Nepal is the second largest remittance receiver among the Least Developed Countries (LDCs), according to a latest United Nations report.
"Of the total $27 billion remittance received by LDCs in 2011, Nepal stands second to Bangladesh," said the Least Developed Countries Report 2012 'Harnessing Remittance and Diaspora Knowledge to Build Productive Capacities', released here today.
The top three recipients — Bangladesh, Nepal and Sudan — shared 66 per cent of total remittance inflow to LDCs, it said, adding that from 2009 through 2011, Nepal and Haiti received more foreign exchange from remittance than from exports.
"Nepal's remittance equals trade deficit as a share to the gross domestic product (GDP). Likewise, remittance exceeded both Foreign Direct Investment (FDI) and Official Development Assistance (ODA) in 2008-2010 exceeded in nine LDCs; Bangladesh, Haiti, Lesotho, Nepal, Samoa, Senegal, Sudan, Togo and Yemen."
"However, the widening gap between FDI inflow and remittance inflow has to be taken seriously," said senior economist at the UNDP Basudeb Guha-Khasnobis making his presentation.
"Though remittance has helped reduce poverty, it has also been instrumental in widening the rich-poor gap," he said, adding that a good remittance policy will not only help reduce the cost of remittance but also the cost of migration.
"Generally, a Nepali worker has to pay $1,200 to migrate to Qatar," he added. "As a skilled and professional migrant normally does not remit, cost reduction for migration will help low income people have easy access to migration that will increase remittance inflow," he suggested.
The brain drain rate — that is the share of highly skilled nationals living abroad — is considered 'high' as it stood at 20 per cent in 30 LDCs out of 48 LDCs, the report highlighted, estimating that two million university-educated persons from LDCs live and work abroad.
However, brain drain can be reversed, opined central bank governor Dr Yubaraj Khatiwada, releasing the report.
"Apart from thinking of how to attract professionals and skilled people to remit, brain drain could also be reversed to brain gain, if the government can create an encouraging environment for the return of migrants, who have expertise, skills and knowledge that could help their originating countries," he said, adding that the current NRN Act also needs to be revisited to encourage Non-Resident Nepalis to return to Nepal.
"However, LDCs like Nepal must prepare for alternative sources to finance consumption, in case remittance inflow slows down," he added. "Likewise, countries like Nepal should be prepared for price shocks — that has increased the cost of living — financial shocks, and keep gauging increasing vulnerabilities. Remittance is an indicator to gauge rising vulnerabilities of Nepal too."
Likewise, LDCs have failed to build trade capacity despite the World Trade Organisation's (WTO) facilities on exports from these countries, the central bank governor opined, adding that Aid for Trade could also be a tool to help increase capacities of LDCs like Nepal, besides effective mobilisation of resources by proper utilisation.Senior economist Prof Dr Biswambher Pyakurel sought a diagnosis of the structural problem of the Nepali economy before prescribing any pill for the ailing economy.