Harnessing the Potential of Non-Resident Nepalis for Nepal’s Development

Statement by Kul Chandra Gautam at the NRN / FNCCI Seminar in Kathmandu

11 October 2006

It is a great pleasure to join you all in Kathmandu on the occasion of this special NRN Day.

I want to congratulate the founding leaders of the NRNA – Dr. Upendra Mahato and other colleagues and compatriots for their vision with which they started this dynamic movement.

Let me also thank FNCCI for hosting the NRN secretariat and providing it with all facilities.

And I acknowledge with great appreciation the presence here of our senior government leaders and members of the media who have recognized the enormous potential of the NRN community’s contribution to Nepal’s all-round development.

It is said that all dark clouds have a silver lining.

The last decade of civil war has been the cruelest period in Nepal’s history –– when Nepalis killed other Nepalis by the thousands, we destroyed the nation’s meager infrastructure, and institutionalized a culture of violence and impunity – all in the name of revolution, and counter-insurgency.

It will take a long time for us to fully recover from this nightmare. Yet several highly positive things have happened in Nepal during this period of conflict.

The percentage of people below the poverty line fell from 42 to 31 percent. Nepal is making steady progress towards the Millennium Development Goals, and is on track to achieve the goals of reducing child mortality, access to safe drinking water, primary education and other basic services.

Globalization is penetrating not just the cities but even the hinterlands of Nepal.

How was such progress possible in the middle of a brutal civil war?

A key factor certainly was the positive contribution of remittances from non-resident Nepalis.

As Mallika Shakya illustrated so clearly, foreign employment and remittances have become the life-line of Nepal, keeping our economy afloat.

I will not repeat the statistics that have been cited, but it is clear that remittances from foreign employment have emerged as the second largest economic activity in Nepal – second only to agriculture – and higher than trade, manufacturing, construction, tourism, and foreign aid.

It is therefore most fitting that we have here with us at this conference several cabinet ministers and other dignitaries of Nepal.

Perhaps the time has come for Nepal to contemplate a full-fledged ministry or department in charge of NRN affairs, as is the case in many countries with a large diaspora.

As we embark on restructuring of the Nepali state and our structures of governance, it would be most appropriate to consider, for the first time in our history, how we deal with the 6 to 7 million Nepalis – equivalent to a quarter of Nepal’s total population – who live and work outside Nepal, but who love and cherish their homeland.

We have heard estimates of remittances worth a billion $$ a year injected into the Nepali economy through formal banking channels, and perhaps another billion $$ through informal channels, especially from India and other neighbouring countries.

These remittances constitute a minimum of 13 percent, and some estimate up to 23 percent of Nepal’s GDP.

Surely, any responsible national development planning cannot ignore such a huge segment of Nepali population and Nepal’s economy.

But it is not only the financial remittances that count. We should also value the “social remittances” that come in the form of new ideas, improved technical skills, and greater openness to attitudinal and behavioural changes that help build our “social capital”.

To be fair, we must also acknowledge that there are some negative aspects of migration, foreign employment and remittances.

We are all aware of the phenomenon of “brain drain” from Nepal , and the downward social mobility of highly educated and skilled Nepali professionals working in menial jobs in Western countries.

We have heard the horror stories of Nepali labourers exploited by unscrupulous middlemen and employment agencies, trafficking of women, and mistreatment of labourers by their employers, including sexual abuse of women.

Foreign employment can lead to separation and disintegration of families, poor parental care and socialization of children.

Remittances can sometimes lead to unproductive and ostentatious consumption.

And as most people availing of foreign employment tend to be from slightly better off families with some education, rather than the poorest people from deprived communities who maybe functionally illiterate, overseas jobs might actually worsen our existing socio-economic inequalities.

We must be mindful of these pitfalls and try to mitigate them. But on balance, the positive impact of foreign employment and remittances far outweigh the negative connotations in the current situation of Nepal.

In Nepal we have not fully studied the impact of large-scale migration and foreign employment in our towns and communities. But studies from other countries provide an interesting picture.

On the positive side, families and communities receiving remittances tend to have a higher level of school attendance, improved access to health care, better nutrition, lower child mortality, reduced prevalence of child labour, and generally upward social mobility.

Remittances generate positive “multiplier effect” when children consume better food, go to better schools, get proper health care, live in better houses, and eventually become more productive citizens.

Globally we have seen an increasing trend towards feminization of migrants and remittances. Studies show that, on the whole, this contributes to greater gender equality and empowerment of women.

Salaried women are more independent, less subject to abuse by husbands and in-laws, and take better care of their children and families.

In the poorest families and communities, remittances are a crucial part of the people’s subsistence and survival strategy. Without the seasonal migration to India in search of jobs, many people in certain hill districts of Nepal would face starvation and become destitute.

In slightly better off communities, improved consumption as well as investment and employment created through remittance-led activities promote significant economic growth.

In Mexico, for example, it is estimated that each $1 received in remittances increases GDP by $3.

Remittances are a good antidote against macro-economic volatility. They help improve balance of payment, balance of trade, and foreign exchange shortfalls.

Remittances are generally less affected by political crisis or conflicts or even corruption.

During the Asian economic crisis in 1997-99, when foreign direct investment (FDI) tumbled down, remittances actually increased and helped cushion the impact of the crisis.

Because people in the diaspora feel special empathy towards their relatives and friends in times of crisis in the home country, they tend to be even more generous and forthcoming with remittances than in normal times.

In the Philippines, for example, at the height of the Asian economic crisis, the health and education situation of children actually improved a lot, thanks to increased remittances.

And as we have seen here in Nepal, during the most intense period of our conflict, remittances actually increased and helped save our economy.

Expatriate nationals can be a great source of financial as well as social remittances and social capital for the development of their home country.

Let us take the example of Ireland. Until just over a decade ago, Ireland used to be the poorest country in Western Europe. To avoid poverty and to improve their lot, a large number of Irish migrated to the United States and other countries.

As they became more prosperous, the Irish diaspora started investing in their home country. With the right sets of policies and incentives, Ireland started prospering. Today Ireland has a booming economy and has joined the league of the richest countries in the world.

We have seen similarly positive impact of remittances in national development in countries ranging from Israel to Jordan, Lebanon, Turkey, Mexico, the Philippines and lately our neighbours India, Pakistan, Bangladesh and Sri Lanka.

Here in Nepal, seasonal employment in neighbouring countries has been an important source of livelihood for many Nepalis for centuries.

A more organized system of employment in foreign military service started nearly 200 years ago following the Treaty of Sugauli.

300,000 Nepalis served in the two World Wars and suffered a staggering 45,000 casualties. Thereafter, the hard-earned remittances of the Gurkhas became the principal export earnings of Nepal for many decades.

These remittances sustained the livelihoods, and led to relative prosperity of the communities from where the Gurkhas and other Lahures came.

Today, a more diversified labour force is once again Nepal’s number one export.  And we have begun to value their contribution not only for their families and communities but for the nation as a whole.

It is heartening to see how in the very short period of its existence, the NRN movement has begun to leverage its potential for the benefit of our country.

Today, individually and collectively, the NRNs are engaged in health, education, philanthropy and other community service projects. When disaster strikes Nepalis whether in Nepal or elsewhere, such as in Lebanon recently, the NRNs respond promptly and generously.

Some NRNs are investing in infrastructure development. Others facilitate technology transfer. This is just the beginning. I can see the NRN investment portfolio expanding in the years ahead.

Beyond the economic sphere, the moral, material and intellectual contribution of NRNs in opposing autocratic rule and violent insurgency, and their active support of the historic jana-andolan and the current peace process shows the enlightened maturity of the NRN movement.

As an organized movement, NRNA is still at a formative stage. I can see it growing and becoming an important partner in our all round national development efforts.

For us to maximize its full potential, the Government of Nepal will need to seriously address some of the issues that hinder NRNs’ contribution.

Girija Gautam raised the issue of dual citizenship and made a number of suggestions. These merit serious consideration.

At the very least, I would urge our Deputy Prime Minister and Minister of Foreign Affairs to arrange for instructions to be issued immediately for the implementation of the 10 year multiple-entry visas to people of Nepali origin, which I understand has already been agreed to by the government.

In terms of dual citizenship, as Girija explained, there are different models ranging from full-fledged citizenship with all rights, to more limited rights such as those enjoyed by the Overseas Citizens of India.

What is absolutely undesirable is the kind of requirement that the ex-Gurkha soldiers have to sell off their land and property in Nepal when they acquire British citizenship. I do not see how this is beneficial for Nepal.

Any special dispensation made for NRNs and PNOs in terms of long-term visas, dual citizenship and other investment facilities should obviously be of mutual benefit – both for NRNs and for Nepal.

But I would urge the government of Nepal to examine with an open mind and creative spirit what is truly in the best interest of Nepal, not in terms of some outdated, narrow, nationalistic or xenophobic sentiments, but in terms of what is truly beneficial for Nepal and Nepalis in this rapidly globalizing world.

If so many other countries have decided that some kind of dual citizenship is in their national interest, Nepal ought to consider it positively.

Many Nepalis acquire foreign citizenship for the sake of benefiting from legitimate business opportunities and social services to which they are entitled as taxpayers in their adopted countries.

Some wish to acquire foreign citizenship to avoid the hassle of having to face severe travel restrictions with a Nepali passport. I do not see Nepal losing anything but gaining much by responding to the needs of such NRNs and PNOs.

In terms of servicing the large and growing number of NRNs, it is highly desirable that Nepal’s diplomatic and consular services be restructured and strengthened in countries and regions where there is a large concentration of Nepalis.

This can actually be a partnership arrangement between NRNAs of those countries and the Nepal government.

Our diplomatic and consular services should be strengthened and expanded to additional countries such as the Republic of Korea, Malaysia, and the Gulf countries.

Nepal should also establish bilateral agreements with these and other countries to ensure that NRNs benefit from minimum wage, social protection, medical care, humane working conditions, and to avoid unfair double taxation.

I am sure there are other opportunities to leverage the contribution of NRNs to national development and for their own well being. We must study and learn from other countries and emulate their best practices.

But to do that the current structure in the Nepal government is clearly inadequate. Some countries have full-fledged ministries or departments to service their expatriate nationals. We do not even have a designated section or focal point of adequate seniority and authority.

I would strongly urge the Nepal government to upgrade its liaison function for NRNs to at least departmental level.

We know it costs money to establish a whole new Department and new embassies and consulates. But let us recall that we are talking about servicing a constituency that commands an eighth of Nepal’s GDP and a quarter of Nepal’s population.

Let me conclude by recalling that we are all meeting here as our top political leaders are in the middle of the most important discussions on peace, democracy and progressive restructuring of our state institutions.

We wish our leaders success and wisdom in coming up with a negotiated settlement that will be in the best interest of Nepal and Nepalis everywhere.

In recent years, many NRNs actually felt embarrassed to introduce ourselves as Nepalis and having to acknowledge that our country had become the land of a senseless war, unspeakable brutality, and human rights violations; where a group of misguided “revolutionaries” were trying to impose a universally discredited ideology; where an arrogant and ambitious monarch was undermining democratic institutions; and where even elected political leaders and parties had betrayed the people’s trust.

The extraordinary Jana-Andolan of April 2006 has once again allowed us to redeem our dignity and hold our heads high when we introduce ourselves as Nepalis.

Let us hope that our political leaders will rise to the occasion at tomorrow’s Summit meeting,  and agree to a credible and sensible plan for arms management, abandon violence as a legitimate method of seeking political change; constitute an interim government of national unity; accelerate the process of conducting free and fair elections for a Constituent Assembly that will usher a modern, progressive, multi-party democracy to build a just, prosperous, peaceful society where people’s human rights are respected and human security is secured.

While this important political process is on-going, it is vital that simultaneously we also work towards developing an ambitious post-conflict reconstruction and development plan, so that our people will see rapid improvement in their living standards as the fruits of peace and democracy.

Populist slogans are not enough. We need carefully prepared and detailed investment plans.

I know the international community is full of goodwill to assist Nepal. The United Nations is already here to help. And the Non-resident Nepalis are also ready to play their part.

Thank you.

(Mr. Gautam, a citizen of Nepal, is Assistant Secretary-General of the United Nations and Deputy Executive Director of UNICEF. The views expressed in this paper are those of the author in his personal capacity.)