Interviewed by Syed Md. Rakeen, Team MBR

Dr. Khondaker Golam Moazzem is an industrial economist by profession. His primary areas of interest include the development of industrial enterprises, entrepreneurship development, private investment, including Foreign Direct Investment (FDI), competition policy, and trade- related issues at the bilateral, regional, and multilateral levels. He holds a PhD from Kyoto University, Japan, and was a visiting fellow at the Centre for South East Asian Studies (CSEAS), Kyoto University. Along the years, he has worked as a member of various committees at both the national and international levels while publishing numerous articles in international peer-reviewed journals, several book chapters, and co-authored books published by the Centre for Policy Dialogue, where he currently works as a Research Director. Team MBR was in conversation with Dr. Khondaker Golam Moazzem and was fortunate enough to receive his take on the recent trend of remittance inflows in Bangladesh.

Syed Md. Rakeen: According to the World Bank, Bangladesh is currently ranked as the 7th highest recipient of remittances in the world, with figures reaching USD 21.61 billion in FY2022-23, as per the Bangladesh Bank, and is also the third highest recipient of remittances in South Asia. In your opinion, which factors do you believe have helped Bangladesh consistently bring in strong remittance inflows over the years?

Dr. Khondaker Golam Moazzem: The importance of remittances in Bangladesh has often been underrecognized in the context of their contribution to our economy. Currently, Bangladesh’s strong economic growth can be attributed to the 3 Rs, which stand for rice, remittance, and RMG. Among them, RMG is often the most talked-about sector of all industries, while remittance isn’t talked about in the same light.

Since 1976, Bangladesh has been experiencing a push factor in migration, whereby people in the country move abroad due to inadequate job opportunities. Due to the large number of unskilled workers in Bangladesh, which is largely a result of the lack of job opportunities, many young, unemployed, and educated semiskilled workers feel motivated to leave the country in search of employment. However, pull factors have also played an influential role in the immigration of workers. As the market in areas like North America is quite diversified, it opens up opportunities for immigrants to find diverse and more job opportunities across various sectors. Chain migration has played its role as well, with a large portion of immigrant visa issuances experienced over the years. Finally, information asymmetry has reduced significantly compared to the 1970s and 1980s, with the news of life abroad now accessible to people from all corners of Bangladesh. The majority of the immigrant population is involved in blue-collar jobs, which are easier to obtain as opposed to white-collar jobs in foreign countries. All the aforementioned factors, coupled with the immigrants’ preference to work abroad, have contributed to incurring consistent remittance inflows in Bangladesh.

Syed Md. Rakeen: According to data on remittance inflows obtained from the Bangladesh Bank, the figures experienced a sharp rise of 36.1% in FY2020-21 relative to FY2019-20, a subsequent decline of -15.1% in FY2021-22 against FY2020-21, and then another increase of 2.8% in FY2022- 23 relative to FY2021-22. Would you kindly share the underlying reasons behind this uneven pattern in remittance inflows for the last three fiscal years?

Dr. Khondaker Golam Moazzem: Generally, growth in remittance inflows is often associated with an increase in migration from a country. But, in reality, there is no one-to-one relationship where an individual factor can impact the remittance inflows of a country. One of the most crucial factors behind this uneven trend can also be attributed to the channelling of funds through informal channels rather than formal channels. In fact, the figures of remittance inflow would’ve been much higher if the funds channelled through both formal and informal channels were added. Alarmingly, only 48–52 percent of the remittances are sent through formal channels. The injection of unrealized proceeds through informal channels could’ve established a strongly positive relationship between migration rates and remittance inflows. Besides, hundi has hindered the growth in remittances to a large extent, as the remittance figures from informal channels far exceed those from formal channels.

A big positive growth can often be experienced during a short period when Bangladesh Bank allows the banks to buy dollars at a higher rate, which influences the remitters to send funds through formal channels for a brief period.

One particular factor that isn’t mentioned enough is the remittance outflow in the country. There are many workers from India, Pakistan, Sri Lanka, and China stationed in Bangladesh who send remittance inflows through informal channels. Every year, a large amount of funds is syphoned away by the foreign nationals in the country. These remittance outflows should be brought under formal channels.

Syed Md. Rakeen: Back in September 2023, remittance inflows hit a 41-month low as remitters continually opted for informal channels like ‘hundi’ as opposed to official banking channels. In your opinion, why are funds still channelled through informal channels despite government incentives and relaxations in document requirements?

Dr. Khondaker Golam Moazzem: A part of the reason behind this continuous flow of funds through informal channels can be attributed to forex dealers. I believe that some legal action should be taken against these forex traders who involve themselves in illegal operations. Additionally, state-wise, the identities of hundi dealers are quite well known. Also, a lot of big agencies have formed a huge network of hundi channels, offering far better USD rates than formal channels. Besides, the formal channels tend to have high transaction costs along with a lot of formalities for sending remittances, which has hindered remitters from sending their proceeds through formal channels.

Syed Md. Rakeen: The remittance figures experienced a massive increase from USD 1334.35 million in September 2023 to USD 1977.56 million in October 2023, after a period of declining remittances. Would you kindly shed some light on the policy reforms that have triggered this sharp incline? Do you expect this growth to be sustainable?

Dr. Khondaker Golam Moazzem: Sometimes, the central bank allows banks to buy remittance dollars at a higher rate, which can temporarily rival the exchange rates offered through informal channels and influence the remitters to send funds through formal channels. However, maintaining that growth can be quite challenging, as banks will always have to keep an eye on informal channels as billions of remittances are unrealized. Every year, the dollar outflow from Bangladesh is reaching staggering figures due to procedural loopholes in the government. For instance, the baggage rule, which allows an individual to carry a maximum of USD 10,000 or an equivalent amount of foreign currency, should be drastically reduced.

Syed Md. Rakeen: In a bid to boost foreign reserves, the central bank has decided to allow remitters to keep their proceeds in foreign currencies at domestic banks with an interest rate of up to 9%. In your opinion, what are the potential upsides as well as the downsides of this initiative?

Dr. Khondaker Golam Moazzem: An initiative such as this can only enhance the net remittance inflow for short periods. Temporary migrants will be the biggest beneficiaries of this move, as they tend to stay for shorter periods, which can help them earn a high interest rate on their foreign currency deposits. This, in turn, can boost foreign exchange liquidity as remitters may receive more lucrative terms from the banks in Bangladesh compared to other foreign banks.

However, this won’t attract remittances from non-resident Bangladeshis (NRBs), as they may not have an immediate need for foreign currency. Also, there are several investment opportunities available abroad that can offer higher returns on their country of residence’s deposits.

Syed Md. Rakeen: Though expatriate workers spend a major portion of their lifetime staying abroad, they eventually come back to their native land after retiring from work. Would you kindly share your thoughts on how we can ensure a better life for the expats returning home, as they are the ones who contribute to the country’s remittance earnings?

Dr. Khondaker Golam Moazzem: To understand this, we have to look at the three levels of migration: pre-migration, post-migration, and re-integration. A labour-migration cycle is initiated from the pre-migration stage, where an individual or family plans to live or work overseas and is searching for opportunities in the form of studies, work, permanent residency, and reunification with family. Post-migration refers to the phase when individuals land in their destination country.

Various remitters come across numerous hurdles after setting their feet abroad. Considering the pressure and work environment in the destination countries of remitters, they often endure a poor lifestyle while saving a major portion of their earnings in the hopes of remitting as much as possible. They also injure themselves while working and, at times, pass away as well. Due to a lack of proper identification documents for the deceased individuals, the government of Bangladesh often fails to bear the repatriation costs due to the absence of legal status for some immigrants. Hence, a lot of the deceased immigrants aren’t brought back to Bangladesh and are eventually buried in their destination country with the help of the diaspora.

After returning from a life of struggle and endurance, the reintegration of the returning expats often becomes difficult due to their Bangladesh, making employment and investment opportunities scarce for the returning migrant workers. The struggles they’ve encountered in their lives abroad often discourage them from participating in further local struggles.

In my opinion, a budget should be allocated for the migrant workers. These migrant workers are often devoid of any benefits from health insurance, despite the existence of such arrangements. The government has also introduced a Universal Pension Scheme (UPS), which can hugely benefit returning migrants struggling for opportunities in their native homeland. Due to their lengthy hiatus from the communities in Bangladesh, UPS can help the migrants feel more inclusive of society, while regular pension payments can help them meet their basic necessities. Additionally, a migrant worker scheme could be initiated to help facilitate the migrants working currently abroad as well as smooth the reintegration of returning migrant workers. Currently, the government invests more in an RMG worker compared to a migrant worker, with a shocking statistic revealing that the government invests a mere 13 paisa per migrant. Several ministries should allocate a specific budget for migrants so that they receive adequate backing and become motivated to remit their proceeds. Additionally, we should also explore the opportunity of involving the Directorate General of Health Services (DGHS) to create more schemes catered towards the migrant communities as well as returning migrant workers. The Centre for Policy Dialogue had also put forward a proposal for a BDT 450 crore investment to improve the livelihood of migrant workers and enhance remittance inflows in the process.

Syed Md. Rakeen: As most expatriate workers are stationed in the Middle East and remitters work in some particular job sectors, an economic slowdown in any of these sectors will drastically reduce remittances. In your opinion, what are the initiatives required by Bangladesh to diversify its remittance basket in terms of countries and job sectors?

Dr. Khondaker Golam Moazzem: There are two forms of diversification in the context of migration, namely intra-country and intercountry diversification. While intra-country diversification refers to the migration of people from rural to urban areas with the hopes of better job opportunities, inter-country diversification is associated with the transfer of people from one country to another. Chain migration and network migration are the key ways individuals migrate from their native country. Since chain migration involves individuals bringing their families and relatives to the same country, a large population of Bangladeshis exists in a few countries. If we look at India and Sri Lanka, their recruiting agencies offer more diverse options for migration to different countries as opposed to those from Bangladesh. Besides, media influence plays a huge role in showcasing the lifestyle of life abroad. As we are all aware, the media abroad exerts a huge influence on a country’s future as well. Similarly, the local media that features the expatriate workers’ lifestyle also plays a crucial role in moving to a select few countries.

In terms of job sector diversification, blue-collar work significantly outweighs white-collar work, leading to the majority of the remittance inflows from blue-collar work. While it’s often mentioned that Bangladesh’s expatriate workers should diversify their line of work abroad, it should be pointed out that white collar jobs abroad require a lot of qualifications and certifications with international accreditation. For instance, a doctor or engineer from Bangladesh would face a difficult time finding work in their fields abroad as their local degree doesn’t hold the same value as that of a foreign country’s degree.

Also, there’s a perception among expatriate workers that they’ll only work in the fields they prefer rather than specialising in job roles that are in high demand abroad. Then again, individuals who are looking to migrate should also be trained so that their skills are aligned with international standards. The government will need to play a significant role in ensuring that the local workers are well-equipped with the skills needed to land jobs abroad.

Syed Md. Rakeen: Generally, a small portion of labour migration occurs through formal channels, while the majority of the labourers are migrated through individuals or by recruiting agencies, where the migrants may become victims of fraudulent cases due to middlemen. Would you kindly share how the government can maximise the rate of labour migration through formal channels to enhance its remittance inflows?

Dr. Khondaker Golam Moazzem: Fraudulent cases stem from corruption caused by recruiting agencies. Private recruiting agencies often involve themselves in malpractice by earning a hefty cut from expat workers moving abroad. For instance, a Bangladeshi expat worker needs to pay three times more than a worker from Nepal if they want to migrate to the Middle East. Besides, information asymmetry often becomes a key reason for such fraudulent cases, which often lead to human trafficking. Generally, most migrants remain under a lot of pressure to find work abroad, which makes them vulnerable to such cases.

In order to combat such malpractices, the labour migration procedure through local agents should be well documented. All the recruiting agencies involved in labour migrations should be registered and remain under the watchful eye of the legal uthorities. Not just agents, but sub-agents and even the agents of sub-agents should be monitored to track their activity, thus ensuring that the whole labour migration process is transparent.