Friday, July 8, 2011

More on remittances study in Nepal by the WB

This blog post supplements an earlier detailed blog post about a recent report (forthcoming) based on Nepal Migration Survey (NMS) 2009. After reading the presentation slides I had summarized the main points and put forth my comments on few issues, especially regarding the exact estimates and Dutch Disease effect of high remittance inflows. A detailed summary now addresses these concerns in detail. (Still waiting for the full report).

  • On the estimates of number of migrants, the NMS shows there are 2.1 million migrants, particularly in India (867000, 41%), the Gulf countries (810000, 8.7%), Malaysia (245000, 12%), and other developed countries (186000, 8.7%). Meanwhile, other estimates put the number of migrants to India between 1.5 to 3 million. The study notes that this discrepancy might be because the survey was carried out at the peak of farming season (May-June), when many migrants return home from India to work on the farms. [The number of non-work migrants, mostly with student visas, is estimated at 1.2 million.]
  • The survey estimates that foreign remittance in FY 2009 was US$ 2.5 billion (20% of GDP). Excluding flows from India, remittances amount to 16% of GDP. The NRB’s estimate of total remittances for the same fiscal year was US$ 2.7 billion (22% of GDP). Earlier, WB’s Migration and Development Brief 13 estimated it to be US$ 2.986 billion. [If you include remittances flowing in via informal channel, then it might go well beyond 25% of GDP.]
  • Of the US$ 2.5 billion, US$ 1.2 billion came from the Gulf, US$ 530 million from other destinations (21%), US$ 467 million from India (19%), and US$ 260 from Malaysia (10%).
  • Internal migrants sent about 2% of GDP.
  • The report notes that symptoms of Dutch Disease effect are seen in the economy (not outright Dutch Disease effect due to remittances) due to high consumption demand, high imports, and appreciation of real exchange rate (due to increase in the price of nontradables with respect to the price of tradables), and erosion of manufacturing sector and its competitiveness.
  • Migrants destination vary according to wealth status. Households with least wealth go to India but its attractiveness declines with increase in wealth. In other developed countries, migration increases as wealth and education level goes up. In Malaysia, migration goes up as wealth goes up and peaks at the fourth wealth quintile before declining to the wealthiest quintile.
  • Ethnically, the probability of migration, in descending order, is above average for Muslims/others (mainly to the Gulf), Hill Dalits (mainly to India), Hill Janajatis (mainly to the Gulf), and Brahman/Chhetri (to all India, the Gulf and Malaysia).
  • Migrants are abroad are mostly employed in manufacturing (32%), construction (16%), and hotel/catering (16%).
  • Per capita receipt of remittances generally increases with recipients’ household wealth (skilled and educated migrants send more).
  • Western Hills and Eastern Terai receive the most remittance. The Western Hills sends the largest number of migrants (20%). For Eastern Terai the number is 17%.
  • Returnees generally come back to agriculture and inactivity. Some go to “others” category, indicating a slight increase in entrepreneurial activities and acquired skills. Meanwhile, returnees choose occupation similar to those they held before migration. A returnee who was active before migration is 17.5 percentage points more likely to remain active upon return (this after controlling for a “full” set of observable characteristics).
  • “Real” returnees, those that are not likely to migrate, are involved in more professional and entrepreneurial activities.
  • In FY 1996-2004, poverty decline from 42% to 34% and more than half of this was attributed to remittance. The survey analysis showed that between FY 2004-2010 (but the survey was completed in 2009??), the poverty incidence declined to 21% due to increasing remittance (in the absence of remittances, poverty would have declined to 27%, according to the study).

Read the summary and this blog post for more details. For even more details, wait for the full report to be released.

Below are some of the charts from the report.