Remittances sent by oversees Pakistanis: major portion used on unproductive projects: study

A large portion of foreign exchange remitted by overseas Pakistanis are used on unproductive projects like construction of big bungalows in remote rural areas and lavish spending on marriages, a study conducted by International Organisation for Migrants (IOM) revealed.
The study observed that 40 percent of the total remittances was saved and nearly 10 percent was spent on purchase of agriculture machinery. "There is a need to explore investment behaviour of the migrant households to understand what factors lead to greater investments and savings. The migrant households used the remittances to invest in real estate, agricultural machinery, agricultural inputs and businesses, and to acquire savings," it added.
Data showed that 46 percent of the migrant households were unable to direct any remittances to investments or savings. The percentage is much higher than that computed by Arif (1999) from the 1986 survey of return migrants. "It is worrisome that the relatively longer stay of workers in the Middle East has not enabled them to make investments," the study said.
Speaking on the launching ceremony on "Impact of Remittances on Pakistan's Development" IOM Regional Representative for West and Central Asia Hassan Abdel Moneim Mustafa, said that remittances were playing an important role in the development of the county. He said that currently most of the overseas Pakistanis were sending remittances through inappropriate channels and there was a dire need to provide them banking facilities so that they could send remittance through proper channel.
The studying was conducted in collaboration with Pakistan Institute of Development Economics (PIDE), the Ministry of Labour, and the Bureau of Emigration in nine high-migration districts in Punjab, Sindh, Khyber-Pakhtunkhwa, Balochistan and Pakistan Azad Jammu and Kashmir. Cities covered included Rawalpindi, Gjuranwala, Lahore and DG Khan.
The study stressed the need that Pakistan banking sector should become more efficient, if it wants overseas Pakistani to use formal banking channels to remit their money, which can offer an opportunity to banks to invest their remittances contributing to development of the country.
The study investigated the impact of remittance flows from Pakistani migrant working in Saudi Arabia on their families back home. The study, commissioned at the request of the government, was funded by IOM's 1035 Facility for member states and targets an area that suffers from a dearth of empirical data.
"The research will help the key stakeholders in the government to draft new legislation for enhancing the development impact of the remittances on local, regional and national levels in Pakistan. It may also help improve remittance services for Pakistani workers in Saudi Arabia," says Hassan Abdel Moneim Mostafa, The survey covered 500 migrant-sending households in both rural and urban areas and was carried out from June to August 2009, when Pakistan was struggling to cope with three million people displaced by conflict in the north-west of the country.
The researchers used a detailed, structured questionnaire, developed jointly by IOM and PIDE, to elicit information from respondents in each household. The study showed that overseas migrants are relatively young and that their level of education is much higher than that of the national average. The review of earnings and savings of migrants showed that migrant workers were able to double their monthly savings to 41 percent of household monthly income.
The average total remittances received per household from the time the migrants went abroad were Rs 1.05 million (USD 13,145). The analysis also revealed that a large proportion of remittances are being spent in four areas - real estate and agricultural machinery, food, marriages and savings.
One of the more interesting aspects of the study was that the global economic crisis (2008-09) had very little impact on the outflows of workers or inflows of remittances to Pakistan. Among its key recommendations for reaping the developmental benefits of remittances to Pakistan, the study suggests that the cost of overseas migration needs to be reduced by improving the recruitment system and controlling exploitative practices by middlemen. The study also suggests that a new comprehensive migration policy should be integrated into Pakistan's overall development strategy.