Remittances are not sustainable

Countries that export labour will need to rethink their economic strategies – quickly

Foreign labourers on a construction site in the Saudi Arabian capital, Riyadh. Fayez Nureldine / AFP

In our increasingly interconnected world it should come as no surprise that economic conditions in one country or region have an effect elsewhere. So it is natural that lower global oil prices have affected not only the oil-producing countries, but others in their economic orbit.

As The National reported, a decline in the value of remittances from the Gulf is causing hardship in countries that supply labour to this region. Pakistan, for example, received $19 billion (Dh69.8bn) in remittances in 2015, mostly from workers in Saudi Arabia. But many of those workers have since lost their jobs or have been unpaid for months and the remittances have dried up. This has created financial pain for those workers' families – with some having to sell possessions to pay off debts – and has had a knock-on effect on the entire economy.

Remittances from GCC countries have been good for many countries in this region and beyond. Money flowing into Pakistan, Lebanon, India, Egypt, the Philippines and elsewhere has lifted many thousands of families out of poverty and has helped to fill state coffers. But, as the current crisis shows, some countries have become overreliant on them. And now they have found that exporting labour is not a sustainable economic model.

It could be argued that remittances have become a too-comfortable cushion. It has been easier to send citizens overseas to earn money and repatriate the bulk of their wages than to plot an independent economic course. In the process, they have created a brain drain that will be difficult, perhaps impossible, to reverse. The best and brightest will never return, but those without jobs or opportunities will come home and become a burden.

The Gulf countries are responding to the challenge by diversifying away from their dependence on oil and gas. They are investing in renewable energy and other cutting-edge technologies, taking advantage of their geographic position to become trade and transport hubs, and encouraging innovation and entrepreneurship. Countries that now rely on remittances should apply some new thinking and discover their own competitive edge before it’s too late.