Wealth Creation through International Migration – the Bangladesh Story

1. 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

2. 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

3. 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

4. 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)

5. 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

6. Table 1: Outflow of Migrants from Bangladesh, 1977-2009 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

7. Figure 1: Outflow of Migrants from Bangladesh, 1977-2009

8. Table 2: Remittance Inflow, 1977 - 2009 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

9. Figure 2: Remittance Inflow, 1977 - 2009 • 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%)

10. 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

11. 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%

12. 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

13. 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)

14. 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

15. 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

16. 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)

17. 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

18. 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

19. 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

20. 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

21. Thank you