Zero-sum game in zero-cost migration

Nepal’s overseas migrant workers bear high recruitment costs. A 2016 survey by the International Organisation of Migration (IOM) shows that average recruitment costs to the Gulf ranged from $1,083 to $1,172, while workers going to Malaysia had to pay $1,388.

Compare this to their average monthly salary in the destination country of $294-$346. Out of a two-year contract, workers therefore spend the first few months worth of earnings just on paying back recruitment costs. This is why zero-cost migration has received such enormous attention in Nepal.

The Government of Nepal has been advocating for zero-cost recruitment, and it is also pushed by the International LabourOrganisation (ILO) which last year approved the definition of recruitment fees and related costs related to the placement of the worker to be borne by employers.

The bilateral labour agreements between Nepal and Malaysia, UAE and Mauritius have adopted these principles, and has received accolades. When high-level managers of the same employer get all recruitment-related fees refunded, including generous ‘relocation costs’, it is only fair that Nepali workers at the lower rungs of the ladder be provided a similar facility. On paper, it is against the law of countries like the UAE for a worker to be charged any cost related to recruitment.

But implementation of this policy is a whole different story. Workers are not leaving the country without paying, and there are endless challenges like: workers willing to pay for stints abroad, unhealthy competition among recruitment agencies who outbid each other by buying visas from employers and transferring that cost to workers, and transactions between workers and recruitment agencies are difficult to monitor in the current status quo. Despite the political will, even the strongest advocates of this principle realise there are practical challenges.

The Province 2 government recently announced a collateral free, low interest loan program for outgoing migrant workers in partnership with the DFID funded Skills for Employment Program and Prabhu Bank. While there are other features of the program such as financial literacy and increasing access to finance, the migrant loan is what is eye-catching in Nepal's context.

So far, there have been nine beneficiaries of this scheme. There are merits to this initiative. It recognises that workers are paying interest rates as high as 36% by borrowing from local loan sharks since they do not have access to formal channels. Or, that this cost might be prohibitively high for the poorest segments of society which may not be able to bear the costs of recruitment and benefit from migration. It also takes into account that migrant workers are rationally choosing to pay for the service provided by recruitment agencies. How else would they find a job in Dubai on their own? After all, workers heading to Korea under the government-to-government bilateral program do also end up paying $1,141, although they are guaranteed to recoup this cost in a month, unlike other destinations (see graph).

Nepal used to have a government-backed migrant loan scheme which failed because of the high rates of default. Countries like Bangladesh have migrant loan schemes through the Probashikallyan Bank and BRAC. Low cost migrant loan schemes, however, are new today in Nepal where the free-visa-free-ticket policy has dominated the discourse.

The reaction in social media is quick. ‘There is a contradiction. Why do we need loan when there is a free visa free ticket policy?’ writes Ashim. Binita comments: ‘Very good. This means even the poor can now go for foreign employment.’

Indeed, there are contradictions. For example, will an aspirant worker going to a local government office or a Migrant Resource Center in Province 2  for advice on safe migration  be referred to the loan program or recommended for the central government's  zero-cost recruitment, and to reject any placement offer demanding payment?

Do the loan programs undermine other efforts attempting to adopt a zero-cost principle or are these principles just an end goal that we aspire for while in the near term we focus on incremental changes made possible by initiatives like the loan program?

The difference between informal interest rates and the low-cost interest rate through the migrant loan scheme can make a visible difference to a worker. So, do we adhere to principles or practice?

Last month in this space, we raised the importance of elevating our discussion from whether the zero-cost principle is being implemented or not (because it is not) to the harder questions on why, how and if it can be enforced. The new loan program presents the opportunity to revisit the issue for a more constructive debate.

Upasana Khadka writes this column Labour Mobility every month in Nepali Times analysing trends affecting Nepal’s workers abroad.