Nov 12 - 18, 2012

The writer is an experienced banker with over 30 years of experience and has served for around 10 years in the Middle East as Director Global Home Remittances. Currently he is serving as the SEVP/Group Chief - Global Home Remittances Management Group at National Bank of Pakistan and Chairman NBP Exchange Company Limited.

Currently home remittances are the second largest sources of recurring foreign exchange for the country. In FY 2012, expert Pakistanis sent around US$ 13.186 billion as remittances through formal channels. Home Remittances have grown at an average rate of around 20% in the last few years with banking sector contributing around 89% of the inflows.

Pakistan has the sixth largest population in the world with around 60% of its total population of 187 million falls under the age of 25 years. This translates into a large, young, energetic and talented pool of human resource. Serious efforts need to be made to inculcate desired skills as per international requirements and export human resource to traditional as well as new markets. Today we are reaping the benefits of Mr. Zulfiqar Ali Bhutto's vision and foresight whereby a policy was formulated and implemented in 1970s through which a large number of unskilled laborers were sent mostly to the Middle Eastern countries. This policy has been followed by successive governments including the current one, and as per recent Government of Pakistan estimates the number of skilled, semi skilled and unskilled workforce going abroad in the year 2012 will be around 700,000.

This phenomenon is not only true for Pakistan but applies globally specially to the third world countries. The remittances from international migrants play an extraordinary role in the economic development of many developing countries, far more important than official development assistance. Moreover, as overseas development assistance has been declining, remittances seem to have been rising strongly, even in the face of weak economic performance in the host countries.

Despite these numbers, many experts believe that labor migration does not significantly improve the development prospects of a country like Pakistan rather it only provides budgetary support. In any case a sustainable incremental flow of remittances is absolutely necessary for the economy of Pakistan especially at a time when the country is going through a period of severe energy shortages. In addition, it is argued that remittance income is rarely used for productive purposes. Remittances go in small amounts to poor people and are used mostly to support family maintenance expenses as well as some housing, healthcare, and education. A very small proportion of remitted funds seem to go into income-earning, job-creating investment. This situation can be drastically changed if we start exporting skilled human resource. The difference in earnings of skilled and unskilled human resource is significantly large and the additional flow is bound to improve not just the standard of living of families at home but will also contribute to development of economy in the form of investments.

However, until problems such as poor infrastructure, corruption, lack of access to credit, law and order situation, lack of entrepreneurial skills, and disincentives to savings are tackled and attractive incentives for investments along with the awareness of the same is provided to the beneficiaries, it is unrealistic to expect remittances to solve the problem of low investments/savings which in turn results in sustainable development of the country. In the meantime, remittances lift many recipients out of poverty, if only for as long as remittances continue.

Need of the hour is to adequately develop the large pool of young population in the country into quality human resource by establishing institutions which are mandated to inculcate technical education solely for the purpose developing human resource as per the needs of importing countries. Further, even the unskilled labor going abroad should be provided a compulsory training of at least a month in which local language, social norms, local laws and other relevant subjects are duly explained and taught. This will generate a sustainable flow of home remittances. At present Pakistan is receiving around US$ 1.10 billion per month in terms of home remittances through official channels. This inflow of foreign exchange is not to be repaid as compared to foreign loans which also have associated costs in the form of mark up and are received against strict and difficult terms. Hence it is fair to say that development of quality human resource, even if exported to other countries will result in the improvement of socioeconomic conditions of the country.