As the eighth most populous nation on the planet, Bangladesh has the world’s fourth largest diaspora, with around 13 million people residing outside the country, according to the World Migration Report 2022. In 2022, the World Bank placed the country as the seventh highest recipient of remittance in the world.
Why Remittance Matters
Despite making significant advances in the last one decade, Bangladesh experiences non-exhaustively TWO major bumps in the road of development. First is the inability of the local job market to provide employment for this huge population. This causes a surplus of manpower which includes mostly semi-skilled and unskilled or low-skilled labor. This surplus of manpower, in turn, results in unemployment which keeps them into the low and low-middle income class segment. Second, the country has to fight its way through the foreign currency reserve crisis to stabilize Bangladeshi taka against inflation and make LC payments. Due to the COVID-19 pandemic and Russian Invasion on Ukraine, the international trade pattern was disrupted which largely caused and/or exacerbated the foreign currency reserve crisis in Bangladesh.
Labor migration in foreign countries and the remittance sent by the Bangladeshi diaspora allow the nation to tackle such obstacles in some capacity. The surplus of labor supply in Bangladesh matches with the aggregate demand of labor in foreign countries which creates employment opportunities for our citizens in foreign countries. Once employed abroad, these migrants send foreign currencies in form of remittance that aids the country.
Yearly Remittance Inflow
Source: Bangladesh Bank
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Top 10 Districts in Remittance Inflow (Million USD)
Source: Bangladesh Bank
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Reduces Poverty
Firstly, remittance reduces poverty in the country. It provides a large source of income for millions of families, especially in rural areas, where poverty rates are higher. It helps families pay for basic necessities and contributes to economic emancipation by increasing household consumption and investment. The national statistical agency’s “Household Income and Expenditure Survey 2016” published in 2019 shows that about 68.44% of the remittance received by rural families is used to meet basic needs while 27.98% is invested in different ventures. In 2022, the Refugee and Migratory Movements Research Unit (RMMRU) published an e-book titled “Impact of Migration on Transformation to Sustainability: Poverty and Development in Bangladesh” based on the findings of three surveys conducted in rural areas in 2014, 2017 and 2020 across 20 districts. The e-book showcases that the poverty rate among 1,565 remittance receiving families has declined from 10.9% in 2014 to 6% in 2020.
Source of Foreign Currency
Secondly, the growing remittance inflow allowed Bangladesh to increase its foreign exchange earnings. Remittance is the second biggest source of foreign currency for Bangladesh after the ready-made garments industry. The steady flow of remittances has assisted in resolving the foreign exchange constraints, improving the balance of payments, helping pay import bills & debt servicing and decreasing the reliance on foreign aid. According to Bangladesh Bank officials, the improvements in dollar supply increased LC openings. In February 2023, around 1,500 to 2,000 LCs were opened on a daily basis which previously went down to around 1,000 even two months ago.
All these advancements can be attributed to the dramatic increase of Bangladesh’s remittance since 2008. In 1995, the country earned remittances of only 1197.63 million USD. In 2007, it received around 5998.47 million USD whereas in 2021 Bangladesh recorded the highest remittance received in history sent by Bangladeshi diaspora, around 24777.71 million USD.
Remittance Optimisation: Obstacles
Use of Hundi
However, there are two critical issues to consider when it comes to remittance. The first is the use of informal channels such as hundi to transfer remittance. According to the finance minister, only 51% of the remittance comes through formal and legal ways in Bangladesh whereas the rest, 49% comes through hundi. The formal channels such as banks, foreign exchange houses, and money transfer companies create a significant obstacle for the expatriates to send remittance by consuming a lot of time and paperwork and often charge exorbitant fees. Thus, most migrants are forced or attracted to use the hundi system.
Maintaining a Steady Inflow
The second issue is maintaining a steady inflow of remittance. In 2022, Bangladesh began experiencing a fluctuating trend in remittance inflow. However, the country is trying to recover from the decline in remittance. According to the data from Bangladesh Bank, in July 2022, the remittance received by the country was 2.09 billion USD which fell to 1.52 billion USD in October 2022. However, from November last year, it started to ascend. In Novemeber 2022, the amount was 1.59 billion USD, in December 1.69 billion USD, and in January 2023, it was 1.95 billion USD. Though the flow decreased in February 2023 to 1.56 billion USD, it was soon recovered in March when the Non-Resident Bangladeshis (NRB) sent around 2.02 billion USD to their beneficiaries for the Eid ul-Fitr. There was a 29.3% increase in remittance in March compared to February. In June 2023, the inward remittances reached a 35-month high of $2.2 billion due to Eid-ul Adha. Bangladesh Bank’s data reveals that Bangladesh received a total of $21.61 billion in remittances in FY23, witnessing a 2.75% increase compared to the FY22’s $21.03 billion.
Monthly Remittance Inflow (Million USD) to Bangladesh during FY 2022-23
Source: Bangladesh Bank
No Data Found
It’s critical to note that there are both endogenous (internal) and exogenous (external) factors that are in play when it comes to ensuring an ascending trend of remittance flow in the country. Certainly, the failure of attracting expatriates to legal channels is an endogenous factor but there are a couple of exogenous factors that decrease the remittance flow. Firstly, remittance is highly sensitive to the GDP or overall economic health of the host countries. If the host countries where Bangladeshi expatriates work go through economic turmoil, then it negatively affects the wages earned by the migrant workers. Thus, they have less money to send back in Bangladesh. More importantly, it’s extremely difficult for Bangladesh to maintain an increasing flow of remittance in the face of low wages and decreasing demand of migrant labor in the labor importing host countries.
Remittance: Labour Dipliomacy
However, Bangladesh has been fighting its battle of increasing remittance in many fronts. The first crucial path is diplomacy. There are non-exhaustively two critical factors that are playing in the scene of increasing remittance flow and welfare of our expatriates.
Necessity of Bangladesh as Labor-exporting Nation
First is the necessity of Bangladesh as a labor-exporting nation to enter into bilateral agreements and MoUs with the labor-importing countries to ensure visas, employment and welfare of the migrants in foreign land. In 2020, out of 13 million expatriate Bangladeshis approximately 8 million lived in the Middle East, especially countries such as Saudi Arabia, UAE, Kuwait, Qatar. In 2022, Bangladesh sent 1,135,873 migrant workers which is the highest in the country’s history. This can be made possible if and only if GoB negotiates well with foreign countries to get visas/work permits, job opportunities and above all ensure the labor rights for our migrants. The welfare of our expatriates is an important concern especially in Gulf States who have a history of exploiting workers including domestic female workers by not paying or under paying wages, making migrants work in harsh conditions and not even providing them the basic necessities in many cases. The wages and welfare of migrants are positively correlated with the amount of money they make, which in turn, affect the amount of remittance they send back home.
Recent Trend in Remittance Inflow (Million USD)
Source: Bangladesh Bank
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Top 30 Countries with Highest Remittance Inflow to Bangladesh in FY 2021-22
Million USD (Source: Bangladesh Bank)
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To address this issue, GoB has been proactive in negotiating better deals for its diaspora. Bangladesh has signed bilateral agreements with a number of host countries, namely: Kuwait (2000/2008), Qatar (1988/2008), UAE (2007), Malaysia (2003/2006/2012), Oman (2008), Libya (2008), South Korea (EPS-2007), Jordan (2012), Iraq (2013), Hong Kong (2013), and Saudi Arabia (2015).
Two MoUs focus on Bangladeshi women migrant workers and particularly on women domestic workers: the Bangladesh-Jordan memorandum (2012) that provides Bangladeshi domestic workers with protection and rights under the labor law of Jordan, and the Bangladesh-Saudi Arabia memorandum (2015) that prioritizes on the recruitment of domestic workers.
It’s unfortunate that the GoB did not focus on proactively finding a diplomatic solution before 2008 as most agreements were signed after 2008. Due to this failure of previous governments before 2008, most migrant workers had near to zero line of defence against the oppression of some host countries.
Economic Volatility of Labor-importing Nations
Second critical factor is the economic volatility that the labor-importing countries experience. After the independence of Bangladesh in 1971, the primary reason our migrants received employment in the Gulf States is due to rising oil prices that contributed to these Middle Eastern countries infrastructural development. This era of infrastructural progress in the Middle East increased their aggregate demand of laborers. Bangladesh grabbed the opportunity and satiated this huge demand with its surplus workforce. However, the COVID-19 unsettled the Middle Eastern job market as the businesses had to shut their doors down and oil prices reached an all-time low. During the lockdown many Bangladeshi migrant workers lost their jobs. They lived with the fear that they would be stripped of their legal status.
Number of Migrants
Source: Bangladesh Expatriate Workers and their Contribution to National Development, BMET, GoB
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Fruits of Diplomacy
Thus, there is a dire need to explore new labor markets to diversify the export list. Since a lot of European and Asian countries are experiencing an aging population, a huge labor demand has been created in these economies that Bangladesh can tap into to export its labor. The GoB’s diplomacy, especially through its embassies across the globe, has been pivotal in exploring and adding new labor markets each year to diversify its labor market export list. Following are some notable advances in this venture-
- For the first time in the nation’s history, 240 skilled workers were sent to Uzbekistan in 2020 to work at a project under an engineering company in Qarshi, Uzbekistan.
- In 2022, Greece has become the first EU nation to have signed a MoU with Bangladesh to hire 4,000 new Bangladeshi workers each year by providing them temporary work permits for five years.
- In 2021, the Balkan state, Romania opened a temporary consular office in Dhaka to hire Bangladeshi workers after closing its Bangladeshi mission in 2000. Since private recruiters charge exorbitant prices, in Romania around 10-12 Lakh BDT per person, GoB managed to set the migration cost at 1,65,000 BDT which ameliorated the financial burden from the shoulders of these emigrants.
- In 2022, Bulgaria has become the first European country to hire skilled RMG manpower from Bangladesh offering handsome salaries.
- Through the Employment Permit System (EPS) program, South Korea has taken a record number of 5,891 Bangladeshi low and medium skilled workers in 2022.
- Italy has taken up a $3 million project to ensure sage migration of Bangladeshi migrant workers through information dissemination and reintegration assistance for returnees.
- The UK will hire nearly 1,000 Bangladeshi agricultural workers from this year 2023.
Recent Trend in Country wise Remittance Inflow (Million USD)
Source: Bangladesh Bank
No Data Found
Alongside all the diplomatic measures, the UN Convention on the “Protection of the Rights of All Migrant Workers and Members of their Families 1990” was pivotal in recognizing the vulnerabilities of migrant workers and their family and the need to protect and maximize their welfare in the first place. The Convention was signed in 1998 during the first tenure of Sheikh Hasina but wasn’t ratified until 2011 (after 18 years) by the same government. The ratification of the Convention pave the way for the Overseas Employment and Migrants Act 2013.
Boosting Remittance
Alongside diplomacy, GoB has taken several steps to accelerate the inflow of remittance, reduce the cost of remittance transfer and attract expatriates to use formal channels. Some of the key measures are:
- To incentivize workers to send more money through legal channels, GoB has allowed tax-free income for remittances up to BDT 150,000 per year
- GoB provides a 2.5% cash incentive through Bangladesh Bank on money sent by expatriate Bangladeshis. No documentation is necessary for remittances up to BDT 500,000. Additionally, Bangladesh Bank provides a higher exchange rate and waiver of bank charges to attract expatriates to send remittances using formal banking channels.
- Bangladeshi banks can make drawing arrangements with exchange houses abroad without prior permission from the Bangladesh Bank. They are also permitted to go for drawing arrangements without letters of reference or certificates from the Bangladesh embassy or high commissions of the respective country.
- To reduce the monopoly of Hundi, Bangladesh Bank has allowed Mobile Financial Service (MFS) providers to bring in remittances which will allow migrant workers to transfer money to their beneficiaries easily, directly and digitally. To improve the flexibility of the money transfer system, MFS operators will be allowed to repatriate wage earners’ remittance in association with internationally recognized online payment gateway service providers, banks, digital wallets, card schemes, and aggregators abroad. According to the Bangladesh Bank, remittance disbursement via agent banking increased 178% to 106,628 crore in September 2022 from 38,335 crore BDT in September 2020, during the same period two years ago. Remittance transfer through agent banking or MFS skyrocketed over the years which seems to be able to tackle hundi head on.
- To appreciate the expatriates’ contribution for sending remittance through formal channels, GoB started honoring them with the Commercially Important Person (CIP) status. In 2021, 47 highest remittance senders were honored with CIP.
- GoB actively tries to facilitate investment and housing finance for Non-Resident Bangladeshis (NRB). According to Bangladesh Bank, investment of NRBs will be treated on par with FDI. Special incentives are provided to encourage NRBs to invest in the country. NRBs will enjoy facilities similar to those of foreign investors. Moreover, they can buy newly issued shares/debentures of Bangladeshi companies. A quota of 10% has been fixed for NRBs in primary public shares. Furthermore, they can maintain foreign currency deposits in the Non-resident Foreign Currency Deposit (NFCD) account.
- GoB together with the Bangladesh Bank opened up the opportunity for expatriates to invest in bonds such as the Wage Earner’s Development Bond (WEDC), US Dollar Premium Bond, US Dollar Investment Bond.
1. Establishing & Strengthening Pertinent Government Agencies
To prioritize the migration sector, GoB has established the Ministry of Expatriates’ Welfare and Overseas Employment to facilitate overseas employment and maximize migrant workers’ welfare.
Prime Minister Sheikh Hasina inaugurated the Expatriates Welfare Bank (Probashi Kallyan Bank) in 2011 to reduce the cost of migration by offering loans to aspirant migrant workers with simple interest and providing financial assistance to the returnee migrants to invest in income-generating ventures.
To cover all travel-related costs, the Expatriates Welfare Bank has financed 1,793 crore to 98,756 migrant workers from 2011 to 2022.
2. Digitalization of Migration Management
GoB has attempted to digitalize migration management. To reduce malpractices in the process of migration, a computer database has been prepared. A smart card with a computer chip of 32 kb is being provided to the migrant workers to ensure accountability and transparency in the process.
3. Skill Development of Migrant Workers
The Bureau of Manpower, Employment & Training has undertaken initiatives to reskill and upskill workers by providing training in 38 Technical Traning Centres (TTC) across the country.
4. Advances to Reduce Migration Cost
The manpower export industry is dominated by unscrupulous private recruiting agencies which change extortionate migration costs. GoB formed a committee in the Expatriates’ Ministry along with representatives from Recruiting Agency Association BAIRA to analyze the item-wise costs extensively during migration and recommend reasonable migration costs.
Additionally, Government to Government (G2G) recruitment has been prioritized as a diplomatic effort by GoB to ensure check & balance in migration cost and visa trading. G2G arrangements with Japan, Romania are notable examples that ensured fair wage and welfare for our migrant workers.
Policy Recommendations
There are broadly FOUR possible areas of intervention. First is the process of sending migrant workers, second is increasing remittance inflow in the country, third is ensuring the welfare of migrants, and finally reintegrating those who want/have to return to Bangladesh. It’s a daunting task to address all the areas in a single article. However, following are a few suggestions that GoB can look into to specifically increase the remittance flow:
- GoB needs to proactively work to create a congenial environment for transferring remittance – from providing migrant workers financial literacy before and after of relocation to making the transfer system more handy. Tailoring one-stop awareness programs both online and offline in and outside of Bangladesh will allow migrant workers to get all the pertinent information on remittance transfer, migration etc.
- Collecting and analyzing sex-disaggregated information on the flow of remittances should be prioritized. The Bangladesh Bank or BMET does not provide data on remittances sent by female migrants including domestic workers.
- Establishing support structures for migrant workers in destination countries, such as hotlines to obtain information, receive calls, provide support to migrants on remittance and other migration issues and build shelters in collaboration with other key local agencies.
- Skill development of migrant workers needs to be expanded through TVET centers. These institutions may also provide financial literacy to them.
- Further financial incentives can be provided to attract expatriates to the formal methods.
About the Author
Shah Adaan Uzzaman is the Blog Administrator at The Confluence. A former Bangladesh Television Debate Champion and winner of several policy & debate competitions, he is currently a student of IBA, University of Dhaka.