The government feels that due priority must be given to growing sectors like foreign employment,” said Finance Minister Dr Roop Jyoti on March 20, adding that “the government has plans to promote it.” Should short-sighted, misguided and incompetent people handle our economy? A government that promotes foreign employment is beyond naivety. It is amazing that seemingly qualified and educated people could actually think this way. This is the equivalent of promoting alcoholism to boost beer sales, or thinking that an epidemic is good for the medical sector.

For people who wonder how foreign employment and migration affect a country, they need to look no further than a typical remote village. Economically, migration results as the village has no industry and the population is dependent on antiquated farming methods. Demographically, migration renders the village devoid of able-bodied men. Many villagers are supported by their family members who have migrated to the city for jobs. There is very little development in the villages and most families survive on agriculture and remittances. Infrastructure is deteriorating, the standard of living is below poverty level and economic progress is stagnant. This starts a vicious cycle as it leads to the migration of families and depletes the village of manpower. To see how an increase in foreign employment will adversely affect Nepal, one can take this scenario to an international level and think of Nepal as a remote village. The village would have been better served by retaining its population if employment opportunities were provided. The same goes for Nepal.

It was for this reason that King Mahendra came up with the idea of Gaun Pharka (Return to the Villages) but Minister Jyoti has chosen to focus on Desh Choda (Leave the Country). While the analogy may seem too simplistic for many, the impact of remittances on a country’s growth has been studied and mathematically modelled. In 2005, the International Monetary Fund released a staff paper (Chami, Fullenkamp and Jahjah) that used empirical estimations to show that remittances were negatively correlated to GDP growth. In other words, when remittances grow, the GDP falls accordingly. The IMF paper assumes that mostly remittances are altruistic in nature; that is, people send money because they feel indebted to those they left behind. It is generally a substitute for income. It is expected to be used for expenditure and not investment. There are other theories (self-interest, social insurance, etc.) formulated on the motivation of remittances but the fact is that remittance is almost always centred around the family. The IMF paper also points out that capital flow should not be confused with remittances. Capital flow (foreign direct investment) is not altruistic and not meant to be a substitute for income. Since it is not a philanthropic grant and is profit driven, it will lead to job creation and growth in recipient country.

When jobs are created by investment in an industrial plant, it stimulates more gro-wth. There will be infrastructural development and growth in service industries (restaurants, shops, etc.) around the plant to cater to the workers. There will be more opportunities for suppliers and haulers, as well as for other services (transportation, entertainment, etc.) that will create more jobs. This multiplier effect in job growth means that for every job created in the plant, many more will be created around it. On the other hand, foreign employment will simply generate remittances and if one considers remittances to be an act of altruism, it will, “not serve as capital for economic growth, but as compensation for poor economic performance” (Chami, 2005).

Also, the IMF paper points out how remittances can directly hamper a country’s growth and productivity. That is because the recipient of remittances is less inclined to work and be a productive member of the workforce. It is one thing to reluctantly accept the consequences of foreign employment, but it is totally different for a government to promote it. To worry about the balance of payments and disregard everything else is a short-sighted and simplistic recipe for disaster. This government is saying that foreign exchange and remittances are so important that it trumps long-term growth and employment.

Had the government discussed plans to facilitate remittance transfer through banks and financial institutions, it would have been commendable. Had Dr Jyoti expressed the desire to create an atmosphere where NRNs would be tempted to send extra remittances for investment, it would have been appreciated — but foreign job promotion simply for the sake of remittances is a plain irresponsible act. How else can we describe a proposal that will effectively deplete the country’s manpower, lower its GDP, hamper long-term growth pros-pects and do nothing to increase productivity or FDI? What are these people thinking?

Dr Pant is executive director, Institute for Development Studies