Remittance addiction: Low-wage migrants, low-waged population

Imtiaz A. Hussain   | Published: May 09, 2019 20:33:24 | Updated: May 11, 2019 22:00:16

Once an embarrassing Bangladesh trait, it now characterises low- and middle-income countries at large: remittances overtaking foreign direct investment (FDI). For Bangladesh, just as its low-wage workers were in high and growing demand (domestically for the RMG sector, globally with a Middle-east and Southeast Asian accent), inward FDI flows have almost always had to be trimmed for political reasons and apprehensions of sorts. Yet, as FDI flows have begun to accelerate (against the growth and apprehensions of our infrastructure-building outlays and special economic/export processing zones), lo behold, the remittance flows have also spiralled, as a matter of fact, faster.

Whether this is good news or not is a dicey proposition. What we do know is that they often elevate different population segments in different countries; and if those countries happen to be at different developmental levels, generating conclusions become vacuous. Take the case of Bangladesh, the 9th largest remittance-receiving country in 2018 (Simon Roughneen, Asia Times, May 02, 2019). Its $14.4 billion income not only far outweighs the FDI inflows, but also comes primarily from our low-wage migrants. Yet, blessed with a surplus low-waged population segment, it has also climbed the global RMG  (ready-made garments) export sector, vying to hit $50 billion worth of exports by 2021. Leading the remittance-receiving list is India, with a $78.6 billion tally, followed by China's $67.4 billion. Although the former has a low-wage surplus population segment, it also earns income from high-skilled remitters, suggesting why there is no low-wage remittance monopoly. China, the world's second largest economy, debunks that argument more convincingly.

If low-wage migrant export is not the only remittance driver, can it still inhibit any upward-mobility of any low-waged country? Bangladesh's case suggests so. Given the massive long-term RMG contracts to produce for retailers and fashion designers across Europe and North America, there is a discernible go-slow approach to both changing the low-wage production structure, often by rigged rules, and diversifying the RMG-base. As the country enters and plans to climb the middle-income country-bracket, these pose huge long-term problems: on the one hand, it gives the suppressed low-wage pay-structure look increasingly more like slave-wages (breeding strikes and street-side protests), while on the other, it stultifies industrial innovation and opening FDI opportunities. With innovation, RMG automation is passing us by when our RMG importers have seriously begun shifting in that direction. This narrows our future RMG growth without us doing anything significant in return. Without opening new FDI windows, industrial growth faces unnecessary stifling currently. No doubt it will happen one day, but too belatedly to make a dent. Since we are not exploring industrial frontiers, FDI inflows may be more attracted by low-wage labour availabilities than high-end products/service production. It would be tough climbing beyond middle-income and "developing" statuses into a "developed country" group.

China's remittance experiences offer another pertinent observation. It is both a receiver and emitter, indeed, with $16 billion emitted in 2018, it recorded the 7th largest figure in this regard. Behind the inflowing remittance glee, Bangladesh is also being fleeced by outgoing remittance, a sizable proportion of it through non-legal routes, making it too fluid to estimate and value. In conjunction with open-ended smuggling, the country is losing enough of its investible capital to show the spunk of a 9th highest remittance-receiving country. Unlike the low-waged migrants who supply Bangladesh a bulk of its remittance, our outflows go mostly through high-skilled, or upper-end jobs in which India could be the runaway receiving country leader.

Without a carefully calibrated industrial policy, it will be very hard for Bangladesh to maximise its remittance mileage. Such a policy approach is not just about industries: it coordinates different economic sectors under expert guidance to get the maximum bang out of every buck. We made a dashing, albeit unwitting start in this regard by going massively with infrastructure-building projects on a priority basis, largely with public funding. We were able to do so largely because of the glow from our RMG income and remittance money. If pursued adroitly, Part Two would be to spur private investment, both domestic and external: an open-ended private sector within obvious safety, health, pay-scale, environmental, transparent taxation rules can be further lubricated with available and appropriate infrastructures. What industrial policy could then do is to channel such investment into new production types.

Many wait at the door. From cultivating natural fibre, like reinventing jute to displace plastic-laced RMG production, to shifting the low-wage threshold upwards, that is from the RMG sector to a better-remunerated but still globally low-paid ICT (information and communications technology) production, or even pushing the leather opportunities in newer arenas. These are all viable domestic investment opportunities crying out loud for more attention, and in sectors guaranteed to attract foreign investors through joint exercises. All that is needed is the guidance, encouragement, and initial catalyst.

Only when these are in place will we fully understand that multi-dimensional beast called remittance: it is but a short lifeline meant to catapult lesser endowed countries into higher thresholds provided the necessary infrastructures and unhindered flow-channels are in place. Those remittances were meant to fuel that transformation. Yet, as that transformation nears completion, new rules, institutions, resources, and ballgames must enter the picture. We do not have enough of them, even in the pipeline, to sustain a middle-income country. The urgency to find, plant, and cultivate them demands we do not take our present "upswing" for granted, and that includes every impact the RMG and remittance incomes has had for us: the spiralling proportion of imported luxury-goods suggests we are becoming too much of a consuming society, relative to our productive index, too soon to be able to heed that crucial lesson; and the absence of basic rules, particularly in low-waged countries, that manages metropolitan traffic, housing, and fire-protection, among other critical arenas, shows how we are not even preparing the middle-income playground. These are pivotal.

Upgrading our low-waged workers is also pivotal: a middle-income society is not for population segments, but for all, even within the ups-and-downs of competition. To slowly supplant the remittance magic in our mindset by new income sources invites far greater future yardage than remittance would, and where we should be exploring those opportunities.

Even more: there is a place in our plastic world for a country to lead. It has been discussed time and again how the plastic population in the oceans will replace fish by mid-century, meaning the plastic we are ingesting daily is incrementally destroying our health and bank-accounts from medical visits. A quick, renewable alternative is needed more urgently every day. A lot of research and development (R/D) awaits harnessing. For a country that has at least one putative alternative, we have been too slow to pick it up because of the RMG/remittance blinders. Once we do, there is a globe-leading trajectory with a larger pot of gold than the pittance of a rainbow we have been stuck with.

Dr. Imtiaz A. Hussain is Professor & Head of the Department of Global Studies & Governance at Independent University, Bangladesh.




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