According to the State Bank of Pakistan, Pakistan received $ 811.85 million as workers’ remittances during the first two months of the current fiscal year. This is 22.72 per cent more that what these remittances were in the corresponding period of the last fiscal year.
As a matter of fact, workers’ remittances have historically worked as a silent supporter and one of the few lifelines of Pakistani economy. This is an open fact that emigrant workers not only send precious foreign exchange to Pakistan but also they try to compensate for the visibly absent social safety nets in their homeland. Thus, in a way they do what the government should be doing.
The birth of Pakistan as a nation is profoundly linked to migration. In the past 60 years, millions of its people have immigrated to and emigrated from Pakistan, resulting in a vast network of migrant connections around the world. These connections were very apparent in the large number of people returning to Pakistan following the October 2005 earthquake to help their friends, families and other near and dear ones. High levels of emigration in recent decades have resulted in millions of people of Pakistani origin living overseas (the government of Pakistan estimates that they number around seven million), many of them residing in much richer countries in the West and the Persian Gulf region. This is no coincidence; therefore, that Pakistan is one of the highest recipients of workers’ remittances in the developing countries.
For many years, their remittances have far exceeded either foreign direct investment or official development assistance to Pakistan. In the 1980s, the remittances have been linked to a rapid decline in poverty levels during that period. Today, Pakistan’s economy has an even higher level of remittances coming from abroad. During last fiscal year, when the earthquake occurred, the remittances recorded a noticeable increase of some $ 430 million and an annual growth rate of 10.35 per cent.
The flow of remittances initially increased significantly after 9/11. This has been attributed to both a move by remitters away from informal mechanisms and a desire to repatriate any savings being held in the foreign countries because the future policies towards these funds were not clear.
It is important to note that gauging remittance flows is fraught with difficulties because of differences in their definition as well as their recording and reporting. There exist a multitude of ways in which people can move money or goods around the world and thus a huge number of remittance mechanisms are in use. A common, but problematic, distinction in common use is a distinction between formal and informal mechanisms. So, it must be noted that the above mentioned figures do not include informal remittances that are estimated to be 50 per cent of formal/official flows of remittances in case of Pakistan. But one can’t deny the importance of informal remittances because they are cost effective, quick, and can be sent to those areas also where people have no or little access to formal channels.
The usage of remittances has always intrigued many researchers and policy makers. Most of them conclude that remittances are often spent on subsistence — on day to day household expenditures — rather than on investment and/or saving. This use is termed ’non-productive’ by many. But it is also recognised that these direct inflow of cash at household level may be extremely vital as a coping mechanism during the times of emergency and crisis. In other words, while other forms of income may be variable and unpredictable, remittance income is constant and allows the household to absorb unforeseen shocks. This implies that migrant workers’ remittances can be a form of insurance for use at the time of urgent needs.
It is suggested that remittance flows increases as a result of crises. In the case of Pakistan this already stands proved because remittances significantly increased following the earthquake. People living in the earthquake-affected areas of Pakistan are long known to be reliant on remittances from migrant labour. Research and surveys before the earthquake show that reliance on remittances from migrant labour is very high in both NWFP and Azad Kashmir, from both people working within Pakistan and abroad.
Early assessments have identified that a large number of wage earners who normally work in distant cities within Pakistan had returned to their families immediately after the quake, often giving up their jobs and thus the household’s income. This loss of domestic remittances was quickly highlighted as a significant problem and brought remittances to the forefront of aid agencies’ thinking.
But the role of remittances in people’s livelihoods in ’normal’ times is not well understood and their role during emergencies even less so. In an attempt to fill the gap, this research was carried out to understand the importance of remittances. Another objective of the research is to highlight the ways in which humanitarian actors and governmental agencies could support and facilitate remittance flows.
Qualitative interviews and discussions were conducted with groups of men and women in camps and remote villages in Mansehra, Bagh, Muzaffarabad, and Mansehra district. The significant issue of migrant labourers having returned home was constantly discussed. Many spoke about the need for these men to be with their families until the family had a locking door and a roof as part of some sort of permanent shelter. Some men who had returned from the Middle East stated that the costs to migrate there in the first place were so high that they could not return without having lost their savings. Several people stated that Hundi, the informal system of sending remittances, had been highly disrupted, preventing remittances from getting through. Financial access was also an issue raised by some people while discussing problems in encashing cheques at banks and difficulties with identification documents. The earthquake destroyed post offices and banks and disrupted means of transferring cash to the quake-hit areas. Discussion with post office officials revealed that some systems were quickly re-established but not utilised as much as they had been for remittances before the earthquake.
Destination of emigrants
Communities in the highlands of Azad Kashmir and NWFP were dependent on natural resources for their livelihoods during pre-partition era. Livestock rearing and subsistence farming were major economic activities at that time. Then people migrated to nearby and far off towns and cities such as Muzaffarabad, Balakot, Abbottabad, Peshawar, Lahore and Karachi for casual jobs. In late 1960s, some people from this area managed to go to the Middle East. During 1973, Zulfikar Ali Bhutto, the then Prime Minister, requested the Gulf states to provide jobs to unskilled Pakistanis. It was followed by an easy process of issuance of passport. This change in policy encouraged a number of persons to go abroad, especially those who were already working in Karachi. Saudi Arabia and the United Arab Emirates were the most common destinations for them. The early birds facilitated the new entrants and over the passage of time there were many recruitment agents who started facilitating emigration on a commercial level. Many people entered in Saudi Arabia on Umrah visa and overstayed there for daily waged jobs.
Frequency and amount of remittances
Frequency of remittances varied on case to case basis. Three trends were reported to be equally common, that is, on monthly basis, after every two months, and after every 3-4 months. Some senders were reported to be irregular in sending their remittances. It was informed that monthly remittances were common among emigrants working on contractual arrangements whereas those working as casual labourers used to send their remittances after every two or three months. In most of the cases, per month average amount of remittances was Rs 5000-10,000.
Here it should be mentioned that duration for which remittances senders are settled abroad plays an important role in the usage pattern as well as the impact of remittances in shaping the livelihoods of remittance receivers.
Mode of remittances
Hundi was reported to be most widely used mode of sending remittances. Hundi is preferred because it is quick, efficient, accessible to all, involves least documentation and incurs minimum transaction cost. It is used most when remittances are required on an urgent basis. Those who transfer money by hand prefer it for speediness, and find it trustworthy. Bank, as a medium of transfer, was preferred for larger transactions because it maintains secrecy and is considered to be comparatively safe. Here it is pertinent to mention that carrying money by hand was reported to be the most preferred secondary mode of remittance.
Before the earthquake, a majority of the respondents (68 per cent) did not have bank accounts because they felt that opening an account was too formal, bureaucratic, time consuming and a process that required too much documentation. Moreover, access to banks was also an issue. But after the earthquake, partly due to the government’s compensation policy, a vast majority of respondents (90 per cent) have opened bank accounts.
Earthquake appears to have had no effect on the mode of transfers. But immediately after the disaster, there was a temporarily decrease in use of Hundi as a mode of remitting money. This was partially due to destruction of means of communication as well as due to displacement. This gap was filled by transfers through banks. Most of such transfers used an exceptional method, sending money to the accounts of relatives residing outside the affected area (that is, Peshawar, Islamabad, Abbottabad etc). Many emigrants brought remittances along as they returned to join their families in the quake zone. Eight months after the earthquake, use of Hundi as a mode of transfer has again gone back to normal.
Comparing receiving and non-receiving households
The research found out that receivers of remittances had generally better economic conditions than the non-receivers. Remittances receivers were better off, less vulnerable. They were better able to recover their physical and financial losses. The research saw a significant difference between the ownership of expensive consumer goods (televisions, refrigerators, radios), assets (houses, motorcycles, bicycles), and gold, by receivers and non-receivers before the earthquake. Even afterwards, the difference remained significant. None of the remittance receivers (in the study areas) had to sell their assets to meet other urgent needs. However, some non-receivers sold their gold jewellery and livestock after the earthquake to meet the cost of shelter and health.
Remittances and livelihoods
Life in quake hit highlands of Azad Kashmir and NWFP has always been difficult. Due to uneven topographic features and sever winters, farming alone has never been a secure livelihood strategy in most of these areas. It is in this context that remittances played a major role in securing livelihood for remittance receivers of Azad Kashmir and NWFP. The importance of these remittances to receivers means that the characteristics of receiving and non-receiving households’ livelihoods are quite different. For instance, 96 per cent of receiving households stated that remittances were their primary source of income and were the sole source of income for half of them before the earthquake. In contrast, for non-remittance receivers, manual labour, farming (including livestock rearing), private jobs and services were important sources of livelihoods before the earthquake.
Remittances and food security
Food grain production has always remained limited in quake affected area. People had to procure food from market and store it for future use. There was comparatively less damage to stored food of remittance receivers than that of non-receivers. This is partly due to the fact that majority of the receivers had cemented houses which were partially damaged, compared to totally damaged mud-houses of non-remittance receivers.
Here it is pertinent to mention that October 8 earthquake was followed by many aftershocks. Due to these aftershocks, people living near fault lines were forced to leave their houses to live in tents and camps irrespective of the fact whether their houses were completely or partially destroyed. During that time they were not able to access their stored food. Thus, earthquake affected the access to food, at least for a short span of time, for both the receivers as well as non-receivers. As a result receivers as well as non receivers were equally dependent on external food aid immediately after the earthquake. This dependence on external food aid continued for first few months, till the flow of remittances resumed.
Remittances and relief assistance
It was also observed that remittances played an important role in facilitating access to relief goods. Remittances receivers had the means (either they owned transport or were able to pay the rent for hired transport) to reach major distribution points. Especially in district Batagram, 51 per cent respondents said remittances had enabled them to reach the nearest distribution points for humanitarian aid. Non-receivers complained that due to inaccessible terrains and lack of road link they were not able to get the relief assistance in time and in sufficient quantity.
Shelter
After the earthquake, many remittance-receiving households (with cemented houses) only needed repairs to their houses. The continued flow of remittances allowed them to repair and reconstruct their houses much more easily than other households. Remittance receiving households were not only less vulnerable to the earthquake due to their prior financial capacity to build higher quality housing but have also been better able to recover from what damage the earthquake did to their houses because of the continued flow of remittances.
Health
It was reported that 80 per cent of remittance receivers remained unhurt. However, mortality was slightly higher among remittance receivers compared to non-receivers. Some respondents attributed this phenomenon to cemented houses and described that injuries resulting from the collapsing roofs and walls were more fatal, compared to those caused in damaged mud houses.
A little more than half of remittance receiving households reported that they had to pay for follow up treatment for their injuries in private healthcare system, as relief and rescue aid was confined to surgical operations. In most of the cases, patients had to take care of post-operative treatments. The expenditure on treatment after earthquake ranged from 5000-50000 rupees. Remittances were reported as major source of meeting these healthcare costs. Most of the non receivers had to rely on public healthcare system but they were not satisfied with the quality of the treatment.
Education
There was no major difference between enrolment rate of school going children among remittance receivers and non-receivers. Almost similar percentages of receivers as well as non-receivers are sending their children to school in post-earthquake scenario. Very few are not able to send their children to school but this is mainly due to the reason that schools are completely destroyed in their village and they don’t have any alternative educational institute available in their area.
Access to remittances after earthquake
According to respondents, damaged communication systems were the major cause (reported by 71 per cent) affecting their access to remittances. The other factors that affected their access were closure/destruction of remittance delivery outlets (21 per cent), long waiting time (19 per cent), lack of identification documents (7 per cent), and loss of contact with the senders (4 per cent).
Majority (76 per cent) of respondents reported that they did not receive any assistance from anyone to be able to contact their remittance senders abroad immediately after the earthquake. A vast majority (91 per cent of respondents) informed that there was no assistance to access banks after the earthquake. Only 7 per cent respondents reported that financial institutions provided emergency or mobile services in refugee camps to access remittances. Respondents were of the opinion that remittance receivers’ sufferings would have decreased, had there been some external assistance for ensuring smooth flow of remittances after the earthquake.
Spillover affects of remittances
Almost one-third of the remittance receivers used to share their remittances (in kind or in cash) with non-receiving family members before the earthquake. But sharing of remittances with non-receivers decreased significantly after the earthquake because receivers had to take care of their own needs first. However, flow of remittances indirectly helped local economy. Local markets that collapsed after the earthquake would have taken much longer to reopen without the remittances. Similarly construction workers are finding jobs in quake hit areas because remittance receivers are getting their houses repaired. Thus spillover affects of remittances are strengthening local economy.
Conclusion
The research found out that in the aftermath of the earthquake, most people were in need of immediate humanitarian assistance, regardless of whether they formerly received remittances or not. But households whose livelihoods included remittances appeared somewhat less vulnerable to the effects of the earthquake and had considerably more livelihood resilience once remittance flows were re-established.
Also, remittance-receiving households have been better able to re-establish their livelihoods and to begin repairing and rebuilding lost assets such as housing. But the return of some migrants and the subsequent loss of income as well as the inability to re-emigrate may mean that some former remittance-receiving households will be struggling along with non-receiving households to establish secure livelihoods in the local economy..