Role of Remittance on an economy of Marming VDC.

Background
Remittance is an important source of foreign income for developing countries like Nepal
increasing dramatically in size over recent decades. It is a private income that is regularly or
periodically transferred from international migrants to family members in their country of origin.
It represents one of the largest sources of financial flows to developing countries. Foreign
employment is gradually getting a major source of foreign exchange earnings and sustaining the
positive balance of payment in Nepal.
The end of war between Nepal and British after signing of Sugauli treaty in 1814 opened the
recruitment for Nepalese in British Army. This leads to start the foreign employment opportunity
for Nepalese to India as well as Britain. The process of civilian in the foreign employment started
since 1980s and now the number of job aspirants in foreign land increased dramatically,
especially after the restoration of democracy. More than 0.4 million Nepali youths enter into the
labor market each year and about 75 percent to 85 percent choose foreign employment.
According to Economic Survey, 2014, the contribution of remittance in GDP is 28% (FY
2013/14) or NRs 1.5 billion per day. Remittances can generate a positive effect on the economy
thorough various channels - savings, investment, consumption, and income distribution. At the
community level, remittances create multiplier effects in the domestic economy.
This study focuses on the role of remittance on an economy of Marming VDC of Sindhupalchok
district of Nepal. Being a village close to the trade point between Nepal and China, the major
occupation in the area used to be local job opportunities created by the trade between the two
countries and the local projects initiated by the joint government of both countries. But during
recent years and especially after the recent earthquake of April 2015, the number of people going
abroad for employment has increased drastically and this study tries to highlight the role of the
money they send back home on the local economy.
Objective of the study
The objective of the study is to show the effect of remittance on the economy at a local level. It
also tend to analyze the economic condition during the time when the people now abroad had the
local jobs and compare it with the economic condition now, after they are abroad. The study also
tries to reflect the impact on economic development of the Sindhupalchok district, due to people
going abroad, leaving the local job.
Data source and Methodology
This paper is based on the secondary data provided by different government and local
institutions. The major data necessary for this study was obtained from local youth club survey
of Marming VDC, which is conducted by the local educated youth every year as an annual
programme. Some of the data employed in this study were obtained from various issues of
Economic Survey of Ministry of Finance. Internet is also used as the source of some data in this
study. Descriptive statistics, trend analysis, and other relevant statistical tools have been applied
for the analysis of data.
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Interpretation and Analysis of Data

Remittances can generate a positive effect on the economy through various channels such as
savings, investment, growth, consumption, and poverty and income distribution. Workers
remittances flow in as a component of foreign savings and as such complements national savings
by increasing the total pool of resources available for investment.
Since 2004 remittance has positive growth rate every year, and has helped rise in BoP surplus,
which have played a significant role in maintaining a stable economic condition for Nepal.

Figure 1: Remiittance income, Current Account and BoP situation (Rs. in ten million)
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
-5000

2004

2005

2006

2007

Current Account

2008

Remittances

2009

2010

2011

2012

2013

Balance of Payments

Source: Economic Survey, 2013/14

Since 2004 remittance has positive growth rate every year, and has helped rise in BoP surplus,
which have played a significant role in maintaining a stable economic condition for Nepal.

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Figure 2: Top 5 labor destinations.

11.23

2.12

40.87

20.28

22.92

Malaysia

Saudi Arabia

Qatar

UAE

Kuwait

Source: www.nepalee.com
The recent data published by the website www.nepalee.com shows Malaysia as a top destination
for the Nepali migrant workers.

Figure 3: Top 10 districts sending migrant workers.

10
9
8
7
6
5
4
3
2
1
0
Sindhupalchok

Jhapa

Morang

Makwanpur

Kavre

Kathmandu

Nuwakot

Sunsari

Illam

Dolakha

Source: www.napalee.com
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And the people from my area of study i.e. Sindhupalchowk district is the district from where
maximum numbers of the migrant workers are sent.

Figure 4: Average income of the households. (quarterly)

45000
40000
35000
30000
25000
20000
15000
10000
5000
0
1st Month

4th Month

8th Month 12th Month 16th Month 20th Month 24th Month
Local Employment

Column1

Source: Marming VDC Youth Club (2015 Survey)

At the beginning the amount of remittance is almost zero, as workers use their initial salary for
the settlement or adjustment purpose. But as they settle down, they start sending more and more
amount of remittance every month. Also during festival seasons, the workers send more money
and the remittance rises drastically at that point of time.

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Figure 5: Average spending of households. (quarterly)

30000
25000
20000
15000
10000
5000
0
1st Month

4th Month

8th Month 12th Month 16th Month 20th Month 24th Month

Spending at local employment

Column1

Source: Marming VDC Youth Club (2015 Survey)

The role of remittance on local level economy can be significantly seen in the figure above. With
more remittance flow every month, the consumption behavior of a house hold rises. With rise in
consumption rises the spending and with spending, local business and local income earning
activities gets promoted. Thus, helping the local economy to improve.
Table 1: Locals employed in local employment sectors.
Local Job offering organizations. No. of local
(2014)
The Last Resort.
52
Bhotekoshi Hydro Project.
87
Chaku Hydro Project.
75
The Border Lands.
45
Source: Marming VDC Youth Club. (2015 Survey)

people. No. of local people. (2015)

35
45
62
10

But the table above shows the consequence of foreign employment. Though foreign employment
brings more remittance, which helps improve local economy, it also creates scarce of man power
at local level. Most of the good local jobs offering organizations are losing manpower, which has
raised a question mark on their sustainability.

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Concluding Remarks
The study shows that there is significant role of remittance on the economy at local level.
Marming VDC has attained notable improvement in local economy due to remittance but it also
is facing the problem of human resource at local organizations. So remittance is good from the
perspective of developing an individual or a household, but for a nation to develop foreign
employment should be made less attractive by providing proper incentives, so that local man
power would work for local jobs and help a nation to develop.
References

MOF (Ministry of Finance) (2013/14). Economic Survey. Kathmandu: MOF

Marming VDC Youth Club (2014/15). General Survey. Sindhupalchok
Remittance, migrant workers and Terai of Nepal (2014). www.napalee.com

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Map of area of study

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