Remittance not increasing in proportion to expatriate workers

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Thousands of new workers are joining the expatriate workers already working in various countries overseas. Over the last 1 year 9 months, on average more than 100,000 workers have been going abroad every month. However, remittance is not increasing in proportion to so many migrant workers.

Experts in the expatriate sector say there is no reason for remittance to fall. The expatriates are sending home more money than before. But as this money is not coming in through legal channels, it is not being recorded. This is harming the foreign exchange reserves.

The two main sources of boosting the reserves are exports and remittance. If remittance doesn’t increase, there is hardly any way that the reserves will increase. Yet the government has taken no initiative to increase the volume of remittance.

According to the central bank records, remittance of Tk 13.09 billion (Tk 1,309 crore) came into the country in the first seven months of this year. This is a bit more than the remittance that came into the country in the first seven months of last year. Remittance to the tune of Tk 12.89 billion (Tk 1,289 crore) came to the country in the corresponding period last year. In that manner, this year remittance may increase to an extent. However, that will not be a significant increase. Remittance this July was less than that of last July by 5.88 per cent. If this trend continues, that remittance will be less than last year.

The overseas employment sector was hit hard by the Covid outbreak. According to the Bureau of Manpower, Employment and Training (BMET), while over 700,000 workers went overseas last year, this had dropped to 200,000 in 2020. It increased to over 600,000 in 2021. And last year over 1,135,000 workers went overseas. This was a record number of workers travelling overseas from the country. Earlier in 2017, 1 million had gone abroad. This trend continues this year. In the first seven months alone, already 750,000 workers have gone overseas. Yet the remittance flow is slow.

Speaking to Prothom Alo, senior secretary of the ministry for expatriate welfare and overseas employment Munirus Salehin said, the expatriate welfare ministry is working to create new labour markets, increasing overseas employment, sending skilled labour overseas as for as possible, and apprising the workers of all matters by providing the workers with three days training before they leave the country. This has made it possible to send a record number of workers overseas. The workers are also motivated to send remittance back home through official channels.

Laundering and hundi are obstacles

Remittance has dropped due to an increase in money laundering and the difference between the dollar rates in the banks and in the curb market. Recruiting agency owners see no logical reason for remittance to fall in face of a record overseas employment rate. They say, those who send in money last year are still overseas. Thousand of new migrant workers are joining them. The job market too has stabilised after the pandemic. So there are no instances of unpaid dues either. That means remittance sent back to the country should increase, but that is not happening. The fluctuating state of the dollar has changed the situation. The curb market is paying higher for the dollar than the banks.

Only 2 per cent of the overseas workers have gone through government channels. And in the private sector, money is made on each and every visa. Those involved in sending workers overseas say, there is a transaction of at least USD 500 to avail a visa from the Middle East. And as this money can’t be sent though legal channels, it is send through the unofficial hundi channels. They more the workers go, the more money has to be paid. That is why with the higher number of workers going abroad, the volume of dollars coming in has lowered.

Former secretary general of the recruitment agents’ organisation BAIRA, Shameem Ahmed Chowdhury, told Prothom Alo, over the past two years over 2 million new workers have joined the old workers overseas. They are sending money back home. So remittance shouldn’t be decreasing. If USD 300 is sent through unofficial channels, a worker receives from 2500 to 3000 taka more. If this is to be stopped, the government will have to increase incentives and the banks will have to offer all sorts of attractive packages.

Speaking to Prothom Alo, Bangladesh Bank’s spokesman Misbaul  Haque said incentives can be increased or the value of the dollar can be pushed up in the banks, and then the rate will go up in the curb market too. It will not be possible to complete with hundi in this manner. The people must be made to realise that sending money through illegal channels is wrong. They must be motivated. Until and unless the people understand this, it will not be fixed. Work is on to halt hundi. Every day 100 to 150 bank accounts are being frozen on grounds of hundi.

If the hundi wallas offer this price, which fool would send money through official channels?
Biru Paksha Pal , Professor of economics, State University of New York at Cortland

Banks can’t keep up with curb market

Bank officials say that when there was the outbreak of the Covid pandemic, the people had no alternative but to send in their money through the banks. That is why there was a record overseas remittance. Then when the situation gradual came back to normal, the volume of dollars crossing the border decreased. And so reserves aren’t increasing.

Previously the government would offer a 2 per cent cash incentive on remittance sent through the banking channels. From 1 January last year this incentive was increased to 2.5 per cent. The expatriate welfare ministry had proposed that it be increased to 4 per cent.

The World Bank regularly publishes reports on the rate of sending in remittance from various countries of the world. This shows that it costs an expatriate worker 3 taka for every 100 taka sent in, on average. The highest number of expatriates is in Saudi Arabia. It costs a worker there around 3.5 taka to send 100 taka home. If an expatriate worker sends 100 taka through the banks, he will receive 102.50 taka inclusive of incentive, but 3 taka is being spent. So he loses 50 paisa on every 100 taka he sends home. Also there is a huge gap in dollar price. The dollar rate is 7 to 8 taka higher in the curb market compared to the banks. The worker is getting more money than the incentive by sending money outside of the banking system.

The monthly income of the workers sending in money from abroad on average is 200 to 300 dollars. If a worker gets 8 taka more per dollar in the market, he will in no way send it through the banks. That is why the banks must pay a proper price for the dollar.

In an article published in Prothom Alo on 28 August by professor of economics at the State University of New York at Cortland, Biru Paksha Pal wrote that the rate of the dollar must be increased from 109 taka to 115 taka. It costs 116 taka to buy dollars from the market. If the hundi wallas offer this price, which fool would send money through official channels? The government received 22 billion dollars in remittance in the immediate past 2023 financial year. But at least another 15 billion dollars entered the economy in remittance, experts estimate. Unless a proper price is offered for the dollar, it will not be possible to stop this illegal channel.

Expats must be brought to the banks

The research institution on migration, RMMRU, says that though migration increased last year, remittance growth was negative. It takes two years for there to be an impact of the increase or decrease in employment. That time has passed too. Now basically it is the dollar rate for which remittance is not increasing.

Concerned persons say the banks have various packages for the export industry, the agro industry and so on, but there is no campaign to motivate expatriates. The banks can offer packages with loans on easy terms and other facilities if the expatriate is a regular client. The expatiates must also be made aware of the risks involved by sending remittance through hundi. The money can be lost. The bank dollar rate must be increased to near that of the curb market. Government incentive must be at least 5 per cent. Expatriates would be encouraged to use the banks instead of hundi if the banks would offer such facilities. If this is done, it will be possible to increase remittance from USD 22 billion (USD 2,200 crore) to USD 3o billion (USD 3000 crore).

Founder chair of RMMRU, Tasnim Siddiqui, told Prothom Alo that the expatriate’s money is coming into the country through unofficial channels. If their money is to be brought in through banking channels, then they must be given the rates same as the unofficial exchange rates. Otherwise a worker will never knowingly incur such a loss. If the government has a demand for remittance, then the distance between the bank and the market must be closed. Money laundering must be stopped. Confidence in the banks must be restored. This is now in the hands of the government and Bangladesh Bank.

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