Nepali Times
'Lahureys’ prop Nepal’s economy


When Kaji Amar Singh Thapa lost his Malauna Fort to the British 185 years ago, his Gorkhali soldiers looked for alternative employment. They had two choices: join the British forces, or go over to their rival, the Punjab army under King Ranjit Singh. Pretty soon, any Nepali soldier who fought for a foreign army began to be known as a "lahurey", so called after the Sikh king's capital in Lahore (now in Pakistan). Today, any Nepali migrant worker abroad is known by the generic term, lahurey.

Nearly 200 years after they first started enlisting in foreign armies, the descendants of lahureys are propping up Nepal's otherwise stagnant economy. According to investigations by Himal magazine, remittances from Nepalis abroad today contribute more than Rs 70 billion annually to the economy-more than tourism, foreign aid and exports put together and nearly equal to this year's budget. Nepal's economy today is a remittance economy. There is now so much cash in the informal economy that when a commercial bank made an initial public offering of shares worth Rs 175 million it was oversubscribed within a week to the tune of Rs 1.4 billion. Banks in remote districts report difficulty in keeping up with interest payments due to burgeoning savings.

Nepal's per capita income grew by Rs 1,500 in 1998/99 compared to the previous fiscal year. Balance of payments rose by 100 percent to reach Rs 9 billion in Nepal's favour. The government's current account, which had been in the red in previous years, showed a surplus last year, and foreign currency reserves marked a 16 percent increase to reach Rs 75 billion. Although imports from India doubled, Nepal's banks still have convertible and Indian currency reserves to cover a whole year's imports. Where is all this money coming from?

The only explanation is the remittances from Nepalis working abroad, a cumulative amount that is now larger than the money generated by Nepalis exports, tourism, and foreign aid put together. Government officials say the main reason the Nepali financial market is witnessing the present excess liquidity is the huge amount of remittances entering the country. The only figures the government has on remittances from outside the country are what the British and Indian
governments pay their former soldiers. And this has been substantial. Till as late as 1971, the earnings of British Gurkhas were the highest source of foreign currency for Nepal. Tourism and exports, took over the top spot later.
Besides the serving soldiers, there are 26,000 pensioners from the British Army, while ex-Indian Army servicemen number 105,000. According to the government's Economic Survey 1999, the pensions paid to these two groups amounted to Rs 6.2 billion in the first eight months of 1998/99 alone. With the the British government decision to raise Gurkha pensions by 100 percent or more from January 2000 this amount has gone up significantly.

The only known study on Nepalis working abroad was conducted by British scholar David Seddon, with his Nepali counterparts Ganesh Gurung and Jagannath Adhikari, for the British aid agency, Department for International Development (DFID). This study released in late 1999 showed a staggering Rs 35 billion came into the country in 1997 as emittance from the 392,000 Nepalis working in nearly 20 countries around the world (see table). But because the figures mentioned in the DFID study are three years old, even they do not tell the complete story. The number of Nepali workers in the Gulf has risen dramatically in the last few years and has crossed 200,000 (more than twice the number provided by Seddon), with almost 100,000 in Saudi Arabia alone. The number of Nepalis in Qatar has also risen rapidly. While Nepalis earlier went as labourers, drivers or brick-layers, in recent years, college graduates have been making their way over to the oil-rich countries. The DFID study put the number of Nepalis in all of East Asia at 34,000, but the British Gurkha office in Kathmandu has a tally of some 70,000 Nepalis working in Hong Kong alone. Most of them are children and relatives of former Gurkhas who were granted Hong Kong IDs by the departing British. There are an estimated 50,000 or so Nepalis working (legally and illegally) in the other countries of Southeast and East Asia. Of these, around 2,000 (mostly former British Gurkhas) are employed as security officers in Brunei and Singapore, and sources say their annual per capita savings on average amounts to more than Rs 1 million. There are thousands more scattered across Japan, Taiwan and South Korea.

In the case of India, the DFID calculation included only those Nepalis in the Indian Army and those working for the public sector. If the unorganised and private sectors were taken into account, the study believed there could be as many as one million Nepalis working in India. A Nepal Rastra Bank study estimated that Nepalis working in India were sending back Rs 40 billion annually.

The preferred mode of money transfer for Nepalis in countries other than India is hundi, which entails payment in rupees within Nepal for a premium on hard currency deposited abroad. The foreignearned wealth then comes into the country in kind, the bulk as gold. Based on the declarations of gold imports at Kathmandu airport it is believed that all the money used to purchase this gold is hundi money, since none of the Nepali banks have provided foreign currency to import gold. This totalled Rs 35 billion during 1998/99. (Presently most of the remittances are coming into Nepal through regular banking channels because the difference between bank and hundi rates have fallen to 3-4% from the earlier 12-14%). By this reckoning alone, the total annual remittance from all Nepalis working abroad is Rs 75 billion.

For comparison, Nepal's annual budget for 2000/2001 is Rs 92 billion. But surprisingly, there is still no official acknowledgement of the substantial role that this money from outside plays in keeping the country's economy afloat. Only in recent years has the Nepali government been taking note of the importance of foreign employment for the Nepali economy. Even then, it views it more as a safety valve to relieve the pressure of unemployment rather than as a source of income. Neither has there been any attempt by the state to facilitate entry of cash into the country. Overseas remittances sustain the Nepali economy. It is this country's economic lifeline.

(11 JAN 2013 - 17 JAN 2013)