11-December-2008
enepalionline.com |MY VIEW|

Dr. Aasif Ali Siffiqui

Deputy Managing Director, Medical Scientific Co. (L.L.C)
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Cause of Financial Crisis:

The global financial crisis was suggested by several important indicators of economic downturn worldwide. These included high oil price, which led to both the drastic high food prices (due to a dependence of food production on petroleum, as well as using food crop products such as ethanol and biodiesel as an alternative to petroleum) and global inflation.

Impact on Nepal :

Although as of now global financial crisis does not have any direct impact on Nepal's economy but it might take its toll by way of squeezing overseas job opportunities because Nepal’s major exports is labor.

With the approval of the Labor Act of 1985, the government of Nepal officially recognized the potential value of foreign labor migration "overseas," meaning beyond the Indian subcontinent. The government has done little since then to develop a coherent labor export policy or to provide any kind of training or support packages. The trade unions in Nepal are finally beginning to show an interest in overseas workers.

Foreign labor migration from Nepal is still largely a privately organized affair in which individuals make use of their own personal networks or make arrangements through a number of private, government-registered manpower or recruitment agencies. From the late 1980s onwards, Nepalis began to migrate in significant numbers eastwards to Southeast Asia and the Far East and, from the mid-1990s onwards, westwards to the Gulf countries

According to research in 2002 by the Nepal Institute for Development Studies for the women's fund at the United Nations (UNIFEM), approximately 170,000 or more Nepalis were in East and Southeast Asia, with nearly 36,000 in Europe and over 10,000 in North America. However, the Gulf countries by this time had eclipsed Asian destinations; over 465,000 Nepalis were working in countries such as Saudi Arabia, UAE, Qatar and Bahrain and at present, remittance of these migrants are playing a vital role in Nepal economic

Contribution of Remittance GNP of Nepal

Since 1991 international migrant’s remittance has become a lifetime for economic development of Nepal. Initially, the share of remittance to GNP was found 1.74 percent in mid- July 1991. This share increased sharply 9.38 percent in mid-July 1999 and eventually reached to 12.03 percent in mid-July 2005. On average, the share of remittance to GNP was 11.03 percent during the review period of mid-July 2000 to 2005. This analysis clearly indicates that remittance has become an important contributor to the current transfers in balance of payments of Nepal.

Unemployment and the Global Financial Crisis : According to the Director-General of the International Labour Office (ILO). The global financial crisis could increase world unemployment by an estimated 20 million women and men. The US Labour Department said the US economy lost 533,000 jobs last month, far exceeding forecasts for around 325,000 and taking the unemployment rate to a 15-year high of 6.7 per cent

Although the impact of a global recession is not dramatic in the Gulf countries as it is in the case of Western economies but the recent slump in stock prices and other asset classes point to the mounting pressure on the region . Some big company such as Emmar and Nakheel has already cut some employment due to the GFC. More than 4000 lost job in this region since September, 2008.

Considering the facts that 87 percent of officially registered migrant workers of Nepal (those recruited by recognized manpower agencies) were headed for the Gulf countries, if job opportunity decrease in this region than remittances from Gulf counties will be decline, which in turn will have impact on Nepali economy in long term. Therefore, this a right time for the Government of Nepal to form a committee in order monitors impact of GFC in Nepal and to take possible needful action before the time.