With right policies Nepali diaspora can be a huge resource for economic prosperity of Nepal
Diaspora is a Greek term made up of two words, dia meaning ‘through’ or ‘over’ and speiro meaning ‘dispersal’ or ‘to sow’. It owes much of its origin to the exile of the Jews beyond Israel mainly in the 8th to 6th centuries BC. It is now commonly used in a generic sense for communities of migrants living or settled permanently in other countries, aware of their origins and identity and maintaining various degrees of contact with the mother country.
The history of Nepali diaspora is old and has been unorganized previously. However, this has been organized properly under one umbrella organization—Non-Resident Nepali Association (NRNA). The NRNA was established on 11 October, 2003 with the motto “For Nepali by Nepali’ for the purpose of uniting and binding Nepali diaspora. During the short span of its existence, NRNA has developed into a global organization and a network of people of Nepali origin by establishing National Coordination Council (NCC) in 80 countries to represent its interests, concerns and commitments.
Role of Diaspora
The role of the diaspora is particularly important to economies that have yet to gain confidence of foreign investors and this is where the leverage of NRN network will help economic development of Nepal. The impact of diaspora on economic development has multiple dimensions—for example remittances to the country providing or making itself felt in three areas in particular: trade, investment and transfer of skills and knowledge. Let me discuss each of them in brief.
The strong correlation between the presence of a diaspora residing in a country and trade ties to the country of those diaspora’s origin have been studied. Diaspora populations also buy the products of their countries of origin and introduce these products to new markets in the countries of settlement. One study of Canada’s trade with 136 partner countries in 1980-92 period showed that a 10 percent increase in immigration from a particular country was associated with one percent increase in exports to that country, and three percent increase in imports from it. NRN chapters are actively working to enhance Nepali trade in the countries where they are residing.
Diasporas play a similar role when it comes to investment (either Foreign Direct Investment or Portfolio Investment), both investing directly in their countries of origin and persuading non-diaspora investors to do the same. A study published by the World Bank mapped the stock of African migrants in Organization for Economic Cooperation and Development (OECD) countries against investment from these countries into the migrants’ countries of origin, and found a very strong indication that the existence of migrant networks increases both direct investment and portfolio investment.
Huang and Khanna (2003: 81) have noted: “With the help of the diaspora, China has won the race to be the world’s factory. With the help of the diaspora, India could be the world’s technology lab.” Between 1979 and 1995, investment by the Chinese diaspora accounted for 80 percent of total foreign direct investment (FDI) in China. The Indian diaspora is estimated to have invested $2.6 billion out of $10 billion of FDI in India between 1991 and 2001. In Nepal, Non-Resident Nepalis (NRNs) had invested Rs 29.85 billion (approx USD 200 million) in nine districts of Nepal until 2014, creating 8,276 jobs, a study by the Society of Economic Journalists Nepal (SEJON) said in 2015. However, it is estimated that total NRNA investment into Nepal so far could be more than USD 500 Million.
Dilip Ratha and Sanket Mohapatra (2011) suggest that annual diaspora savings of developing countries could be in the range of $400 billion. And Nepali Diaspora (one million) savings is around eight percent of the GDP annually and 99 percent of savings as percentage of domestic savings. Therefore, especially now with five million NRNs living abroad can amount to savings of more than US$ five billion. Thus small percentage of this saving in the form of FDI and/or portfolio investment can hugely contribute to Nepal’s economic development having multiplier effects on aggregate investments.
The expansion of networks and transfer of knowledge are often cited as very important outcomes of diasporas. A Duke University study found that foreign born entrepreneurs started 25 percent of US technology and engineering companies in the last decade. Companies like Google, eBay and Intel were started by migrants. Considering skills, knowledge, and experience of Nepali diaspora living in more than 100 countries, NRNA organized the first NRN Global Knowledge Convention, in partnership with Government of Nepal, in Kathmandu, in October last year. The Convention has identified a number of areas to transfer NRN skills and knowledge back to Nepal.
Drivers of prosperity
With right policies Nepali diaspora can be a huge resource for economic prosperity. The government can do more to remove obstacles and create opportunities for diaspora to engage in economic development. The diaspora policies work best when diaspora are engaged as full partners.
Therefore, liberalizing repatriation of, say, $10,000 annually directly via commercial banks without needing Nepal’s central bank approval of investment could be a welcome step to start with. This will also help connect second generation of NRNs to Nepali economy. We can see similar regulations in India and Sri Lanka where the governments have allowed liberalized remittances of $250,000 and $20,000 respectively. The empirical evidence shows that the portfolio investments are greater than those of FDI investments by diaspora. Nevertheless, the government should also put proper measures in place from the very beginning such as level playing field for domestic and NRN investors as the investments sometimes result in cash round tripping whereby Nepali citizens can use relatives (NRNs) abroad to make investments in Nepal while concealing their wealth from authorities.
Extension of Double Taxation Avoidance Treaty (DTTA) and Bilateral Investment Protection and Promotion Agreement (BIPPA), allowing outbound investment, putting corruption control measures in place and enactment of strict bankruptcy laws can create conducive environment for domestic, NRNs and foreign investors alike.
The author, a PhD scholar, is a member of NRNA ICC and NRN Cyprus