Migration and remittances in South Asia
The authors note that South Asia has traditionally had a comparative advantage in the export of low-skilled labour at low cost, pointing that there has been a growth in migration from South Asia into new markets across the world.
The document highlights that migration was considered a problem in the developing world, including South Asia, in the past for its negative implications for development in terms of brain drain and labour force depletion. However, migration has been a critical factor in South Asian economies as a source of employment and livelihood for workers, and as a source of remittances which provide a stable flow of external finance.
- migrants’ remittances represent a significant proportion of most South Asian countries’ gross domestic product (GDP) as well as foreign exchange earnings
- still, remittance income may not always reach the poorest of the poor since the initial costs of migration are often prohibitively high for this segment of society
- as a result, it is important for South Asian countries to improve the utilisation of remittances
- in fact, greater utilisation of formal transfers ensures greater receipts of foreign exchange and also exposure of the poor to formal savings and financial systems
- to improve the utilisation of remittances, South Asian governments are recommended to enhance formal channels of financial transfer of remittances by reducing the transaction costs of this process
- in addition, they should improve knowledge and information among migrant households