Pakistan’s economic stepchild

Labour, not textile, is Pakistan’s biggest export. Measured by worker remittance flows, labour export is in fact nearly 80 percent of Pakistan’s total goods export. And if annual flow data of labour migration is any guide, then as a segment it’s one of the biggest employment pool as well – 10.7 million – compared to estimated number of 6-8 million employed by domestic textile sector, which is touted to be the biggest non-farm employer. Despite its significance, however, the subject of labour, labour exports and remittance remains an underappreciated and ill-researched area in Pakistan.

Only a handful of good papers have been written on the subject of labour migration and remittances where three names stand out: Dr Rashid Amjad, Dr G.M. Arif and Dr. Mohammad Irfan. Most of their work happens to be in not so recent past. In fact, a lot of research work is before the noticeable rise of remittance following the setting up of Pakistan Remittance Initiative (PRI), when in fact labour market at home and abroad is ever changing field.

Universities clusters, think tanks, books by noted economists, TV talk shows – all have largely ignored the subject. Even the central bank’s quarterly and annual state of economy reports don’t have detailed analysis on remittances – not even special sections at the end of the report - save for one-off analyses in the context of global remittance trends a few years ago.

In part the paucity of data is to be blamed for this stepchild treatment. For instance, according to data maintained by Bureau of Emigration and Overseas Employment (BEOE) labour migration totals around 10.7 million as of May 2019. In other words, assuming one migrant from one household, on average one person in every third household in Pakistan is abroad. But BEOE’s data does not include return of workers from abroad, and also excludes those who go abroad for studies, marriage or immigration but keep remitting money back home.

Here is a glaring example of why BEOE’s data of total labour migration is unreliable. If one is to divide the annual remittance received by the total number of workers abroad for that year, the average remittance per labour would be around 2000 dollars. In contrast, according to PRI, the average ticket size is around $580; its $500 from the Middle East and $750-800 from advanced countries. (See Brief Recording interview with PRI’s head, Aug 21, 2017)

Similarly, while BEOE’s data show that only 0.18 percent of workers abroad have gone to the US and UK, central bank’s remittance data show that about one-third of total annual remittance is from these two countries. To point the obvious again, BEOE’s cannot be relied upon. But neither can the government surveys such as the Pakistan Social & Living Standards Measurement Survey (PSLM) or Household Integrated Economic Survey (HIES). Analyses by the scholars cited earlier have shown that remittances estimated through these surveys are significantly lower than official remittances received through banking channels.

A working paper (IGC: F-37108-PAK-1) by Amjad and Arif maintains that that “HIES/PSLM type surveys have not been designed for the estimation of remittances and that remittances from the non-Middle East regions, predominantly North America and Europe (UK), where Pakistanis have settled permanently, are hardly reflected in these surveys.”

Likewise, there are umpteen so-called estimates of remittances received through informal channel, but these are only guesstimates based on “knowledgeable source rather than hard evidence” as Amjad and Arif put it. Nor can the rise in remittances be simply understood by the rise and fall of annual labour migration, since there many factors at play such as inflation, exchange rate, PRI’s marketing efforts.

The central argument here is that what we don’t know about labour migration and remittance is much more than what we know. What is the flow of remittance across major districts within Pakistan; how are remittances used; what are the future prospects of labour migration now as the economic structure of typical labour destinations (Middle East) are changing; impact of PRI’s marketing and agency tie-up efforts on official remittance; impact of BEOE’s pre-departure labour training efforts; average remittance by category of labour – these are some of the many questions still answered.

Nor does the economics community have a clear idea of how to efficiently structure the governance mechanism to boost labour productivity or analyse wage rates for domestic economy or for labour exports. Overseas migration is a federal government subject with its various agencies and organisations to regulate and monitor labour migration, including the coordination with more than a thousand overseas employment promoters who monitor demand to send people abroad. In contrast, education and development of vocational skills is a provincial subject, whereas dollar inflow lies in the domain of the central bank.

It is not difficult to imagine the complexity of coordination and collaboration across these players, which is further complicated by geographical segmentation both from the sending side and receiving end, and ever-changing market conditions. Yet neither the importance of labour migration in terms of dollar inflow, nor its growth potential, and complexity of its governance has put the agenda of labour and remittance under the spotlight by any of the policy drivers or even influencers. Youth dividend; yeah right! (See also BR Research’s Labour export losing steam, Sep 11, 2017).