Government to Transform Remittances into Productive Investment

The upcoming annual policy and program for the fiscal year 2083/84 introduced by the government has made a significant announcement to transform remittances from consumption to productive investment. The government's policy is to operate a Remittance-Investment Fund (Remittance-Investment Matching Fund) to transform remittances from consumption to productive investment.

The inclusion of the Remittance Investment Matching Fund in the Government of Nepal's policy and program for the upcoming fiscal year is not just the announcement of a new economic program, but it could also be a potential historic turning point to connect Nepali labor, which has been going abroad for decades, with national capital formation.

The reality that Nepal's economy has been primarily dependent on remittances for the past three decades is clear to us. Millions of Nepali youth have supported the country's economy by spending their labor, sweat, family, and important time abroad. Today, Nepal's foreign exchange reserves, consumption market, banking liquidity, real estate transactions, and even the state's financial stability are all dependent on remittances. However, the irony is that the very workers who are sustaining the economy are themselves still deprived of long-term social security, savings, pensions, and dignified rehabilitation. This is the biggest paradox of Nepal's development model: remittances sustain the economy, but they have not been able to create concrete national capital.

To date, a large portion of remittances has been limited to consumption, house construction, debt repayment, purchase of imported goods, and short-term expenses. As a result, although dollars have entered the country, a structure to transform them into productive national assets has not been built. If this flow can be channeled through the right policies, reliable structures, and a long-term vision, then Nepali labor going abroad can become the basis for Nepal's largest national capital formation in history.

It is important to seriously analyze why the Remittance Matching Fund has become a decisive issue at this time. Today, Nepal stands at a juncture where remittances are not just an economic indicator. It has become a serious issue linked to national existence. According to statistics, Nepal has already received over 1.45 trillion rupees in remittances in the first eight months of fiscal year 2082/83. Remittances currently support about 25 to 27 percent of Nepal's Gross Domestic Product. Approximately 3.5 million Nepali workers are employed in various countries around the world, and Nepal has become one of the most remittance-dependent economies in South Asia. Despite such a large economic contribution, it is unfortunate that the lives of most foreign workers are limited to a cycle of income without future security.

In particular, the increasing geopolitical uncertainty in the Gulf region and West Asia, the automation entering the labor market, the nationalization policies of various countries, the restructuring of oil-based economies, and regional instability are making the future of Nepali workers even more uncertain in the coming decade. Therefore, the main question now is not just how much remittance has come, but whether Nepal can transform its labor going abroad into national capital.

In this context, my study titled 'Utilization of Remittance for Securing the Future of Migrant Workers and Development of Nepal' under 'Executive MBA Capstone Research' at AEC Paris, along with further research conducted in recent years, has provided a very important conclusion. The main essence of that research was that if Nepal can transform just 5 to 10 percent of its annual remittances into a structured investment fund, Nepal can make historic strides in energy, infrastructure, industrialization, and social security. With Nepal's annual remittances now exceeding 11-12 billion US dollars, the potential is even greater. If even 10 percent of the total remittances can be channeled into a long-term national investment fund, thousands of megawatts of hydropower can be constructed, domestic capital can expand in infrastructure and industrial projects, dependence on foreign debt can decrease, the capital market can deepen, and the future of millions of workers can be secured.

Now is the opportunity to transform remittances from a subsistence economy to a capitalist economy. For many years, Nepal has run its consumption on the sweat of its labor abroad, but it has not focused on sustainable national capital formation. Now is the time to make remittances not just a means of running a household, but a long-term economic foundation for nation-building.

Transforming labor going abroad into national capital is now an unavoidable necessity. To date, Nepal has primarily viewed remittances as a source of household income. Now is the time to view it as strategic national capital. Many successful economies around the world have not limited their diaspora capital to emotional connections alone; they have linked it to infrastructure financing, sovereign investment, industrialization, and nation-building. Nepal must also move towards that model. If the small monthly contributions of Nepali workers in Qatar, UAE, Saudi Arabia, Malaysia, Korea, Japan, Europe, and other countries can be linked in a digital, transparent, and reliable structure, it will not just be a savings program, but it will become Nepal's largest citizen-based capital formation campaign.

My study analyzed three potential structures for the 'Migrant Workers Security & Investment Fund'. First, an investment fund operated by the private sector; second, an integrated model with existing government institutions; and third, a completely independent 'Migrant Workers Security & Investment Fund'. The conclusion of the analysis was that an independent, professional, and digitally managed structure operated in collaboration with the government, private sector, regulatory bodies, and NRNA could be the most practical option. This is because Nepalis are scattered in over 85 countries, many workers are in the informal labor market, and they send remittances in small amounts. They need a simple, transparent, and trust-based system to attract them.

In the context of Nepal, policy announcement alone is not enough; building trust is more important than the announcement. In Nepal, the lack of trust has been a bigger problem than the lack of policy. If the government automates this contribution, makes the matching contribution immediately visible in the system, provides full digital transparency, guarantees a minimum return, and keeps this fund free from any kind of political interference, millions of workers will voluntarily participate. However, if this plan is limited to just another government fund, a new type of tax, or a political structure, its great potential could be weakened.

A strong government with nearly two-thirds support should not only spend the budget on infrastructure development but also prioritize 'revenue-based projects' that provide the nation with a permanent income without delay. Many prosperous nations in the world fund their large administrative expenses with income generated from energy, utilities, tourism, natural resources, and strategic investments.

A strong government with nearly two-thirds support should not only spend the budget on infrastructure development but also prioritize 'revenue-based projects' that provide the nation with a permanent income without delay. Many prosperous nations in the world fund their large administrative expenses with income generated from energy, utilities, tourism, natural resources, and strategic investments. Nepal also needs to move towards economic self-reliance by increasing coordinated investment in income-generating sectors such as hydropower, tourism, industry, energy export, and national investment funds, along with road and building construction.

Since 2010/11, while advocating for the problems and possibilities of workers, I have continuously raised the issue of the need for a model that encourages small-ticket investors along with a contribution-based social security fund. Nearly 12 years later, in 2023, the Social Security Fund was established, but because the structure could not be developed according to the effective modality we studied and envisioned, the expected impact and real impact of the fund have not yet been sufficiently felt despite its establishment.

Now is the opportunity to transform remittances from a subsistence economy to a capitalist economy. For many years, Nepal has run its consumption on the sweat of its labor abroad, but it has not focused on sustainable national capital formation. Now is the time to make remittances not just a means of running a household, but a long-term economic foundation for nation-building.

If work can be done with the right structure and intention, even the small contribution of an ordinary worker sending $300 a month can build Nepal's energy revolution, industrial renaissance, social security, and complete economic self-reliance. Therefore, the upcoming Remittance Matching Fund in the budget is not just a technical economic program; it is a historic and glorious opportunity to transform the labor of Nepalis abroad into national capital with high respect.

(The author is a DBA scholar at Durham University Business School (UK), a former President of NRNA ICC, and a researcher and entrepreneur on migrant worker welfare.)