Coronavirus Severs Nepal’s Economic Lifeline

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Coronavirus Severs Nepal’s Economic Lifeline

Amid the COVID-19 crisis, Nepal is losing its lifeline: international labor migration.

Coronavirus Severs Nepal’s Economic Lifeline

In this photo taken on Nov. 30, 2016, a Nepali man rides his bicycle in front of an advertisement of Qatar airways painted on a wall in Janakpur district, Nepal.

Credit: AP Photo/Niranjan Shrestha

In recent weeks, Nepal has obtained a morbid distinction: far more of its citizens are sick or dead from COVID-19 abroad than at home. Domestically, only 31 cases and no deaths have been confirmed. Meanwhile, at least 17 Nepalis in the United Kingdom, eight in the United States, two in the United Arab Emirates, and one in Ireland have died from the novel coronavirus; many hundreds more have fallen ill in 21 other countries, including Bahrain, Saudi Arabia, Kuwait, and Malaysia.

While tragic, it is not entirely surprising that COVID-19 has affected so many Nepalis internationally. Nepal sends more labor migrants abroad, per capita, than any other country in South Asia. It is the fifth-most remittance-dependent economy in the world (after Tonga, Kyrgyzstan, Haiti, and Tajikistan).

Nepali deaths and illnesses abroad portend long-term trouble for the Nepali economy at home. In the past, international labor migration has been an essential lifeline for Nepali families coping with domestic crises, from a civil war that raged from 1996-2006 to an earthquake that brought homes crashing to the ground in 2015. But the current crisis is unlikely to afford Nepalis this opportunity. Nations worldwide have erected barriers to human movement, and job opportunities from New York to Mumbai to Seoul will likely plummet in the aftermath. COVID-19’s long-term consequences could be devastating for Nepal. A recent World Bank report predicted a severe drop in GDP growth over the next three fiscal years, stating that “the risk of falling into poverty is high, and it will increase into 2020.”

It is difficult to overstate the importance of migration and remittances to millions of Nepali families.  Nepalis have long depended on seasonal agricultural and military work in India, and after 1990, increased access to passports opened up new types of work in destinations from the Middle East to Southeast Asia and beyond. Constructing high-rises in Dubai, guarding private homes in Kuwait, or working on assembly-lines in Penang often paid more than anything available in Nepal.

Departures climbed in the early 2000s as young men sought to flee dangerous rural towns and villages during the Maoist “People’s War,” which claimed around 18,000 lives by 2006. A 2010 nationwide survey found that 56 percent of households relied on remittances, about half of which came from abroad. Another 2014 study estimated there were more than 4 million Nepalis abroad — out of a national population below 30 million. By the time a devastating earthquake struck in 2015, migration was the standard pattern of behavior for responding to a crisis: many survivors packed up and went abroad to earn money to rebuild their homes.

The poorest usually migrated to India, where salaries were lower but travel was cheap, and which — until the current crisis — shared an open border with Nepal.

“When I recently visited villages in Doti [a poor district in far western Nepal], every household had at least one member working in India,” says Arjun Kharel, a migration expert at the Center for the Study of Labor and Mobility. “These families rely on remittances for their livelihood throughout the year.”

In many cases, migration helped lift families out of poverty, allowing for investments in education, healthcare, and land. As departures rose, the proportion of the population living on less than $1.90 per day fell from 50 percent in 2003 to 15 percent in 2010. For marginalized groups like Dalits and women, labor migration represented an escape from a local economy where gender and caste still limited one’s options.

To be sure, labor migration was not without problems. Many Nepalis took loans to pay unscrupulous agents to secure jobs abroad, only to learn the jobs never existed in the first place. In Qatar, workers endured slave-like conditions building World Cup stadiums and died of mysterious ailments. As families fanned out over the globe, parents knew their children only through phone calls, forgoing holding them in their arms for the chance at a better future.

Migration insinuated itself deep into the Nepali macroeconomy, becoming a keystone on which other sectors depended. “Remittances have been crucial to support growth, particularly by sustaining a high consumption level, which comprises over 85 percent of GDP,” says Chandan Sapkota, an economist at the Nepal Economic Forum. “Remittances have also been crucial in meeting a high revenue growth, as over 45 percent of government revenue is based on duties imposed on import of goods financed by remittance income. Remittances have been the major source of deposits in banks and liquidity.”

The COVID crisis has already put many Nepali migrants out of work. As fears of a pandemic spread in February and early March, a few hundred thousand workers returned to their hometowns and villages in Nepal. But most migrants were prevented from returning after the Nepali government announced a nationwide lockdown on March 24. Some were able to maintain their jobs abroad, but many others were fired or took unpaid leave and are living off meager savings. Reports have emerged of workers being forced into unsafe, crowded conditions in Malaysia and Qatar. In the United Arab Emirates, some Nepalis have been evicted from their homes. Meanwhile, hundreds of Nepalis remain stuck at the Indian border, having walked for hundreds of miles through the Indian lockdown only to be denied entry by the Nepali police. The government maintains that quarantine facilities are inadequate to cope with returnees from abroad.

Many Nepalis hope that international labor migration will rebound relatively quickly, as it did after the global financial crisis of 2008.  However, the current recession will probably be different. First, COVID-19 is truly global in nature, leaving no country untouched. Second, with world oil prices at historic lows, jobs in the oil-rich Gulf states could dry up. Third, India, the destination of choice for Nepal’s poorest migrants, is facing a prolonged slowdown that predates COVID-19 and will likely grow worse.

What will happen to Nepali families who depend on remittances?

Ganesh Gurung, the director of the Policy Research Institute, a government think tank, is blunt: “Households will have hard time managing their household economy, especially the lower middle class,” he says. “The decreasing trend of households under the poverty line will come to a halt.”

Falling remittances could have knock-on effects in multiple areas of the domestic economy, harming government revenue and reducing liquidity in the banking industry, says Sapkota, the economist. Along with tourism — another sector sledgehammered by the crisis — remittances are a key source of foreign currency, crucial in an import-dependent country like Nepal. The national bank holds enough foreign exchange reserves to cover more than eight months’ worth of imports – a comfortable cushion in normal times, but then these are not normal times.

Nepal’s food security depends on foreign exchange reserves as well as international trade remaining open, because Nepal is a net food importer: it spent nearly $2 billion on agricultural product imports in 2018-19. Amidst COVID-19, the border with India – Nepal’s major trading partner – remains mostly open to food and other essentials. However, the Ministry of Agriculture recently issued an alarming notice about moves by some countries — including India — to restrict certain food exports. Experts with the UN’s Food and Agriculture Organization warn that national-scale hoarding by governments could be “particularly damaging for low-income, food-deficit countries” like Nepal. Millions of Nepali migrants returning home from abroad could add to the problem by raising domestic demand for food.

Some speculate that a drop in migration could swell the ranks of unemployed youth at home, leading to social unrest. While political violence is relatively uncommon, one rebel group, an offshoot of the original Maoist party that led the People’s War, remains active – it bombed a former minister’s home just last month. Gurung worries that such groups could gain more traction if unemployment rises.

“Twenty years ago, youths joined the Maoists not because their political philosophy was great, but because the situation of unemployment compelled them to join these political parties. This can still be a risk for Nepal,” he says.

There could even be environmental harm. Reports have already emerged of illegal logging during the lockdown, but long-term pressure on forests could increase, too. Nepal experienced an amazing forest resurgence over the last three decades, attributed in part to out-migration, since migrants’ households farmed less land and spent remittances on cooking gas, reducing demand for firewood from forests.  If migrants return home en masse, the consumption of forest resources could increase.

So far, the Nepali government’s economic response to the COVID-19 crisis has been slow and small, even relative to South Asian neighbors. Prime Minister Khadga Prasad Sharma Oli has emphasized the need to focus on agriculture and continue large infrastructure projects already underway. But besides some programs for food aid and debt postponement, initiatives that directly put cash in the hands of struggling citizens are lacking. (And several cabinet members are embroiled in corruption allegations surrounding health supplies procurement.)

Along the Indian border, and in labor camps from Qatar to Malaysia, anger brews among migrant workers who are stuck, waiting to come home to an uncertain future. On social media, a poem by filmmaker and journalist Arun Deo Joshi has been making the rounds:

Suffering nature’s wrath and restlessness…
And measuring countless miles with his feet,
He arrives at his doorstep

I am locked inside, he is on the doorstep
How dare you padlock 

The doorway to my house from outside
Don’t you know that my father built this house
And my brother has rights here too?

[Translated from Nepali with help of the author.]