Dilip Ratha, lead economist, migration and remittances, World Bank.
Edited excerpts from an interview with ET:
What will be the impact of the Covid-19 crisis and spiralling oil prices on the migrant workforce in the Gulf countries, particularly those from India?
The coronavirus crisis is going to produce unprecedented levels of effects on the migrant economy. The first is pretty direct: Because of social distancing and the lockdown, businesses are mostly shut and only a few people are working. That means a lot of migrant workers are now either unemployed or waiting for something (positive) to happen. It also means a lot of people are stranded. In addition, there is the effect of oil prices. There has been a significant decline in demand for oil, which has been an additional pressure on the economy of the Gulf countries. This means more fiscal restraint, reducing the government’s ability to provide protection to foreign workers.
Do you see a lot of migrants returning, as a result of this?
The effect of the crisis is not so much in the form of migrants coming home, because they are stranded; it is in their inability to earn as much as before, because of which they are unable to send as much money as before to their families back home. We are expecting a fall of 20% in remittances to the South Asia region, and in particular, to India.
Also, for governments to fly back millions of people is not practical. It would have to be people flying back on their own, and they will come back in trickles rather than all at once. And then there is the big question of how the communities they come from originally will receive them. Meanwhile, many workers stay in shared accommodation, where it’s not practical to maintain social distancing. There is a genuine risk for these people. Both the host country and Indian governments need to take care of them.
What will be the likely impact of all this on home countries?
The fact that migrants are not able to send money home because they have either lost their jobs or are not earning as much as they used to, is going to lower remittances going back to families. Even if people want to send money, the money service business itself has been impacted in many parts. Poorer migrants tend to depend on cash remittances, through local stores, picked up by families back home. Access to this can be limited at both ends.
We see remittances to India falling by almost 23%. In India last year, remittances had touched an all-time high of $83 billion. From that peak, we expect it to come to $64 billion this year. For India and other south Asian countries such a decline in what is otherwise a steady flow is going to cause hardships in terms of meeting international payment obligations. It’s not just remittances — foreign direct investment is expected to fall by 37% for developing countries as a whole. The decline will be similar in India. Stock and bond markets are likely to fall more. In that context, balance of payment difficulties could come up in many countries and India needs to manage its balance of payments situation very carefully.
What do you estimate will be the impact on sectors like the recruitment and remittances industries?
Economic activities in the Gulf countries, and worldwide, are going to be impacted for a while — we don’t know for how long. We don’t expect the mega construction projects to renew, nor will the tourism and hotel industries be doing so well for a while to come. This would mean recruitment of new migrants would be impacted. It is not clear either how long those who are there currently will be able to continue for. The majority of people will not find jobs for a while and it’s not clear what will happen to them — they are truly stranded. Some help has to be extended to them.
This brings us to another important point: most of the people who were recruited to the Gulf would have incurred costs to undertake that migration. In the case of Gulf countries, workers would have paid recruitment agencies huge amounts of money. Our research shows that a typical migrant in the Gulf region often pays more than a year’s worth of expected wages as a fee to the recruitment agent in India before migrating. There are cases where people pay 60 months or 48 months worth of wages. These are often paid by taking a loan, at interest rates in the range of 50% a year. These migrants under normal circumstances would have sent remittances which would have gone towards repaying the loan. But now they are stranded and in a way, bonded. The agents won’t allow them to return home — there are chances of harassment and hardship that might come as a result to the disruption to employment and earning capacity of migrants.
The remittance industry has not been recognised as an essential service, nor do store owners want to operate their business because of the contact involved (in physical cash transactions). The money transfer services doing better are the digital ones. But most migrant workers would not have bank accounts. It’s also not clear whether all their families back home will have bank accounts, without which sending money digitally is not easy.
Are there other, less “visible” impacts of this crisis that migrant workers will be going through, that people need to take cognisance of?
It’s important to remember that migrants have seen the world. The person who migrates is typically young, more risk-taking and harder working than the community he or she comes from. When the migrant workers come back home, we shouldn’t forget firstly, that they are people. We should also remember that these are people who have acquired skills. They can also be provided with seed money to start businesses. A number of things can be done to welcome them back and give them help so that they can help themselves. They are not coming back to stay idle. And they’ll be the first to go back once the economy reopens. The Union and state governments and municipalities must provide help.
What are some practices you would recommend to governments, including the Indian government, to help migrant workers abroad?
An immediate policy recommendation is that India takes care of its stranded migrants. We are not talking about a hundred or thousand, we are talking about millions of people. These are Indians who are relatively poorer — not the doctors and nurses. They have to be helped. We have to find some way of bringing people back, if they want to come home. A better solution would be to keep people safe in their destination country. Second, the governments of India and the Gulf countries need to help these workers with cash aid so they can buy essentials, and give them access to housing and health. Third, money service business should be recognised as an essential service and people have to be helped to use online channels.
Finally, and this applies to migrants all over the world, migrants are often subject to discrimination in many parts of the world, even in normal circumstances. With the current fear of contagion, societies are not very welcoming of strangers and foreigners. Those moving from one city to another are held in fear, that they might be carrying the virus. Under these circumstances, the likelihood that discrimination against migrants would increase is very high. Governments have to make sure that discrimination does not increase and lead to social tension, whether in Gulf countries or other parts of the world.