Patan Pragya (Volume: 5 Number: 1 Sept.

2019)

Received Date: July 2019 Revised: Augest 2019 Accepted: Sept. 2019

Foreign Labour Migration, Economic Growth and

Remittances in Nepal
Kunwer, Laxman Singh ( PhD)1
Abstract
This paper examines the history and current situation of foreign labour migration in Nepal, which is
in increasing trend.This paper highlights on some major push and pull factors, impacts of labour
migration and remittances. The role and impacts of remittances in Nepal are also another key issue
of this paper. The objectiveof paper is to discuss historical aspects and highlights the role of
remittances in Nepal. The paper is developed with the help of secondary sources of information and
discussed only on Nepalese foreign labours. The existing exploitative working environment in
destinations of Nepalese migrations labpurs, lack of skills and trainings among labour migrants
including government to government agreement between labour sending (Nepal) and labour
receiving countries to protect rights of labour migrants also has been discussed. This paper also
highlights the need of effective foreign labourpolicies based on scientific research. There is need of
reliable and proper environment of investment of remittances in productive sectors as well as use of
migrant's skills and knowledge to achieve prosperity of nation.

Key words: Labour Migration, Poverty, Remittances, Economic Growth and Investment
1.1 Introduction
Nepalese have a long history of foreign employment. A prominent example is Nepali
people’s recruitment in the British (and later Indian too) army since the early 19th century.
Labor migration1, though, started after the liberalization of the economy in the 1990s. The
Seventh Five-Year Plan (1985-90) addressed the issue first. Nepal started issuing labor
approvals since 1994.
Since then, the number of Nepali residents going abroad to earn their living has increased by
leap and bounds. It took a quantum leap at the turn of the century when Maoist insurgency
engulfed most rural areas and economic opportunities were hard to come by. The number of
people seeking labor permits peaked in 2014. The figure below shows the labor permits
issued by Department of Foreign Employment2 since 2008-9. There are many migrants and
seasonal migrants who travel to India. An estimate by SAWTEE suggests 279,000 Nepali
seasonal migrant laborers work in India and regularly cross the border to and from India3.

1  Mr. Kunwar is associate Professor in Population Studies at Patan Multiple Campus, T.U., Patan Dhoka.

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International labor migration has surged in recent years with an increasing number of
workers moving across international borders for work. The stock of international migrants
increased from 154 million in 1990 to 244 million in 2015 (UNDESA, 2015). An estimated
three million Nepalese are migrant workers who have gone abroad earning foreign
currencies. employment is increasing every year. An official figure shows that a total of 5,
27,814 Nepali men and women (number of women are insignificant, though) left the country
in a single year, fiscal year 2013-2014, ending mid-July (MoLE, 2014). Data maintained by
Ministry of Foreign Employment does not include records of individuals who leave the
country for foreign employment to Indian and illegally via India or with support of
middlemen.One of the Nepal's major exports is labours, and most rural households now rely
on at least one member's earnings from foreign employment.
1.2 History and trends of labor migration in Nepal
The history of formal labor migration begins in 1814-1816, after the Nepal-British India
war. A total of 4,650 Nepalese youngsters were recruited to the British armed forces as a
British-Gurkha regiment after the conclusion of the war and signing of the Treaty of Sugauli
in 1816.India has been a traditional destination for Nepalese migrants. The primary reasons
for this are geographical proximity, historical and cultural links, and a large and open porous
border. The 1950 Treaty of Peace and Friendship between India and Nepal formalized free
border movement of people. The bulk of these migrants are employed in the private,
informal sector. These migrants hold semi-skilled and unskilled jobs in restaurants and
factories or are employed as domestic workers, security guards, and maids.
Similarly, the migration of Nepalese people for other employment purposes, such as
working in the tea states of Darjeeling and the forest of Assam, India, began in the second
half of the 19th century. International labor migration, mostly to Gulf States, Malaysia and
other South East Asian countries is a new phenomenon of migration in the Nepali context
with about a 30 years’ history. Unexpectedly, foreign labor migration has developed in such
a way that it has shifted the agricultural-based Nepali economy towards remittance-based
economy.

As per the preliminary report of the 2021 census, 2.1 million Nepalis are abroad. While the
Department of Foreign Employment (DoFE) has so far approved 110 countries as labor
migration destinations for Nepalis, it is estimated that Nepalis work in as many as 172
countries. Nevertheless, Nepal’s foreign employment is concentrated in only a handful of
countries: India, Qatar, Malaysia, United Arab Emirates (UAE), Saudi Arabia and Kuwait.
Driven by the oil boom in the Gulf Cooperation Council (GCC) countries and shortages of

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labor in South East and East Asian countries like Malaysia, South Korea and Japan,
migration of Nepali workers shot up in the past two decades. Looking at the trend of labor
permit issuance by the DoFE, Nepal had been experiencing a steady rise in outbound
migration since the 2000s. The number of labor permits issued peaked at 2013/14, reaching a
high of 519,638, before continuously falling in the following years. Furthermore, due to the
COVID-19 pandemic and subsequent restrictions imposed on the movement of people, only
72,081 labor permits were issued in 2020/21.

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Table 1: Total Number of Absentees Residing Outside of Nepal

SN Year No. of Absentee
1 1952/54 1,98,120
2 1961 3,28,470
3 NA
4 1981 4,02,977
5 1991 6,58,290
6 2001 7,62,181
7 2011 19,17,903

8
2022 2,169,480
Source: Population Census of Nepal 1952/54, 1961, 1971, 1981, 1991, 2001, 2011 and 2022

NA= Not Available

A majority of international migrants continue to go to India, possibly a reflection of
geographic proximity, cultural ties, and the open border with India. Following India, most
migrant workers are destined either for countries in the Middle East or ASEAN member
states (primarily, Malaysia). During the Fiscal Year 2013/14, approximately 44.2 per cent of
the total labour permits issued were to migrants going to the Gulf countries 23 and a further
39.6 per cent to those going to Malaysia (MoLE, 2014), (Table, 2).

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The objectives of this paper are:

• To introduce the history of labour migration of Nepalese people,

• To highlight the use of remittances and economic growth in Nepal

3. Data and Method

This paper is entirely based literature surveys related on foreign labour migration of
Nepalese people and absentee population in various censuses of Nepal. Therefore this article
is based on secondary sources of information.
4. Push and Pull Factors of Nepalese Labor Migration
The push and pull factors behind labor migration are almost the same in Nepal as in other
parts of the world. Poverty, limited employment opportunities, deteriorating agricultural
productivity, and armed conflict are some of the motives behind international labor
migration. With limited arable land, landlessness is pervasive and the number of landless
households has steadily increased in the agricultural sector. In the non-agricultural sector,
the slowdown in growth, especially since 2000/01, due to the Maoist insurgency and
exogenous shocks has further retarded the pace of employment creation. The conflict had
also created difficult living and security conditions, especially in the rural areas. It had also
prompted people to look for overseas employment (IMF, 2006).
Push factors drives people to leave home and pull factors that attract migrants to a new
location. Push factors occur within sending states, that is, those that send migrants abroad,
while pull factors occur within receiving states, that is, states that receive immigrants from
sending states abroad.
Push factors are negative aspects of the sending country, while pull factors are positive
aspects of the receiving country. In fact, these differentiating factors are really two sides of
the same coin. In moving migrants must not only see a lack of benefits at home (push
factors) but also a surplus of benefits abroad (pull factors).
4.1 Push Factors
Push factors come in many forms. Sometimes these factors leave people with no choice but
to leave their country of origin. Unstable government, repeated strikes and closure and
investment unfriendly environment in Nepal lose the confidence of Nepali youth. Many
active labor forces do not see any future in the country even after the restoration of peace

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and the system derived from the people’s movement led by 12 political parties and civil
societies.
4.1.1. Lack of employment/Poverty:
Economics provides the main reason behind migration. In fact, according to the International
Labor Organization, 164 million people are migrant’s workers – a rise of 9 per cent since
2013, when they numbered 150 million. (ILO, 2018).In some countries jobs simply do not
exist for a great deal of the population. In others, the gap between the rewards of labor in the
sending and receiving country are great enough so as to warrant a move. Nepal has recently
experienced a surge in emigration due to a combination of these factors. The greatest
challenge facing Nepal is creating enough jobs for its burgeoning population. The exact
unemployment rate in Nepal has always been debatable. However,it was estimated
around3.3 per cent unemployment rate and 25.2 per cent population is found below poverty
linein 2011(CIA, 2013). As per the report of IMO, 2012, 75 per cent people are unskilled, 23
per cent are semi-skilled and only 2 per cent are skilled in Nepal. Hence, most of the people
who moved for labor migration are unskilled.
4.1.2 War/Persecution and Political instability:
Some migrants are impelled to cross national borders by war or persecution at home. During
the Maoist insurgency (1996-2006) many people were pushed to move abroad. Youth
population displaced by Maoist-led 10 years-long armed conflict found foreign employment
a lucrative and safe alternative for a living and safety, which in time turned to be a necessity
for them. Additionally, after the restoration of multi – party democracy in Nepal (1990)
there has not been a stable government to make some sound policy to utilize the active labor
force in own country. Rampant corruption and flourishing nepotism culture in Nepal have
made further disappoint to the Nepali youth. Hence, the frustrated youth are propelled to
drive overseas.
4.1.3. Culture of foreign labour Migration:
There are many villages in Nepal where labor migration has been established as a culture of
the communities; that is, going abroad for work for a while and returning with some money
and the experience of living in a different geographical location, preferably in towns and
cities. The influence of friends, relatives and well-wishers has also played a prominent role
in the promotion of labor migration in Nepal.

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4.2. Pull Factors

Whereas push factors usually drive migrants out of their countries of origin, pull factors
generally decide where these travelers end up. The positive aspects of some receiving
countries serve to attract more migrants than others.
4.2.1. Higher standards of living/Higher wages:
Economics provide both the biggest push and pull factors for potential migrants. People
moving to more developed countries will often find that the same work they were doing at
home is rewarded abroad with higher wages. They also find a greater safety net of welfare
benefits. Aware of this situation, migrants are drawn to those countries where they can
maximize benefits. The government of Korea has offered basic salary Rs. 60,000 per month
to Nepali labors where in Nepal even the Nepal government officer receives half of the
salary offered in Korea. Hence, higher wages is one of the strong factors to lure to migrate.
4.2.2 Labor Demand:
Almost all developed countries have found that they need migrants' labor. Rich economies
create millions of jobs that domestic workers refuse to fill but migrant workers will cross
borders to take. High demand of Nepali labor in Korea, Malaysia, Qatar and other countries
with attractive perk and handsome salary make Nepali youth to migrate.
Other pull factors include superior medical care, education, simply a personal fondness of a
certain place, whether it may be linked to culture, language, weather conditions or other
influencing factors. It can be concluded that the majority of emigrants didn't emigrate to
increase educational or social status or to enjoy urban facilities. But they emigrated because
of 'economic failure' at homes and their objective was to raise money in order to upgrade
their economic status. It is true in the sense that some people have got opportunities to go to
USA, Japan, and Germany, United Kingdom etc. as a cook, student, and business men visas.
5. Economic Growth verses Share of Remittances to GDP (%)
According to World Bank report for 2016, concluded that Nepal is leading the way with an
estimated USD 6.6 billion in remittances equivalent to 31.3 percent of the country’s GDP.
With regard to remittances by percentage of GDP, Nepal (31.3 percent) was followed by
Kyrgyzstan (USD 2 billion, 30.4 percent of GDP), Tajikistan (USD 1.9 billion, 26.9 percent
of GDP), among others. Qatar, Saudi Arabia, India and the United Arab Emirates remained
the biggest source of remittances for Nepal in 2016.In addition, Nepal saw a GDP revenue
of USD 21.1 billion in 2016, ranking 96th in the global ranking in terms of purchasing
power parity.

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Whereas according to the World Bank’s Migration and Remittances Factbook of 2016
report, Nepal has been featuring among the top remittance recipient countries over the last
three years. When it comes to remittances (as a percentage of GDP), Nepal (29 percent)
stood third in the list of largest remittance recipients following Tajikistan (42 percent) and
the Kyrgyz Republic (30 percent) in 2015. Nepal, with 29.2 percent remittances as a share of
GDP, was also among the top 10 recipients in 2014.These information shows Nepal
dependency on foreign labour migration as well as role share of remittances in GDP of
Nepal has been increased significantly.
Nepal was among the top ten emigration nations in 2013. When it comes to migration
corridors, Nepal featured among the top 10 list for forming migration corridors with India
and Saudi Arabia. Here, it is noteworthy that remittances to Nepal have almost doubled over
the 2007-16 period boosting the country’s status as the top remittance-dependent
nation.Sending money home in Nepal has Contributed to the SDGs, and the contribution of
remittances to Nepal’s GDP has grown from 17 percent in 2007 to 32 percent by 2016
(IFAD, 2016).
Agriculture remains Nepal's principal economic activity, employing about 65% of the
population and providing 31.7% of GDP. Only about 20% of the total area is cultivable;
another 40.7% is forested (i.e., covered by shrubs, pastureland and forest); most of the rest is
mountainous (WIKIPEDIA, Economic of Nepal).
Table: 3 Economic Growth and Share of Remittances in GDP of Nepal (2007/08-
2017/18)
Year Economic Growth Remittances Share to GDP (%)
2007/08 6.1 17.5
2008/09 4.5 21.2
2009/10 4.8 19.4
2010/11 3.9 18.5
2011/12 4.6 22.7
2012/13 4.1 29.0
2013/14 5.9 29.4
2014/15 3.3 31.4
2015/16 0.6 31.3
2016/17 8.2 28.3
2017/18 6.6 28.0

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6. Findings and Discussions

6.1 Volume and use of Remittances
Since the end of the 1990s, there has been a renewed interest in the financial resources that
migrants send back to their countries of origin. The main reason for the renewed attention is
the growing volume of official remittances to low income countries and their potential
contribution to the economic development of the receiving regions. Remittances denote
household income from foreign economies arising mainly from the temporary or permanent
movement of people to those economies (IMF, 2009). Remittances include cash and
noncash items that flow through formalchannels, such as via electronic wire, or through
informal channels, such as money or goods carried across borders. They largely consist of
funds and non-cash times sent or given by individuals who have migrated to a new economy
and become residents there, and the net compensation of border, seasonal, or other shortterm
workers who are employed in an economy in which they are not resident (IMF, 2009).
Nepal received 5.5 billion US dollars in remittance during last fiscal year, ending mid-July
2014, an increase from 4.3 billion US dollars in the previous one year. The rise in remittance
income boosted the country’s foreign exchange reserve as well as put the country’s overall
Balance of Payment (BoP) into surplus. The gross foreign exchange reserve reached to 6.7
billion US dollars in mid-July 2014, up from $5.4 billion recorded in mid-July last year. For
a country with around $ 6 billion US dollars of annual budget, remittance has been a major
chunk of Nepal’s foreign currency earning sources (NRB, 2015).
Only 2.4 percent of the total remittance was used for capital formation. Out of the total
remittance 79 percent was used in daily consumption, whereas 7 percent was used in
payment of loans (Table, 4).
Table 4: Uses of Remittances in Nepal
SN Use of Remittances Percent
1 Consumption 79.0%
2 Loan Repayment 7%
3 Household Property 4.5%
Education 3.5%
Capital Formation 2.4%
Source: CBS, 2012
6.2 Status of Labour Migrants and Main Destinations:

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Most of this foreign currency comes from the unskilled or semi-skilled workers, majority of
whom shed their sweat in the hot climate of the Gulf countries, including Qatar, Saudi
Arabia United Arab Emirates and Malaysia. The government's statistics show that 74
percent Nepali workers employed in foreign labor markets are unskilled. Such workers
normally choose to leave for low paying labor destinations (MoLE, 2014).
6.3 Labour Migration, Remittances and Poverty Reduction:
Nepal is among the poorest and least developed countries in the world, with about
onequarter of its population living below the poverty line. Nepal is heavily dependent on
remittances, which amount to as much as 30% of GDP (CIA, 2018). Country’s GDP would
be only one side of the whole story, as the other side would clarify how this global
phenomenon has indirectly resulted in poverty reduction, employment generation, increasing
household income and capital formation of the country. Remittance and migration driven
economy has reduced poverty in Nepal from 42 percent in 1996 to 25.16 percent in 2012
(CBS, 2011). Reduction of poverty has helped in diversification in livelihoods, greater
ownership and acquirement of assets and capitals. This, in turn, has contributed in increased
financial capital, education of the children, social capital, and migration-specific knowledge.
6.4 Reasons of Labour Migration and Role of Remittances
Remittance, as a source of development funding, are directly linked to migration. In many
instances, particularly in the vulnerable countries, this migration has been forced either by
civil conflict, political persecution or economic hardships. For people from the least
developed countries (LDCs), migration is often a case of running away from a very difficult
situation, rather than a matter of preference. The irony of it is that having escaped their
countries, migrants then assist in sustaining the economies of those very countries through
remittances.
Remittances can contribute significantly to local, regional and national economic
development in migrant-sending countries. In many instances, remittances form a significant
percentage of total household income, acting as a substitute for earned income lost to
unemployment, illness, retirement, emigration, falling wages and crop failure, among others,
and ultimately protect poor families against the erosion of hat are already basic household
assets (Pant, 2012).
In addition, remittances has generated a positive effect on the economy thorough various
channels such as savings, investment, growth, consumption, and income distribution. At the
community level, remittances has created multiplier effects in the domestic economy,
producing employment opportunities and spurring new economic and social infrastructure

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and services, especially where effective structures and institutions have been set up to pool
and direct remittances.
6.5 Contribution of Remittances in Internal Migration and Change in life Style
Families having increased income from remittance tend to migrate from villages to urban
areas, where they spend, not in investment sectors but investmoney for luxurious lifestyle.
Growing towns and cities across the country is an indication of money spent in better living
among migrant's families. Some of the young members of the remittance earning families
have been found indulged into drug addition, fly-away from education and training. Family
breakaway is another implication of labor migration in the Nepali society.
6.6 Working Condition of Labour Migrants at Destination or Working Place
Most of the migrant workers abroad are working in vulnerable situations without any
effective legal protection by the Nepalese government and the receiving countries'
government. Workplace exploitation by employers are reported frequently. However, the
Nepalese government has not been effective in protecting its citizens. Frequent serious cases
are reported in the news media about the pathetic situation of Nepalese migrants working in
unauthorized countries without any legal or social protection by the host countries. 6.7 Ways
to Develop Respectful Working Condition for Nepalese Labour Migrants
Now, the role and importance of Government to Government agreement (G to G agreement)
between labour sending and receiving countries has been considered in order to increase the
number of jobs for Nepalese youths, increase security as well as improve the migrants’
working conditions at their countries of destination. A return to G to G recruitment through
bilateral agreements (BLAs)and memorandums of understanding (MOU)has come to be
seen as a viable migrationmanagement solution, particularly in theAsian context. The
emergence of this new wave of G to G recruitment is related togovernment concerns
regardingundocumented migration of low-wageworkers as well as the human rightsconcerns
associated with employer-tied visaarrangements (ILO, 2015).
7. Conclusion
Nepal has long history of foreign labour migration. Remittance flows are a crucial policy
concern since they are very large in size, arerelatively stable and provide a cushion for
economic shocks, and are unique in providingdirect benefits for households. However,
remittances do not automatically contribute tonational development. To carry out effective
and efficient public policies to channelremittances into productive projects, the government
has to look at what motivate Nepaleseto send money home particularly beyond individual
family remittances, and craft itspolicies to take advantage of it. While the policies and

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initiatives undertaken so far toaugment the impact of remittances are primarily aimed at
encouraging the sending ofremittances through official channels, the utilization aspect of
remittances has beenlargely ignored by the government authorities.
Directing remittances to productive investments is a challenge for the government as well as
to the migrant’s families.Families of migrant workers should be encouraged and trained so
that they are able toundertake small businesses and entrepreneurship. This will generate jobs
and help improve the domesticeconomy. Government of Nepal should develop sound
policies with reliable environment of investment of remittances in productive sectors as well
as use of migrant's skills and knowledge in Nepal. In the long run, migrant workers can
come back and be reintegrated in thecountry's development activities with their achieved in
better skills and technology.
There are still lacking of study on number of foreign labour migrants and remittances send
by migrants. Existing open border, role of human traffickers including fake information and
documents, low level of knowledge and skills among migrants as well as remit through
formal and informal channels are being more challenges to analyze to real the scenario and
outcome of foreign labour migration. References
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Central Bureau of Statistics).
Central Bureau of Statistics (CBS). (2011). Nepal living standard survey 2010/11. (Kathmandu:
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CIA World Fact Book (2018). Nepal Economy, 2018, Retrieve on 10th June, 2018 from
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International Monitory Fund (2006). Nepal: Selected Issues and Statistical Appendix." IMF Country
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Nepal).
Nepal Restrya Bank (2015). Annual Report, Fiscal Year, 2014/15 (Kathmandu: Research Division,
Nepal Restrya Bank)

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Nepal Real GDP Growth Data, Retrieve from: https://www.ceicdata.com/en/indicator/nepal/realgdp-

growth retrieve on 9/13/2019
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