Department of Business Administration
ASSIGNMENT ON:
Remittance Situation of Bangladesh
Course Title: Economy of Bangladesh
Course code: ECON 701
SUBMITTED TO:
Md Abdul latif Mahmud
Senior lecturer,
Department of Business
Administration.
World School Of Business
SUBMITTED BY:
Md. Sakiruzzaman
Jubayer Chishte Dip
Israat jahan Ritu
Afsana Mimi Asha
Sakila Sarkar
3236
3151
3801
3811
3486
BATCH: 55/C
PROGRAM: BBA
Department of Business
Administration
WORLD UNIVERSITY
OF BANGLADESH
DATE OF SUBMISSION:
13th April, 2019
[1]
ACKNOWLEDGEMENT
First, I remember Almighty Allah for helping me to successfully prepare this report. I express
my profound thanks to Md Abdul latif Mahmud, Senior lecturer, Department of Business
Administration, World University of Bangladesh, for being a co-operative and very
accommodating advisor and providing me appropriate direction in carrying out this report I
heartily thank all my friends who directly or indirectly provided me their support in this regard.
Finally, I would like to humble thanks to all of my family members who gave me physical,
psychological and economical supports to complete this report.
[2]
Table of Content
SI.
PARTICULARS
Chapter-1
Introduction
1
Overview
4
1.2
Meaning of Remittance
5
1.3
Objectives of the study
5
2.1
Analysis
2.2
2.3
Remittances Inflows in FY18-19
9
2.4
Country-wise migration in FY-2018
10
2.5
Country-wise Female migration in FY-2018
11
2.6
Overseas Employment by skill in FY-2018
12
2.7
2.8
Bank-wise Remittances Inflows in FY18-19
World’s Top 10 Remittance Recipients 2017
12
13
Remittances and Economic Growth of Bangladesh
6-7
8
14-16
3.1
Remittance Inflows in Last 10 Years
14
3.2
Impact of remittance on development
14-15
3.3
Significance of remittance income for Bangladesh economy
16
Findings and Recommendations
17
Chapter-4
4
6-13
Remittance as percentage of GDP, Export and Import and
its growth
Country-wise Remittances Inflows in FY18
Chapter-3
3
4-5
1.1
Chapter-2
2
PAGES
4.1
Findings
17
4.2
Recommendations
17
Chapter-5
18
Conclusion
[3]
Chapter One
1. INTRODUCTION
1.1 Overview
A remittance is a transfer of money by a foreign worker to his or her home country. Remittance
can also refer to the accounting concept of a monetary payment transferred by a customer to a
business (Wikipedia, the free encyclopedia). According to the World Bank, in 2018 overall
global remittance grew 10% to US$689 billion, including US$528 billion to developing
countries.
Overall global remittance is expected to grow 3.7% to US$ 715 billion in 2019, including
US$549 billion to developing nations. Due to its large diaspora and overseas expats population,
India consecutively remains the top receiver of remittance, e.g. with US$80 billion in 2018,
US$65.3 billion (2.7% of India's GDP) in 2017, US$ 62.7 billion in 2016 and US$70 billion in
2014, Other top recipients in 2018 were US$67 billion to China, US$34 billion each to
Philippines and Mexico, US$26 billion to Egypt.
Remittance has been playing a very significant role to the sustainable economic development of a
developing country like Bangladesh. The government has used remittance to pay the different
government and non-government import bills and the installments of different foreign debt and
donation.
Remittances are used to make import payments and are used for productive investment by the
government. Overseas remittances achieving a favorable balance of payments and as well as creating
a new resources base for the country. A large portion of remittance income is spent for consumption
purposes, acquisition of assets, investment in trade and business and to finance import of capital
goods in Bangladesh. It has been positively affecting the socio-economic condition of migrant families
[4]
1.2. Meaning of Remittance
A remittance is a transfer of money by a foreign worker to his or her home country. Remittance
can also refer to the accounting concept of a monetary payment transferred by a customer to a
business (Wikipedia, the free encyclopedia). A person who was exiled and has sent money to
his or her home country, called remittance.
workers’ remittances as the sum of three components: (I) workers’ remittances recorded under
the heading “ current transfers” in the current account of the balance of payments; (II)
compensation of employees which includes wages, salaries, and other benefits of border,
seasonal, and other non-resident workers ( such as local staff of embassies) and which are
recorded under the “ income” sub- category of the current account; and ( III) migrant transfers
which are reported under “ capital transfers” in the capital account of the IMF’s Balance of
Payments Yearbook ( item codes 2391,2310, and 2431 respectively).
1.3. Objectives of the study
The present study has been undertaken with the following objectives:
To investigate and find out the remittance income of Bangladesh;
To know the significance of remittance income for the economic development of
Bangladesh;
To explore the potential opportunity of remittance income in Bangladesh;
To find out the problems of remittance income of Bangladesh; and
To recommend some suggestions based on findings to overcome the barriers of
remittance income in Bangladesh.
Find out the total no of Workers leave Bangladesh at FY-2018
Find out the Country-wise migration in FY-2018
Find out the World’s Top 10 Remittance Recipients of 2017.
[5]
Chapter Two
2. ANALYSIS
2.1. Remittance as percentage of GDP, Export and Import and its growth
Remittances are the second highest source of foreign currency earnings in Bangladesh after
exports of readymade garments (RMG). However, remittances can be considered as the highest
one in terms of net earnings since in case of exporting RMG a significant portion of earnings
is foregone for importing its raw materials. Remittances play an important role on the overall
economy of Bangladesh. World Bank ranked Bangladesh as ninth in the world and third in the
South Asia Region for inflow of remittances based on the data of 2017. Bangladesh joined the
10 billion USD club of remittance inflows in FY10.
Foreign employment and remittances sent by the Bangladeshi expatriates make immense
contribution to the economic development of Bangladesh in many ways such as lowering
unemployment, alleviating poverty and boosting foreign exchange reserves. The patterns and
uses of remittances is one of important factor for economic development. If expatriates’
earnings are invested in productive uses, it can contribute to output growth, employment, etc.
In FY18, remittance was 5.50 percent of country's GDP and 40.86 percent of total export
earnings and 27.51 percent of import payments (f.o.b) (Chart-1 andTable-1). In addition,
remittances play a supportive role in strengthening the current account balance.
[6]
In FY18, remittances increased by 17.3 percent to USD 14981.69 million as compared to USD
12769.45 million in FY17. One of the contributing factors behind this growth was strong
supervision of Bangladesh Bank. Government has taken legal actions against some source
countries for using informal channel for sending remittance which might increase the flow of
remittance in formal channels. Moreover, Bangladesh Bank had simplified the approval policy
of drawing arrangements between foreign exchange houses and domestic banks.
FY
Remittance
as %
of GDP
Remittance as % of
Export
Earnings (f.o.b)
Remittance as % of
Import
Payments (f.o.b)
Growth (%) of
Remittance
FY07
7.51
49.60
38.54
24.50
FY08
8.64
55.93
40.62
32.39
FY09
9.44
62.11
47.70
22.28
FY10
9.52
67.80
46.29
13.40
FY11
9.05
50.64
34.61
6.03
FY12
9.63
53.58
38.59
10.24
FY13
9.64
54.43
43.07
12.51
FY14
8.21
47.78
38.91
-1.61
FY15
7.85
49.08
40.67
7.64
FY16
6.74
43.59
37.42
-2.51
FY17
5.11
36.85
29.36
-14.48
FY18P
5.50
40.86
27.51
17.32
[7]
2.2. Country-wise Remittances Inflows in FY18
Bangladesh receives a lion share of remittances from the Middle East countries. During FY18,
the highest amount (17.3 percent) of remittances came from Saudi Arabia followed by the
United Arab Emirates (UAE) (16.2 percent), United States of America (13.3 percent), Kuwait
(8.0 percent), Malaysia (7.4 percent), United Kingdom (7.4 percent) and Oman (6.4 percent).
All other countries contributed to 24.0 percent of total remittances over the same period.
Country wise remittances inflows in FY18 is shown in Chart
Country-wise Remittances Inflows in FY18
[8]
2.3. Remittances Inflows in FY18-19
[9]
2.4. Country-wise migration in FY-2018
Each year, more than 500,000 workers leave the Bangladesh for overseas employment. Problems faced
by Bangladeshi migrants include: high fees for migration charged by recruitment agencies, especially
for low skilled jobs; low wages, lack of information on migration opportunities and risks;
discrimination, exploitation and abuse while overseas; and insufficient services to protect the rights of
workers.
It has been observed that most of the expatriates are working in Saudi Arabia, the U.A.E.,
Malaysia, the U.K., Kuwait, the U.S.A., Oman and Singapore. Besides, new employment
opportunities for Bangladeshi workers have also been created in Bahrain, Qatar, Jordan, South
Korea, Brunei, Mauritius, Italy and other countries. During 1976 to October 2019, Saudi Arabia
ranked by far the first and foremost destination for Bangladeshi migrants and accounted for
about 35 percent of total manpower export.
[10]
2.5 Country-wise Female migration in FY-2018
It has been observed that most of the expatriates are working in Saudi Arabia, the U.A.E.,
Malaysia, the U.K., Kuwait, the U.S.A., Oman and Singapore. Besides, new employment
opportunities for Bangladeshi workers have also been created in Bahrain, Qatar, Jordan, South
Korea, Brunei, Mauritius, Italy and other countries. During 1976 to October 2019, Saudi Arabia
ranked by far the first and foremost destination for Bangladeshi migrants and accounted for
about 72 percent of total Female manpower export.
[11]
2.7. Overseas Employment by skill in FY-2018
It has been observed that most of the 45% people are skilled where 38.55% people are migrated
to foreign countries without skills.
2.8. Bank-wise Remittances Inflows in FY18-19
Both the formal and informal channels are using by Bangladeshi migrants to send their
remittances to their relatives at home. Among the formal channels, two channels are common,
such as draft issued by a bank or exchange house and electronic funds transfers into accounts.
Some government banks such as Sonali Bank Limited, Janata Bank Limited, Agrani Bank
Limited and Some private commercial banks such as Bank Asia Limited, Prime Bank Limited,
AB Bank Limited, United Commercial Bank Limited, Mercantile Bank Limited, Citibak N.A.
and Social Islami Bank Limited are very much active in the remittance market. Among the
informal channels, the most used channel is hundi system. The sender and remitter are avoiding
tax and violating foreign exchange rules & regulations that may facilitate money laundering.
[12]
2.8. World’s Top 10 Remittance Recipients
Bangladesh has been recognized as the ninth highest recipient of remittances this year with
$15.9 billion, ranking third in South Asia—after India whose remittance is $79.5billion and
Pakistan who ranked $20.9billion.
— according to a World Bank report
In 2018, the top remittance-receiving countries are projected to be India ($79.5 billion),
followed by China ($67 billion), Mexico and the Philippines ($34 billion each), and Egypt ($26
billion), according to the global lender.
In 2017 Bangladesh has received 13B USD while Vietnam has received 13.8B USD
[13]
Chapter Three
3. REMITTANCES AND ECONOMIC GROWTH OF BANGLADESH
Bangladesh has been an important source of migrant workers for countries suffering from
labor shortages and migrant workers’ remittances have become an increasingly important
source of export income for this region. Within South Asia, Bangladesh, India, Pakistan and
Sri Lanka have been the main suppliers of migrant workers who are spread over almost all over
the world. Remittances sent by these migrant workers to their home countries have played an
important role to promote economic development in these countries.
3.1. Remittance Inflows in Last 10 Years
Remittance inflow posted its all-time high in the
immediate past year 2018 amid appreciation of US
dollar against the Bangladeshi currency, prompting
expatriates to send money through legal channel.
In 2018, inflow of remittance increased by 14.83 per
cent or $2.01 billion, taking the total remittance
inflow to $15.53 billion from $13.53 billion in the
previous year.Before 2018, the highest amount of
remittance earnings of the country was in 2015 when
the country’s remittance earnings posted an all-time
high at $15.31 billion.
3.2. Impact of remittance on development
In Bangladesh 156 million people live in an area of 143,998 sq.km, which means 1,083 persons per
sq.km, or one person per square meter! In terms of population, Bangladesh is the 7th largest country in
the world whereas in terms of GDP (PPT, Per Capita Income Parity) its position in the world is 196.
About 45% of the population lives below the poverty line and each year natural calamities like
devastating flood, cyclone, drought, etc. push millions of people below the poverty line. A big
percentage of its 70.86 million labour is either unemployed or nominally employed. Under such a grim
socio-economic condition what is the impact of remittances on the socio-economic development of
Bangladesh?
[14]
Currently, about 6 million Bangladeshis work abroad, and when they send money to their families back
home these are in foreign currencies, and for the government these remittances are one of the most
important sources of foreign exchange earnings. According to the Bangladesh
Bureau on Manpower and Training (BMET), Bangladesh received more than $9 billion as remittances
in 2008. According BMET, during the last 33 years (1976-2008) Bangladesh experienced a significant
rise in remittance growth -- it was only $23.71 million in 1976 whereas it has reached $9.02 billion
(formal remittance) in 2008.
As one of the Least Developed Countries (LDC), foreign currency is needed for socio-economic
development. Remittances help Bangladesh to make investments for industrial development, modernize
its industries by importing high-tech machineries for export-oriented manufacturing, modernize its
agriculture, invest in education, etc.
On the one hand, these factors create more employment in the country and, on the other, help the country
to increase its export of manufactured goods as opposed to agricultural products, raw materials, low
quality finished products etc., as they were in the past.
In 2008, the total value of exports from its agricultural, industrial and service sectors was $13.97 billion
whereas in 2008 it received $9.02 billion from its overseas workers as formal remittances. Thus, we
must consider remittance as a very important source of foreign exchange earnings for the country. If we
combine both formal and informal remittances the total exceeds the total earnings from its exports.
Remittances also help Bangladesh in making the balance of payments favorable, or make up the deficit
between total export and import. For example, in 2008, Bangladesh exported $13.97 billion worth of
goods and services and in turn imported $19.59 billion worth of goods and services. This gave a deficit
of $5.62 billion in Bangladesh's Balance of Payment (BOP).
However, in 2008, the amount of remittances that Bangladesh received from its migrant workers abroad
amounted to $9.02 billion and that helped Bangladesh correct its BOP deficit to a surplus of $3.4 billion.
In July 2009, Bangladesh's BOP surplus reached $1.39 billion. Remittance in the first 11 months of the
fiscal year 2008-2009 was $8.76 billion, which helped boost the country's BOP.
A World Bank analysis said: "Remittance has been a key driver of economic growth and poverty
reduction in Bangladesh." The migrants send back billions of dollars and the country can then use these
resources for investment for industrial development, improvement of educational facilities and services,
and extend and improve its health services. The money that is sent back is also beneficial to the families
and to the country in that it helps reduce poverty and also allows for investment in small businesses and
chances for furthering education.
The government also believes that there is compelling evidence that international migration -- through
remittances and the transfer of social capital -- can positively contribute towards alleviating poverty.
The government is also convinced that the effects are both direct and also through consumption and
investment multipliers. Migration provides job opportunities to the young population in Bangladesh.
These views are also supported by the 2005 IOM report "The MDGs and Migration," which explains
how migration can not only increase income (remittances) but also reduce economic inequality in the
society, and thus recommends mainstreaming migration into poverty reduction strategies.
[15]
3.3. Significance of remittance income for Bangladesh economy
1. Remittance contributes to our national economy is a large scale by increasing foreign
exchange reserve per capita income and employment opportunities.
2. It has been continuously lifting-up the GDP (Gross Domestic Product) of Bangladesh. In
2012, the remittance which has sent by the migrant workers is the 11 percent of the total GDP
of Bangladesh.
3. Remittance has been continuously keeping the contribution to alleviate the poverty of
Bangladesh through micro-enterprise development, generating substantial employment and
income.
4. The government has been paid various government and non-government import bills and
installments of different foreign debt & donation from the remittance income.
5. Remittance income helps the government of Bangladesh to reduce dependency on foreign
aid.
6. Remittance helps to improve the balance of payment position of Bangladesh.
7. Remittance income makes more strong local currency Bangladesh) against US dollar.
8. The government of Bangladesh is using remittance income to build schools, colleges,
universities, hospital.
[16]
Chapter Four
4. FINDINGS & RECOMMENDATIONS
4.1. Findings
This document provides a set of security measures, and some excellent recommendations to
improve banking and other issues. However, the following are some important and immediate
recommendations the government can begin to work on:
The Labor Migration Cost in Bangladesh is too high relatively other countries like
INDIA.
Huge no of workers face corruption or other problems.
A huge no of people are unskilled and after migration they are facing lots of problems.
Remittance is an important source of Government revenue.
A huge amount of money that is sent illegally; alternatively.
Long delays in receiving the money.
4.2. Recommendations
Cost is a significant factor for small, individual transfers. Cost should be
decrease by Government to reduce illegal money transfers.
Fair recruitment process should be Available for the workers.
Provide training to improve skills.
Establish faster and safer methods of transferring money to the recipients.
Migration Cost should be reduce.
[17]
Chapter Five
5. CONCLUSION
This study reveals the magnitude and direction of migration and remittances and the ways
remittances are affecting the development of the society and economy as a whole. Plausibly,
Bangladesh will remain a labor export franchise in the foreseeable future because of its low
level of economic development and a huge surplus labor force that is always ready to fly. So
remittances should continue to rise in the economy if the out-migration continues.
As we have seen, migration from Bangladesh is more diverse in terms of destinations.
However, an improvement in the composition of female workers abroad could enhance
economic empowerment of their families and the returnee female migrants at the end.
Moreover, Bangladesh still needs to improve remittance delivery infrastructure so that migrants
can avoid informal channels for sending remittances back home. That could help diminish the
growth of the unofficial economy by reducing the unrecorded inflows of remittances. It may
also minimize the problem of superficial inflation visible in the zones that have most migrants
outside the country.
[18]
REFERENCES
https://www.bb.org.bd/
http://www.bmet.org.bd/BMET/stattisticalDataAction
https://www.worldbank.org/
https://www.dhakatribune.com/mobile
https://www.ilo.org/dhaka/lang--en/index.htm
https://www.wikipedia.org/
https://www.investopedia.com/
https://www.academia.edu/
[19]