise, private sector has also not been able to create jobs due to lack of business expansion because of acute power shortage and political and policy instability in the last one decade. However, the largest job creator, manufacturing units that have been employing more than 10, has created 204,360 in the fiscal year 2012-13, according to the CBS.

 

Entrepreneurship Nepali society is not an enterprising society also due to flaw in education system that has been producing educated unemployed. The government must relook into the education system and teaches youth to be job creator instead of seekers. There is no linkage between university and industry, though some of the colleges have started entrepreneurship courses. Recently, the private sector has also come up with some support to start ups. Nepal Young Entrepreneurs Forum (NYEF) – a youth wing of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) – has started some initiative with seed capital and mentoring for freshers. Likewise, the government has also in the current fiscal year’s budget planned a Start-Up Fund with seed capital of Rs 5 million. The government planned StartUp Fund should be able to address new graduates/start ups to make them entrepreneur by guiding them as capital alone cannot create employment. The government must decentralize the system to identify the start ups and support, otherwise, it would be like the failed Youth and Self Employment Fund. However, lack of support from the family and friends, entrepreneurs have not been able to make inroad to the society as it needs moral support and capital support. Despite unfavorable conditions, some of the migrant returnees have started their own businesses. But only one percent of the returnees have been able to start their own business, according to the data. It needs to be increased.

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