Addressing inefficiencies and proper implementation of policies are a must to boost inward remittances

Illustration: TBS

At a bustling intersection in Dhaka, traffic lights are frequently out of order. Drivers honk incessantly, weaving through the chaos, while pedestrians risk life and limb to cross the road. The traffic police attempt to impose some order, but the dysfunction persists. These traffic lights, installed to ensure a smooth flow, remain ineffective—a reflection of the challenges facing Bangladesh's remittance system. Despite numerous policies and initiatives, significant inefficiencies continue to hinder progress.

Remittances play a vital role in macroeconomic management and microeconomic development, particularly in low- and middle-income countries (LMICs) like Bangladesh. According to the World Bank, remittances have become the largest source of external financing for LMICs. Bangladesh is the seventh-largest recipient of remittances and the sixth-largest migrant-origin country globally. In FY24, total remittance earnings stood at $23.91 billion, while in the first five months of FY25, this figure reached $11.13 billion. Remittances accounted for 5.21% of GDP and 58.59% of export earnings in FY24.

Despite the growth in remittance inflows, the labour migration process and the broader migration sector remain fraught with challenges and complexities. For instance, Bangladesh's labour productivity is only 6.6—far behind other leading remittance-receiving nations such as Mexico (20.2), China (15.4), the Philippines (10.5), India (7.9), and Pakistan (6.9). Labour productivity, calculated by the International Labour Organisation (ILO) as the total output produced per unit of labour, is a key indicator of competitiveness, living standards, and economic growth.

Due to low labour productivity, many Bangladeshi migrant workers are unable to secure white-collar jobs and are instead confined to low-paying roles. This increases their vulnerability to violence, excessive working hours, health risks, and deportation. In 2022, nearly 70,000 Bangladeshi workers were deported from Saudi Arabia—often for not possessing valid residence permits. Alarmingly, The Guardian reported that an average of four Bangladeshi workers died daily in Saudi Arabia in 2022, totalling over 13,000 deaths between 2008 and 2022. These figures are particularly concerning as Saudi Arabia prepares to host the 2034 FIFA World Cup, a project heavily reliant on migrant labour for constructing infrastructure such as stadiums, transport networks, and hotels.

Upskilling migrant workers has been a long-standing topic of discussion in Bangladesh, yet the country has failed to increase the % of skilled and semi-skilled migrant workers. In fact, the % has declined—from 64% in 2019 to just 47% in 2023. In comparison, Nepal and Pakistan report 74% and 54%, respectively, in this category. The Philippines offers an instructive example: while 54% of Overseas Filipino Workers (OFWs) are engaged in domestic work, only 7% occupy managerial or professional roles. However, highly skilled professionals, such as Filipino nurses renowned for their dedication and efficiency, remit approximately $8 billion annually—accounting for 25% of all remittances and 9% of GDP. Their average monthly salaries in the US and UK are $3,000 and $2,530, respectively, compared to entry-level salaries of $271 to $452 in the Philippines. This underscores the importance of upskilling, as demonstrated by the case of Filipino nurses.

Bangladesh must prioritise equipping its workforce, particularly its youth, with the necessary skills to meet global labour market demands. Youths, being the most adaptable and productive demographic, are critical assets. Countries with high remittance inflows typically exhibit declining age dependency ratios, indicating a growing workforce. Bangladesh, with its youthful population, must capitalise on this demographic dividend by fostering skill development to secure higher-paying jobs abroad.

Another pressing issue is the high cost of remittance transfers, which drives many to use informal channels. World Bank data shows that the average cost of sending $200 to Bangladesh is 7.2%—higher than in comparator countries such as India (4.9%), Mexico (4.7%), the Philippines (3.9%), Nepal (3.8%), and Pakistan (3.5%). The Government of Bangladesh (GoB) has struggled to reduce these costs. Consequently, a rigorous evaluation of existing policies is essential.

To encourage formal remittance channels, the GoB introduced a 2% cash incentive in 2019, which was later increased to 2.5% in 2022. While this scheme has redirected funds to formal channels, it has placed financial strain on the national budget. Alternative measures, such as Pakistan's "Sohni Dharti Remittance Programme," could be considered. This initiative uses a mobile app to track remittances and rewards remitters with redeemable points for free public services.

Investing in youth skill development, addressing policy inefficiencies, and improving the migration process are crucial for boosting inward remittances. Regularly updating reliable data through an integrated data management system would further support these efforts.

Muhammad Nafis Shahriar. Sketch: TBS

Muhammad Nafis Shahriar is a lecturer of Economics at BUP. He can be reached at nafis.shahriar@bup.edu.bd 

Disclaimer: The views and opinions expressed in this article are that of the author and do not necessarily reflect the opinions and views of The Business Standard.