People's Movement

Overdependence on foreign employment instead of creating jobs domestically spells disaster for Nepal's economy

ON THE LOOKOUT: A day labourer waiting to be hired at Chakrapath Labour Chok in Kathmandu this week. Photo: GOPEN RAI

Malaysia is slashing foreign worker intake from end-May, conflicts in West Asia risk engulfing the region, and fortress Europe is building higher walls for migrants.

All this means that Nepal’s economy, almost completely dependent on money its workers send home, is as fragile as a house built on sand. Proof of that was the Covid pandemic, which impacted overseas jobs and remittance inflows.

Malaysia has now capped foreign workers to only 15% of its 17 million strong workforce, and this will mean there will be much fewer jobs for Nepalis in its palm and rubber plantations, construction, manufacturing and service sectors.

Malaysia has instructed companies that no work visas will be issued after May. One saving grace is that the restrictions do not apply to foreign security guards, most of whom are Nepalis.

Malaysia’s curb on foreign workers appears to be related to domestic unemployment, as well as an EU decision to phase out the import of palm oil as a renewable biofuel because of rainforest destruction. Malaysia is the world’s second-largest producer of palm oil after Indonesia.

There are an estimated 500,000 Nepalis in Malaysia, some of them undocumented workers. Of the 771,000 Nepalis who got labour permits from the Department of Foreign Employment in the last fiscal year, 259,000 went to Malaysia.

“The fact that a major labour destination country like Malaysia is reducing the number of Nepali workers is not good news,” says labour migration expert Ganesh Gurung. “It will seriously impact on remittance inflows and the economy. It does not seem like the Nepal government has any concrete plans to deal with this issue.”

Rajendra Bhandari, President of the Nepal Association of Foreign Employment Agencies (NAFEA) agrees that Malaysia’s decision is concerning, especially as the demand for foreign workers in Gulf countries is also decreasing. He adds that unless the Nepal government finds alternatives, the number of Nepalis going abroad illegally and ending up doing dangerous work will increase. This is evidenced by the increasing number of Nepalis killed in action while fighting for the Russian Army on the Ukrainian front.

Yet even as Foreign Minister Narayan Kaji Shrestha is demanding that Russia send Nepali soldiers home, Labour Minister Dol Prasad Aryal, who is alleged to be involved in recruitment and remittance agencies, reopened labour permits for Russia on Wednesday.

The value of Nepal’s exports is only one-tenth of its imports, and the country pays for imports with remittance income. Latest Nepal Rastra Bank figures show that the country earned $6.35 billion in the last six months of this fiscal year, and foreign exchange reserves hit a record $13.9 billion.

Ganesh Gurung says that even though Malaysia’s decision might have seemed abrupt, such overwhelming dependence on remittances has always been a risky path for Nepal. Money the diaspora transfers to relatives in Nepal makes up an equivalent of 25% of Nepal’s GDP – one of the highest ratios in the world.

There are an estimated 2 million Nepalis in the Persian Gulf region, and a change in foreign labour policy or a regionwide conflict could jeopardise their jobs and in turn, impact the national economy.

“This overwhelming reliance on foreign employment has meant that Nepal’s rulers have not been able to implement policy and incentives to create jobs domestically,” says Gurung. “It is inevitable that jobs overseas will dwindle eventually.”

With Malaysia closing, and earnings in the Gulf countries being less than what was promised by recruiters, Nepalis are increasingly looking to Europe as an alternative. But while Europe needs cheap foreign labour, it is also becoming more restrictive.

Croatia was a favourite springboard for Nepalis seeking to go to Western Europe, but it joined the Schengen area last year. There are now an estimated 15,000 Nepalis in Romania, and more hope to make it there before the country also joins Schengen on 31 March.

NAFEA’s Rajendra Bhandari says the hurdles are not just from Schengen states in Europe, but also from the Nepal government. Those seeking work in Europe need a work demand letter from a European country that is verified by a Nepal embassy in that country. But most European countries do not have resident embassies.

“If the demand letters could be verified in Nepal itself, it would open the door for a lot of Nepali workers to go to Europe,” says Bhandari, adding that although the Labour Ministry is open to the idea, the Foreign Ministry does not think so.

Unlike migrant workers who go to other Asian countries to earn money, send remittance back home, and eventually return, Gurung says, most Nepalis who go to Europe more often than not settle there permanently.

Overseas migration has been seen as a safety valve for Nepalis, but there are many thousands of domestic migrant workers at construction sites all over Kathmandu.

Ensuring a basic minimum wage and labour protection for them would open up more meaningful employment within Nepal in semi-skilled jobs, many of which are being given to migrants from India.

Says Gurung: “Continuing to depend on other countries to give Nepalis jobs, instead of providing jobs in Nepal for Nepalis, will mean trouble for us down the line.”