GP Insights

GP Insights # 320, 4 April 2020

COVID-19: The Migrant Labor, Remittances and Economy in Asia
Aparupa Bhattacherjee

What happened?
Travel restrictions and closed borders in order to prevent the spread of the virus have threatened the livelihood of the migrant labourers across the world. According to the International Labour Organization, several countries in South Asia, including Bangladesh, Pakistan, Nepal, and India currently have more than 30 million people in jobs overseas. Similarly, the rest of Asian countries such as the Philippines, Indonesia, China, and Malaysia have been providing for skilled and unskilled labour to the rest of the world especially to the US, Europe, and the Gulf countries. 

The lockdown will impact not only these labourers but also their families who are solely dependent on their remittances. These remittances also play a crucial role in their country's GDP; hence, the virus will have a larger impact on the economy than anticipated as of now.

What is the background?
For Nepal, remittance plays a pivotal part; foreign employment is a major source of its GDP.  In 2019, remittances contributed 26 per cent to the country's GDP. Even in the current fiscal year, within the first four months, the country has received more than 50 per cent of its total remittance from Nepalese working in Qatar, Saudi Arabia, Kuwait, the United Arab Emirates, and Bahrain.

Similarly, in Bangladesh, more than 7.5 million external migrant workers contribute to their economy; around US$ 1748.16 million in 2019 itself. The year was celebrated as it has recorded to be highest since 2012. As mentioned in the government data, Saudi Arabia is the most popular destination for Bangladeshi labourers.

According to the World Bank report, as of 2018, India has been the world's top recipient of remittances. In the same year, the diaspora has contributed approximately US$ 79 billion to the economy. Over the last three years, the country has witnessed a growth rate of 14 per cent in inward remittance.

Parallel, to both Bangladesh and India, another Asian country that has witnessed a surge in the amount of remittance in the 2018 and 2019 fiscal year, is the Philippines. In 2019, the remittance contributed approximately US$ 33.5 billion to the economy.

Along with these countries, several other Asian countries like Indonesia, Malaysia, Thailand, China, Sri Lanka, Maldives, and others are also heavily dependent on the remittances.

What does it mean?
First, there will be a significant impact on these countries' economies. Previously, the impact of other epidemics like SARS, the worldwide financial crisis, and other calamities did not render the economy in such a terrible state. The reason is that the crisis was restricted to one of the other regions but never before the impact was global. Hence, the recovery from this dent will be difficult and time taking.

Second, some of these economies are healing economies, such as Nepal from the 2015 earthquake, Sri Lanka, from last year's terrorist attack, Thailand and Malaysia from the political crisis. The contribution from the remittances could have assisted in the process of recovery; unfortunately, the impact of the virus will lead to deterioration.  

Third, similar to remittance, these economies are also heavily dependent on tourism especially, Nepal, Sri Lanka, Thailand, and Indonesia. Thus, most of these countries once they win over the fight against the virus, the crippling the economy will be their next challenge.

Lastly, the virus will have an impact on the worldwide economy, including those of the labour importing countries, this will lead to unemployment. Currently, several unskilled and semi-skilled labourers have already lost their jobs due to the lockdown. Majority of them are not part of any contract; hence they are most vulnerable. As a result, once the lockdown is withdrawn these countries will witness the return of these labourers, who will add to the list of unemployed within the country. The rise in unemployment will have a larger impact on society.

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