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Political impact of remittances

Posted in democracy, elections, labour, political economy, politics by jrahman on July 12, 2017

Along with the garments industry and the NGOs, there is a broad consensus that remittances have played a key role in Bangladesh’s economic development over the past decades.  Notwithstanding that broad consensus, the economic impact of remittances may be more nuanced than one might think, as I conjectured a long time ago:

Well, how about a stylised, and very speculative, story along this line — while RMG has meant women entering the formal workforce, migrant worker boom has sent a lot of risk-taking men overseas; aided by the NGOs and microcredit, households have smoothed consumption and invested in human capital of their children; but they have not invested in physical capital, avoided entrepreneurial activities, and have not pushed for a more investment-friendly polity.

We would want to explore this story further. We would also want to explore the income side of GDP, and tie it into a political economy analysis.

The remittance boom, for example, should see the labour share of the economy rise. Of course, the question is, what happens to the money that is remitted back? It’s reasonable to assume that unskilled labourers are from the poorer parts of the society. So, in the first instance, any remittance back to the villages is a good thing in that it reduces the direst type of poverty — that is it stops things like famine or malnutrition. But what happens after that? My tentative hunch is that a lot of remittance has been saved but not invested in a productive way, rather they ended up fuelling land/stock prices —this is an area that needs to be explored in detail.

Needless to say, I have not followed up on these questions.  But at least the economic impact of remittances is something people have thought about.  What about the political impacts?  That’s the question Shafiqur Rahman of Oregon University explores.*

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What does the Fund say?

Posted in economics, labour, macro by jrahman on July 14, 2012

At school, macroeconomics is all about fancy arse mathsy jazz.  But at work, it’s really about telling stories with charts.  And no one does it better than the IMF.  So, what stories are they telling us for their billion?

Over the fold are some tid bits from the Fund’s assessment of Bangladesh’s economy that accompanied the loan agreement.

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On migrant workers

Posted in economics by jrahman on July 14, 2011

Given the importance of the remittance for Bangladeshi economy, it is remarkable how little solid work has been done on migrant workers (remarkable, though not surprising — on garments too there are questions but no answer).  This article by Manohar Sharma and Hassan Zaman, both of the World Bank, is a rare exception.

The article’s title Who migrates overseas and is it worth their while?  An assessment of household survey data from Bangladesh pretty much tells you the questions the authors are investigating.

Their empirical work is based on a sample of 6,282 households in 20 villages based on three ‘corridors’ — the Dhaka corridor comprising Dhaka, Mymensingh, Madaripur, Barisal and Narail; the Chittagong corridor of Chittagong, Comilla and Noakhali; and greater Sylhet.  These corridors themselves are quite revealing — overseas migration, and thus remittance, are not uniformly distributed across the country, and these districts have benefited disproportionately more from the remittance boom of the past decades.  Whereas a quarter of all households in Chittagong division receives remittance, less than 5% in the three western divisions do so.  Surely this is going to create/exacerbate regional inequality, with potentially serious political consequences down the track.

Anyhow, that’s not the main focus of the authors.  I learnt a lot from the paper — brief summary over the fold.

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On remittances 4 — the outlook

Posted in economics by jrahman on June 27, 2011

Previous posts on remittances:

– asked about the likely impact of the Arab summer;

– discussed a relatively optimistic assessment by a World Bank analyst; and

– showed the trends in the outflow of workers.

Now we have two sets of forecasts for remittances.  The 2011-12 Budget expects remittances to have grown by 5% in FY11, and forecasts a growth of 10%.  Asian Development Bank is more pessimistic, with growth of 3% this year and 4% next year pencilled in.  By way of comparison, during the 2000s, remittances grew by 19% a year.

All these are shown in the chart.

 

 

 

 

 

 

 

 

Of course, no one predicted the Arab uprisings.  But even then, it should be noted that even a year ago, ADB was more pessimistic than the government.  In April 2010, ADB predicted remittances would grow by 12.5% in FY11.  Two months later, the government predicted a whopping 22.4% in the Budget.

Meanwhile, Syed Zain Al-Mahmood paints a bleak picture in the Guardian.

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On remittance 3 — outflow data

Posted in economics by jrahman on May 31, 2011

The last post on remittance discussed an unofficial freeze by Saudi Arabia on Bangladeshi workers.  This unofficial freeze would be evident in the number of workers travelling to Saudi Arabia.  I don’t have that data.  The data on total outflow of workers are, however, available from the CEIC Asia database. 

They show that nearly a million workers had left Bangladesh in 2008/09.  In 2009/10, this number had come down to around 425,000 people.  But this was still a higher number than at any year before 2006-07.  This is shown in the chart below.

Since December 2008, about 35,000 workers have left Bangladesh a month — similar to the monthly outflow in the year before the boom (during the boom between March 2007 and November 2008, the monthly outflow averaged at 75,000).

The monthly data is available to only February 2011.  Thus, the effects of the Arab uprisings are not yet visible.  Plus, there is no data on inflow (that is, return of workers from overseas). 

And what about the Saudi freeze?  This data don’t tell us anything about that.

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On remittances 2 — an (almost) optimistic assessment

Posted in economics by jrahman on April 18, 2011

(Updates below)

The earlier post onr remittances argued that the strong remittance figure seen in March might be masking a gloomy outlook.  The story might be that faced with uncertainty in the Middle East, workers are sending back every poisha possible.  And if the worst were to happen, we might see a sudden drop in remittances in the coming months.  However, Ceren Ozer, a World Bank economist (with experience in Bangladesh), is more optimisitic. 

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On remittances — the Arab summer edition

Posted in economics by jrahman on April 8, 2011

When the Global Financial Crisis hit, remittances were considered to be one channel through which Bangladesh might have been hit.  As it happens, throughout 2009, remittances continued to grow at a reasonably healthy pace.  The Chart below — through the year growth in remittances — shows this.  

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