What to expect from Nepal-India Oversight Mechanism meeting
August 20, 2020
19 August, 2020
The global pandemic caused by the spread of COVID-19 majorly affected the tourism and remittance-based economies across the world. Nepal, which relies extensively on remittances and tourism as its main source of foreign earnings is anticipated to confront a more dire situation.
In the fiscal year 2018/19, the contribution of remittance to the national GDP of Nepal was 25.4% of its USD 29.8 billion economy. According to a recent report by the central bank of Nepal,- Nepal Rastra Bank, over 50% of the remittance were sent by Nepalese migrant workers in the Gulf Cooperation Council (GCC) countries,- Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and the United Arab Emirates (UAE).
Migration from Nepal to the GCC countries consists mostly of young and economically active men. These workers who are sent abroad normally represent the largest source of household revenue for the sending Nepalese families. Remittances have been used as a helpful development strategy by Nepalese households to diversify their revenue sources as well as generate additional income. This strategy is proven particularly popular within households belonging to lower economic strata or in rural areas as it provides much greater livelihood opportunities than which can be obtained if they were to remain in Nepal. Notwithstanding this, it seems whoever migrates to the GCC, it has noticeably enthused the socio-economic mobility ladder as remittances begin to influx into migrant households.
Between 2008 and 2017, the government of Nepal has issued more than 3.5 million labor permits for workers destined to the GCC countries and Malaysia. In conjunction, according to 2019 official migration report of Nepal, around 50% of Nepalese households currently have or have had a member of the household who is working abroad.
Large inflows of remittance have far-reaching effects on the economy of Nepal, both at the micro and macro level. Remittance is thought to have created a more visible socio-economic upliftment in the Nepalese community than foreign aid or donations. Remittances do not involve intermediaries and go to the intended beneficiary directly where they mostly invest in their daily necessities (such as food, fuel, and clothing), education of their children, healthcare, micro-enterprises and other small-scale businesses in rural communities of Nepal.
Moreover, the inflow of remittances has also been a reliable source for the balance of payments and foreign exchange reserve of Nepal.
Currently, the GCC countries are facing the simultaneous dual shock of the COVID-19 pandemic and the collapse in oil prices. The global seismic shifts have devasted the national economies of the GCC countries and resulted in substantial job cuts for many migrant workers. The mass loss of work for Nepali overseas workers will no doubt have wider implications for the economy of Nepal. Asian Development Bank (ADB) projects 28.7% contraction in remittance of Nepal in 2020, which is highest among the developing countries of Asia. At the macro level, Nepal is anticipated to fall into the economic recession.
The GCC countries are operationalizing the Kafala sponsorship system where employers branded as ‘Kafeel’ undertake complete economic and authorized responsibility of migrant workers. This means sizable power is held by the employers who are responsible for issuing and renewing the work contract. The work contract specifies the duration of the stay and migrant workers are expected to return to their origin country at the end of the contract period. The temporality of the contract is characteristically for one to two years. However, it may be extended up to five years or even more depending upon the employers will or need.
On the flip side, several intermediary agencies in Nepal, popularly known as ‘manpower companies’ are responsible to facilitate their migration process. Apparently, aspiring migrant workers are channelled to GCC countries through these agencies.
Thusly, coupling of transnational labor brokerage system along with the state reinforced kafala sponsorship regime in the GCC countries have been acting as management tools through which migrants are managed, governed and controlled.
During the COVID-19 pandemic, the precariousness of migrant workers mainly in semi-skilled and low-skilled sectors has been displayed throughout the GCC countries. They were seen exposed to the vulnerabilities further challenged by the spread of coronavirus.
During the peak of the pandemic, Qatar even locked down migrant workers inside the labor camp for which news agencies in Arab called the 'coronavirus prison.' Many of these migrant workers were working in the construction sector for the FIFA World Cup 2022 infrastructures. According to a report by Amnesty International, hundreds of Nepalese migrant workers were barbarically detained and expelled from Qatar during the month of March.
While in other cases, foreign workers were on the frontline across the GCC countries ranging from hospitals and, isolation wards to grocery stores, carrying out the essential work and potentially exposing themselves to the coronavirus infection.
When the pandemic began to cripple the economic activity, UAE instantly changed some work-related law that allowed companies to breach the work contracts. Under this arrangement, employers can reduce the salary permanently or temporarily and can even send workers on paid or unpaid leave. This provision leads to many job losses in the UAE. In such stances, low-income migrant workers were the hardest hit.
Beginning from early September, Nepal has decided to resume the international and domestic commercial flights. With the lift on the suspension of international air travel, a large number of Nepalese labor migrants are anticipated to return home from the labor-receiving countries of the GCC along with Malaysia and South Korea among others.
For a country like Nepal, the repatriation of a vast number of migrant workers has the likelihood to create significant issues and concerns. When they start returning home, the remittance-dependent economy of Nepal is more likely to face the rising pressure on the domestic labor market. Analysts believe that the Nepalese government is not well enough prepared to support returnees in precarious time of COVID-19. Let alone the talks of guaranteed social protection intervention.
Their return is not going to be a happy homecoming as living conditions is likely to grow dire, threatening the collapse of basic social safety nets of the communities relying highly on the influx of remitted money.
During the time of national economic crisis, remittances have always been a counter-cyclical tool to deal with the economic vacuum in Nepal, be that during the time of Maoist insurgency or 2015 earthquake. Studies show that foreign remittance to Nepal was raised by 20 percent when it was hit by 2015 earthquake. But this time, the global economic crisis has emerged, and it is going to create additional uncertainties in the economy of Nepal.
Coronavirus pandemic will come to its end one day. As the home country has not been able to create more employment opportunities for its youths, they will be obliged to migrate overseas. Correspondingly, a large number of returnees are likely to re-migrate having not been able to satisfy their financial needs. They have a comparative advantage of working overseas than in the home country which eventually maximizes resources in migrant’s household. Additionally, repetitive migration has also been an important cornerstone for the poverty-stricken section of rural households in Nepal further creating spaces in the transnational field as an alternative to secured livelihood practice.
The fate of Nepalese migrant workers has crucial ramifications not only in the origin country and their communities but equally on the host countries of the GCC.
The flourishing construction and service sector, oil production and its export are the major sources of revenues and economic stabilization in the GCC countries. Having a small number of native populations in its booming economy, the GCC countries will always require foreign labor. In such a backdrop, Nepalese migrant workers will always be sought after in the GCC. They are aware that, their essential economic sectors like oil and gas, construction, shopping and retailing, hotels and catering, health care and many others would come to standstill without having migrant workers to work on them. Migrant workers are a crucial component of their economies regardless of how they are treated.
It is uncertain exactly when the global labor market will recover from the wreck of the COVID-19 pandemic. Circumstantially, when the Nepalese migrant workers are pressured to return to their origin, it is unlikely that they would travel back sooner to the host countries.
Covid-19 pandemic has further challenged the economy of Nepal that was already feeble and fragile. Nepal will keep sending the migrant workers in the states of the GCC until it figures out and starts practising the model of sustainable economic growth from its more stable government. Until then, labor migration remains a sad sack for Nepal.
Labor-exporting country Nepal will maintain good relations with the GCC countries as remittance is a huge source of foreign exchange and mainstay of its economy. On the other hand, Nepal expects the GCC countries to take care of the rights and basic necessities of the migrant workers in the both legal and humanitarian ground.
The views expressed above belong to the author(s).
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