Tej Prasad Panthi
Korea University
Roll No. 2009470082
August, 2011
Background/Introduction
Research
Results
Thesis
methods
& findings
/Article
Publications
Some
Refreshments!

KOICA scholarship received in 2008

Course: International Development Studies; 50 Credits

University: Korea University

Period: Feb 2009-2010 (One Year)

Major Subjects: International Economic, International
Business, Economic Development, Multinational
Corporations & Foreign Direct Investment, Multilateral and
Regional Cooperation for Economic Development, Digital
Economics, East Asian Economy, US Foreign Economic
Relations
context
•Remittances inflow is increasing
 Mixed results in economy
• Poverty reduced by 11%
• BOP is positive! (2/3 contribution of
Remittance Income
(million $)
300.00
rd
remittance – Gaudel, 2006))
But
• Inflation is increasing
• Huge brain/labor drain
• Trade gap is increasing
• 2 ways to increase of
remittance: Qual. Vs Quant.
•Push and Pull factors acting
238.17
250.00
200.00
154.01
150.00
138.59
100.00
61.11
50.00
81.31
90.63
73.45
61.42
0.00
20012002200320042005200620072008
Context
Source: Ministry of Finance, Nepal. 2009. xvii-xxi. Economic survey 2008/09. Government of Nepal July 2009.
http://www.mof.gov.np/publication/budget/2009/pdf/english_full.pdf (accessed August 28, 2009).
Objective:

To assess remittance role and effect to the national
economy of Nepal.
Key Words:
◦ Remittance Inflow
◦ Official Development Grant
◦ Economic Growth
◦ Foreign Direct Investment
◦ Nepal
Objective

Why Remittance Study?
◦ Remittance inflows in unfavorable economic
situation
◦ Contribution on poverty alleviation & resource gap

The argument develops from study gap:
◦ Remittance’s livelihood approach & temporary
support (divergent) Vs prospects for social network
and development resource (convergent).

Is increasing dependency on remittance
good for economy in long term?
Introduction
Argument

•Poverty Reduction?
Possible (WB Study), but meager headcount poverty reduced
◦ 2% remittance contribution to reduce poverty from 1996 – 2004 (Wagle
2008);
◦ 1/5th contribution for reducing 11 percent poverty (Lokshin et.al 2007; Brodak
&Tichit 2009)

Policy (factor) intervention remained crucial i.e. increase of
wage rate and urbanization (NPC)

Costly remittance has pushed up migration

Income gap: Increasing Gini Coefficient (Kollimair 2007; Wagle 2008;
NPC 2007)
Introduction: Argument
Argument

•Does it fulfill the Resource Gap?
Accumulation of Capital: Key resource for
Development

Cushion support and liability free!

Hard money: not flexible to government

High Consumption increases the trade gap

Import revenue increases but it may destroy
domestic industry
Introduction: Argument
Argument

•Is it alternative to external
funding?
Short term help Vs long term support (diverse and
different effect)

"Higher Magnitude" and "Significant Stable" impact on
economic stability among FDI and ODA (Chami et.al. 2008)

Informal flow: push up underground economy

If taxed: further deteriorate poor’s condition (how to
earn revenue?)
Introduction: Argument
Argument
•Social Cost and Physical Costing !
•
•
•
•
•
High Initial Cost: Bankruptcy HH rate
Corruption in Foreign Employment Management
Disruptive Internal Resource Mobilization
Moral Hazards and Social Problems
Incompetency in Labor forces; 3 “Ds” Job: Bad
Image; social insecurity
• Real estate boom; Bad Saving Habit
• Regional Development Problem
Remittance Cost (in USD) from UK to Nepal
Fees
Exchange Rate
Percent
Per 200$
per 500 $
8.69
2.51
6.85
13.7
21.85
Source: WB. 2009. Remittance Prices Worldwide. WB and IFC. http://remittanceprices.
worldbank.org/RemittanceCosts/?from=0&to=136&cinfo=0&sort=1&direction=Asc#0
Facts
•Remittance Economy
160000
140000
1000000
120000
GDP
800000
Amount
100000
900000
Revenue
700000
Remittance
600000
Amount
Remittance
Official Grant
GDP
Revenue
80000
60000
40000
20000
0
Year
Official Grant
FDI
500000
FDI
400000
300000
200000
Remittance
100000
0
Year
Revenue
Official Grant
FDI
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Sources: Economic Surveys (2001/2 to 2008/9). Ministry of Finance,
Government of Nepal; Raghubir Bista (2005, 101). Foreign Direct Investment
in Nepal, CIDS, Kathmandu, Nepal.
Research Questions:

Whether remittances income affects economic growth of Nepal?

Whether remittances fund use as development resources?

Whether skilled labors transfer of knowledge and skill?

The arguing point has developed from the research
questions whether remittance-policy of productive
use as well as quality migrant labor is influential to
economic growth of Nepal.

H1 : Remittance inflow has significant
impact on economic growth as well as fund
use for development purpose and skilled
labor emigrants influence remittances and
economic growth of Nepal.
Context
(input)
Methodology
Effects
on GDP
Growth
Remittance
Inflow
Independe
nt Variable
Aim
(output
)
Economic
Growth
Skilled labor &
spill over
Knowledge &
technology
Productive use
of remittance
Dependent
Variable
Inductive: (causal
links)
•Quantitative and Qualitative Analysis for secondary data
•Comparative Variables: Remittance, Official Grant, FDI
(covering development aspects)
• Econometric / (regression) Analysis for Period: 1987-2008
•
using Stata program
Chapter One: Introduction
Chapter Two: Remittance &
Economic Development:
2.1
Theoretical Perspective
2.1.1 Theories of Migration and
Economic Growth
2.1.2 Convergent and Divergent
Theories
2.2
Remittances Income as a
Key Resource
2.2.1 Remittance and Poverty
2.2.2 Remittance for Resource Gap
2.2.3 Remittance and Economic
Growth
Framework
Chapter Three: Empirical Analysis
on the Role of Remittance :
3.1
Remittance in Relation to GDP
FDI and ODG
3.2
Regression Analysis with
Remittance Inflow and GDP
3.3
Remittance & Development
3.4
Remittance and Skilled Labor
3.5
Results
Chapter Four: Conclusion &
Recommendation:
4.1
Conclusion
4.2
Recommendations
References
Appendices
Des. /Model
I
II
Variables/equati Remittance/G Remittance,
ons
DP
ODA &
FDI/GDP
GDP(_cons)Cof 8.639(31.70***) 9.962 (19.17***)
.414
.178
Rem_1 Coef.
(14.67 ***)
ODA_1 Coef.
FDI_1 Coef.
Rev_1 Coef.
F-value
DW Coef.
R2
Adj. R2
(2.67***)
III
Rem, ODA,
FDI &
Rev/GDP
4.547 (9.97 ***)
IV
ODA, FDI &
Rev/GDP
4.513 (10.78***)
.0056
(0.23 ***)
.0104 (3.89***)
.00086 (0.76 ***)
.00091 (0.85***)
-.0065 (-0.10***)
-.0284 (-1.40 ***)
-.0278 (-1.42***)
.788 (15.69***)
.781 (12.74***)
215.07***
.3978397
124.22***
.6419109
967.96***
1.335079
1362.45***
0.9149
0.9539
0.9956
1.333693
0.9956
0.9107
0.9462
0.9946
0.9949
No. of Obs.
22
22
22
22
***result of 99 degree of confidence interval and t statistic is in parenthesis and results from stata application.
Sources: Data collected, compiled and calculated from different Economic Surveys (2001/2, 2006/07 & 2008/9),
Ministry of Finance, Government of Nepal; Nation Master, nationmaster.com; Bista (2005) FDI in Nepal,
Kathmandu: CIDS..

The contention of remittance has been emerging
since 2000 because of its dubious contribution.

On the one hand, it is reducing poverty and
maintaining balance of payment without such
domestic efforts in Nepal;

on the other hand, it is pushing up inequality and
informal economy as well as increasing the threat
of Dutch-disease effects.

Theoretically, remittance impact to the
national economy is still immature to ensure
because of its dynamic nature and data
collection problem.

Workers’ remittances inflow has the positive
impact to increase in GDP even though
comparatively feeble effects on the economic
growth of Nepal.

The current development path on growing
dependency with remittances economy may not
be beneficial for long term development of
Nepal.

Moreover, this study also finds that using
remittances fund for the productive sector an
d managing quality emigrants’ participation
has indeed influential causal relations putting
positive impacts in increasing economic grow
th through quality remittances income.

However, domestic environment like
insecurity, land-locked geopolitics and policy
factors are crucial to using remittance fund
for long term economic growth.

Poor banking system and less conducive
policy environment cannot create stimulus
investment climate.

The bright side of remittances depends on
revival of economy by using physical, human
and social capital to mitigate its negative
impact on the economy.

Remittances fund has been regarded as
compensation of Nepal's lost-labor efforts. It
has long term economic and social negative
impact to cultivate home economy.

Government policy may improve the
condition through intervention on migration
cycle, coordinating the remittance use, inform
ation, knowledge transfer and exchange.

Remittances impact on GDP growth is positive but not
encouraging for economic growth of Nepal.

Policy on productive use has positive impact to
influence remittances and economic growth.

Skilled labor participation has significant impact to
upgrade remittances inflow i.e. as physical, social and
human capital as well as long term economic growth of
Nepal.
Further studies suggest for:

Role of policy reform and stability for remittance use.

“Managed control” and liberalizing labor services.

Formalizing remittances transfer and technology &
banking network for use of development fund.

Net effects of remittances flow.
. tsset year, yearly
time variable: year, 1987 to 2008
. *Model 1
. regress GDP Rem, level(99)
Source | SS
df MS
Number of obs = 22
-------------+------------------------------------------ F( 1, 20) =
224.68
Model
| 1.0026e+12 1 1.0026e+12 Prob > F
= 0.0000
Residual | 8.9244e+10
20 4.4622e+09
R-squared =
0.9183
-------------+------------------------------------------ Adj R-squared
= 0.9142
Total
| 1.0918e+12
21 5.1992e+10
Root MSE
= 66800
-----------------------------------------------------------------------------------------------GDP
| Coef.
Std. Err. T
P>|t| [99% Conf. Interval]
-------------+---------------------------------------------------------------------------------Rem
| 4.851646
.3236712
14.99 0.000 3.930692 5.7726
_cons
| 178799.3
18755.92
9.53 0.000 125432.4 232166.3
-----------------------------------------------------------------------------------------------. dwstat
Durbin-Watson d-statistic( 2, 22) = .8458659
. *Model 2
. regress GDP Rem ODA FDI, level(99)
Source | SS
df MS
Number of obs
= 22
-------------+------------------------------------------ F( 3, 18) =
163.52
Model
| 1.0532e+12
3 3.5106e+11
Prob > F
= 0.0000
Residual | 3.8645e+10
18 2.1469e+09
R-squared
= 0.9646
-------------+------------------------------------------ Adj R-squared
= 0.9587
Total
| 1.0918e+12
21 5.1992e+10
Root MSE
= 46335
-----------------------------------------------------------------------------------------------GDP
| Coef.
Std. Err.
t
P>|t|
[99% Conf. Interval]
-------------+---------------------------------------------------------------------------------Rem
| 2.798415
.5084844
5.50 0.000 1.334773 4.262057
ODA
| 13.6449
2.810818
4.85 0.000 5.554123 21.73567
FDI
| 14.19825
10.78485
1.32 0.205 -16.8453 45.2418
_cons
| 88458.55
26950.9
3.28 0.004 10881.98 166035.1
-----------------------------------------------------------------------------------------------. dwstat
Durbin-Watson d-statistic( 4, 22) = 1.688243
*Model 3
. regress GDP Rem ODA FDI Rev, level(99)
Source | SS
df MS
Number of obs
= 22
-------------+------------------------------------------ F( 4, 17) =
677.49
Model
| 1.0850e+12
4 2.7125e+11
Prob > F
= 0.0000
Residual | 6.8065e+09
17 400379933
R-squared
= 0.9938
-------------+------------------------------------------ Adj R-squared
= 0.9923
Total
| 1.0918e+12
21 5.1992e+10
Root MSE
= 20009
-----------------------------------------------------------------------------------------------GDP
| Coef.
Std. Err. T
P>|t| [99% Conf. Interval]
-------------+---------------------------------------------------------------------------------Rem
| .525728
.33641
1.56 0.137 -.4492657 1.500722
ODA
| 8.216424
1.357932
6.05 0.000 4.280825
12.15202
FDI
| -2.52042
5.020579
-0.50 0.622 -17.07121 12.03037
Rev
| 4.376279
.4907574
8.92 0.000 2.953951
5.798607
_cons
| 68550.57
11850.79
5.78 0.000 34204.26
102896.9
----------------------------------------------------------------------------------------------. dwstat
Durbin-Watson d-statistic( 5, 22) = 1.302553
. *Model 4.
regress GDP ODA FDI Rev, level(99)
Source | SS
df MS
Number of obs
= 22
-------------+------------------------------------------ F( 3, 18) =
835.56
Model
| 1.0840e+12
3 3.6135e+11
Prob > F
= 0.0000
Residual | 7.7843e+09
18 432459665
R-squared
= 0.9929
-------------+------------------------------------------ Adj R-squared
= 0.9917
Total
| 1.0918e+12
21 5.1992e+10
Root MSE =
20796
-----------------------------------------------------------------------------------------------GDP
| Coef.
Std. Err. t
P>|t| [99% Conf. Interval]
-------------+---------------------------------------------------------------------------------ODA
| 8.530047
1.395787
6.11 0.000 4.512357
2.54774
FDI
| -2.129779 5.211365
-0.41 0.688 -17.13038 12.87082
Rev
| 4.957299
.3329199
14.89 0.000 3.999009
5.91559
_cons
| 58583.63
10380.68
5.64 0.000 28703.46 88463.8
-----------------------------------------------------------------------------------------------. dwstat
Durbin-Watson d-statistic( 4, 22) = 1.359396

Presentation:
◦ Graduate School of Intern
ational Studies in Korea
University in 2010 Feb
◦ KOICA Alumni Association
Nepal (KAAN) and KOICA
in December 3, 2010 in
Soaltee Crown Plaza

Best Thesis Award Provided
by KOICA in May 2011 and
presented by KOICA Nepal
office in July 21 in Hotel
Grand, Kathmandu
KOICA:
KOICA Collection of the Best
Thesis from KOICA’s Scholarship
Program 2009-2010
Web link:
http://ictc.koica.go.kr/2010/page/libr
ary/06/noName01List.jsp?act=noName
01List&BOARD_CD=579&top=4&left=6

Workers' Remittance Inflow and Economic
Growth of Nepal
 Vikash, Vol 30.3, 2010, Chaitra

Challenges and Benefit Analysis of
Nepal from Joining the WTO
 Vikash, Vol 31.2, 2067 Falgun

E-Banking and Fund Transfer in Nepal
 Vikash, Vol 31, No 1, 2067 Shraban-Kartik.

How Does Inclusion Policy Affect
Women's Participation in Nepal
 EMPOWERMENT, 2067 Ashad

Child Poverty and Malnutrition in Nepal
 EMPOWERMENT, 2067 Falgun
고려 대학교
Thank You !