Iran Conflict Poses Existential Threat to Nepal's Economy and Migrant Workers in West Asia

Nepal's foreign employment sector is currently facing a severe crisis. The tension escalating in West Asia is having a major impact on this sector, with prospects of even greater volatility in the coming days. Perhaps such a worrying situation has never before occurred in the history of Nepal's foreign employment. The war and geopolitical tension currently brewing in West Asia (the Gulf region) is not only destabilizing a geographical area but has also delivered a major blow to a country like Nepal, which is dependent on foreign employment.

Many Nepali households depend on foreign employment for their livelihood. Numerous businesses are connected to this process. This development shows serious signs of fracturing the backbone of Nepal's remittance-dependent economy. If we fail to understand this crisis in time and prepare accordingly, the resulting economic and social catastrophe will be unimaginable.

• The Picture of Nepali Labor as Told by Statistics

The future of nearly 3 million Nepali families rests on foreign lands. Of these, about 1.8 million are employed in the Gulf countries of West Asia. This number accounts for more than 60 to 70 percent of our total workforce sent abroad for employment. When such a large segment of the workforce in a region becomes insecure, it directly or indirectly causes problems in every Nepali household.

The state of our country's labor market is extremely dire. Every year, 500,000 to 600,000 new youths enter the market seeking employment. But ironically, we have failed to establish any industries, factories, or productive sectors domestically to absorb them. Therefore, foreign employment has become their only center of hope.

Last year alone, 505,000 young Nepalis left the country after obtaining new work permits. The current crisis in West Asia significantly increases the risk that the path for millions of aspiring youths will be completely blocked. On one hand, new opportunities are being lost, and on the other, the employment of workers who have been there for years is also in jeopardy. As industries, construction work, and service sectors halt due to the war, Nepali workers face the prospect of unemployment. This is certain to trigger a massive wave of unemployment both inside and outside Nepal simultaneously.

• Impact on Remittances and the Economy

Looking at the structure of Nepal's economy, we are completely dependent on external income (remittances). Nepal's Gross Domestic Product (GDP) is around NPR 6,000 to 6,100 billion. Remittances from foreign employment are the primary source driving the country's economy. This year, it was estimated that remittances worth about NPR 1,800 billion would arrive through formal channels alone. However, the existing crisis in West Asia makes achieving that target difficult.

The West Asian region accounts for 50 to 60 percent of the total remittances entering Nepal. If the war there prolongs and the situation worsens, remittances worth NPR 800 billion to 1,000 billion annually could stop flowing into Nepal. This is not a minor deficit; it could cause the entire Nepali economy to collapse.

The cycle of our economy hinges on the inflow of remittances. When remittances arrive, people gain purchasing power, and they increase consumption. Increased consumption boosts market demand, which in turn drives imports and keeps the private sector moving. When people buy goods and imports occur, the state receives customs duties and Value Added Tax (VAT). The state uses this revenue to pay salaries to employees and fund development projects.

However, when a large portion of remittances stops, market demand plummets. Sectors like luxury goods, hospitality, real estate, and construction are directly affected. The halt in the flow of money into the market strikes at bank liquidity and private sector investment. A decline in revenue collection could lead to a situation where the government struggles even to meet its daily administrative expenses.

• Nepalis Trapped in War and the Psychology of Fear

It has been nearly three weeks since the war began in West Asia. The fear and uncertainty witnessed among Nepalis there during this period are indescribable. There is no certainty about when even supposedly safe areas might come under attack. The situation is so dire that about 75,000 Nepalis have already applied to their companies and embassies requesting repatriation. This number is expected to cross one hundred thousand soon.

Countries like Qatar, UAE, Saudi Arabia, Bahrain, and Oman, which host US military base camps, are currently at risk of becoming targets of the war. Thousands of Nepalis, especially those working in the oil and gas sectors, are at high risk. This terrifying situation has crushed the morale of the workers. Their sole objective is to save their lives and return to their homeland.

• The State's Weak Preparation and the Complexity of Evacuation

If the situation deteriorates further and air routes are completely shut down, how will we evacuate our citizens? This is an extremely serious question. But sadly, the Government of Nepal appears to have no concrete plan or mechanism for this issue.

If air routes are closed, one alternative might be evacuation by ship via the Red Sea from Saudi Arabia. However, this route is extremely expensive and complex. The state lacks the financial capacity to spend such a huge sum alone to rescue millions of citizens, and the workers themselves cannot bear that cost. Furthermore, the problems of workers whose paperwork is incomplete or whose visas have expired will be even more severe. Even a slight delay in rescue operations could lead to a major humanitarian crisis.

• Social Crisis Resulting from Job Losses

Another aspect of this crisis is the social impact. If millions of youths return from the Gulf empty-handed and with traumatized minds, in which sector will they be immediately mobilized? We have neither a plan nor the infrastructure for them.

Youths who went abroad after taking high-interest loans from moneylenders or cooperatives in their villages may suffer severe impacts on their mental health upon returning without income. The burden of debt and the pain of unemployment could push them into depression. This carries the risk of increasing crime, poverty, and domestic strife in society. Therefore, this problem is not just for business owners or workers; it is an issue connected to the peace and future of the entire nation.

• Need for Diplomatic Initiatives and Regional Alliances

Solving this crisis cannot be achieved by Nepal's efforts alone. Not only Nepal but also South Asian countries like India, Pakistan, Bangladesh, and Sri Lanka have a large workforce in West Asia. We must collectively raise our voice in international forums. Innocent workers must not become victims of the war, and their security must be ensured. The primary necessity now is to exert global pressure for a ceasefire through diplomatic channels and to establish a common mechanism for citizen protection.

The war in West Asia has pushed Nepal to the brink of crisis. This incident has taught us how risky our extreme dependence on foreign employment and remittances can be. But there is no time to merely learn the lesson. The first priority now is to save the lives of our workers and prevent the economy from collapsing. The state must immediately formulate a high-level emergency rescue plan, increase diplomatic activity, and must not delay in identifying alternative employment sectors, such as agriculture and small industries, for the returning youth.

Rajendra Bhandari is a former President of the Nepal Association of Foreign Employment Entrepreneurs.