SLUMPS FORCING EXPATRIATES MONEY INTO HOME COUNTRY
TARIQ AHMED SAEEDI - email@example.com
Feb 09 - 15, 2009
Slowdown in economic growths in numbers of countries across the world unquestionably has brought about economic hardships of developing economies whose sustenance both depends on doles and trade transactions with affected developed economies. Equally, but this development is turning out to be a boon in disguise, even if for the time being, for developing economies-unscathed or less harmed due to indirect contact with the crisis- as its diasporas seem to have left with only one parking pad to securely land monies i.e. home country following uncertainty lurked over their financial holdings within defaults laden foreign countries.
During 2008, $300 billion remittances were transferred to developing economies by expatriates living around the world that includes regions mainly buffeted by economic slump. Obviously, there is a fear that in coming time period contraction in global economy will unleash a tsunami of workers back to their home countries because of mass unemployment in defaulting financial and other industries, leading to drawdown of remittances. However, people are now eagerly trawling safe refuges for their investments divesting their shares from lucrative portfolios at the same time at host nations. For example, out of panic of downside in financial sector after the collapse of healthy investment banks in USA shareholders are more watchful about managing shares portfolios in the country.
To understand the gravity of economic fallouts it is worth-mentioned that since September 2008 14,000 employees on daily basis faced the hard billow of sword of attrition in USA. Those who are fortunate to swerve off the billow are desperately engaging in safe investment practices to their disposable incomes. With bleak outlook and return on investment under frail of securities inside liquidity-starved markets, they could glance over alternative destinations. For stoke of expatriates working or living abroad this spectacle could not be hard to find.
Assumption that economic slouch in developed economies have sprouted score of trepid immigrants who feel worried about their long term saving is verified by the rise in remittances in developing economies. Remittances from overseas are a major source of foreign currency although eighty percent of which is used as expenditures and spent on familial requirements and little directly invested in economic developments. Yet, the amount becomes important factor of gross development product of country.
Remittances form a major portion of foreign reserve in Pakistan. There is a tendency of improvement in annual figures of remittances in the country. According to data collected by Pakistan Missions abroad, there were over 4 million Pakistani workers and students living outside the country, highest 47% in Middle East followed by Saudi Arabia, and USA. This number was calculated around 7 million at the end of 2005 if illegal and over-stayers were included. Overseas Pakistanis send money that is vital for the economy of Pakistan. In addition, remittances ease off pressure of depleting foreign reserves.
Newly designated federal minister for overseas Pakistanis Dr. Farooq Sattar has expressed his willingness to increase foreign remittances to $15 billion from $7 billion through introduction of line of incentive programmes and new policies. His intention of providing subsidy over service charges on money transaction to attract remittances in the country was good prologue in two ways. One, this government is adamant of withdrawing subsidies even when not needed to scratch off a penny, even though Pakistan has the lowest budget expenditure of 8% on subsidies than India 38% and USA 61%, under these circumstances this poses investors' conciliatory gesture. Second, importantly this will reduce transactions of money through illegal channels. Pension and foreign currency schemes will need revision in procedures. Started in 2001, Overseas Pakistanis Pension Trust provides pension benefits to Pakistani workers living abroad. Similarly, foreign exchange remittances gold and silver card schemes offering special privileges at airports and certain custom exemption on personal baggage, to overseas Pakistanis sending $2,500 to 10,000 per annum are also required reformation.
Also foreign currency product investment for overseas Pakistanis has lost its charm and ministries should design anew, refined and competitive instruments to exert a pull on foreign exchange. Total flow in foreign exchange bearers' certificates during July-December FY09 declined to $0.37 million from $1.12 million in 1HFY08. However, remittances inflow soared to $3.6 billion in this period from an earlier $3.1 billion.
Interestingly, remittances improved during this period as compared to previous half and highest were from USA $903 million against an earlier $874 million followed by Saudi Arabia $714 million against $563 million, UAE including Dubai, Abu Dhabi, Sharjah $699 million as opposed to $500 million, etc.
World economic downturn is forcing expatriates to repatriate money to home country. Analysts observe that people think that their money is safe in their own country
Whether it is an undoable fact or not, rise in remittances in Pakistan despite financial crisis in USA, Saudi Arabia, and UAE-main sources of remittances-is proving that point.
"We prefer to invest in properties in home country and park our money into Pakistani land not only because of commercial benefits but, we believe, it is safer. We fear a sudden policy change in foreign country can make us loosing our stand or rob us of our foreign owned holdings, this fear further is intensified following the current global economic slowdown," one Pakistan-origin Saudi IT entrepreneur told this scribe upon his business visit to Pakistan recently.
Dr. Sattar urged investments from overseas Pakistanis in housing and textiles and proposed professionals be sent abroad in pharmaceutical felid which, he thought, had huge potential.
At present when there is a dearth of trust amongst business community and foreign investors are holding back capital due to political disharmony and concerned with fast erupting insecurity in Pakistan, turning challenge of global economic slowdown into economic opportunity is like a daunting task. But given sagacious leadership and reign of ministry of overseas in right hand can win back confidence of overseas Pakistanis who are able to lend helping hand to sagging economy and financially strong enough to bolster local model of rehabilitation plan to put Pakistan's economy on a track of progress. Equally important is the coordinated efforts of all concerned ministries to ensure full support to Pakistan-based foreign financers whose financial backups to capital-intensive sectors, agriculture, and textile developments would build local ownership on national assets and sparse foreign investment components would prove vital for the national sovereignty. Trust building lies underneath policy initiation to attract expatriates. That can be done through setting up exclusive overseas Pakistanis windows at all government offices dealing in trade licenses, international trade, etc. All authorities and institutes pertaining to agriculture sector come up with special investment attraction programmes for overseas Pakistanis, which can go well along with other investment schemes and incentives. Locals (expatriates) should be preferred in corporate farming over foreigners to get rid of likelihood of the country becoming satellite state of outsiders.