Expats Become Nepal’s Biggest Money Spinner

With Nepal's finances in shambles due to a deadly Maoist revolt and mounting political turmoil, the country has found a new export -- its people -- to help keep its economy going.

About 1.2 million Nepalese are estimated to live abroad, and that does not include uncounted millions in India. Last year they sent back US$1.1 billion -- up 17 percent from the previous year, an amount that accounted for 12 percent of Nepal's GDP, according to the Asian Development Bank (ADB).

"People can't stay in their villages because of the political situation and the Maoists," said Narendra Raj Shreshtha of the Nepal Association of Foreign Employment Agencies.

"All the young people are going abroad and mostly old people are left in towns outside Kathmandu," Narendra said.

More than 180,000 people left Nepal last year for work abroad, government figures show, four times the number who left five years ago.

The Maoist insurgency that began a decade ago and political upheaval aggravated by King Gyanendra's seizure of absolute power last year have pushed increasing numbers of Nepalese to seek better lives elsewhere.

Economists say it is the money these Nepalese send back for relatives that has been vital for the desperately poor Himalayan nation's economy even as the Maoist conflict and political instability have escalated.

"This is the flip side of insurgency, as unfortunate as it is, that overseas remittances are increasing," said Sultan Hafeez Rahman, ADB director for Nepal.

"Remittances are one of the great equalizers in otherwise inequitable economies. People who go abroad are randomly and evenly distributed from across the country," and the money they send home is evenly spread, he said.

King Gyanendra dismissed the government on Feb. 1 last year, promising to end the Maoist revolt that has claimed over 12,000 lives.

But with continuing rebel attacks, protests and government crackdowns on dissent, peace looks far off and the number of Nepalese leaving the country of 26 million nestled between India and China is only expected to grow.

While worker remittances have been a boon for the country where 31 percent of the population live below the poverty line, the money sent home cannot match the conflict-related loss.

"Remittances have helped but they cannot offset the decrease in investment in infrastructure, education and health," Rahman said.

In the 1990s, annual economic growth averaged a healthy 4.9 percent but this figure dropped to an average of 1.9 percent between 2002 and 2004, according to the ADB.

Tourism, which was the kingdom's economic lifeblood, has also slowed sharply. It contributed around 4 percent to GDP in the 1990s but in the last financial year to last July kicked in just 2 percent.

Arrivals by air, which peaked at half a million in 1999, numbered about 270,000 last year, government figures show.

"If there wasn't a conflict, tourism wouldn't have been as hard hit. Nepal has major potential in tourism but none of this investment has taken place for 10 years now," Rahman said.

The money earned from tourism was just US$143 million in the fiscal year that ended last July, down from US$246 million a year earlier, according to the ADB.

"There is hardly 25 to 30 percent hotel occupancy," said Narendra Bajracharya, head of the Hotel Association of Nepal.

Adding to the economic woes is the disruption caused by Maoist roadblocks outside the capital, government curfews and party-led strikes. These have made it difficult for businesses to operate normally, let alone grow.

Furthermore, after the king's takeover, some international donors and lenders curtailed aid. The World Bank suspended a US$70 million credit to Nepal, saying it would need to see how the government implemented development spending and economic reforms.

Development spending, a large part of which comes from donor aid, has fallen by one-third since 2001.

"In the case of government-to-government assistance, when local government is dysfunctional, it's difficult to get the money to the community," said Minty Pande, country director of the development organization Plan, which like other international NGOs with local networks has continued its projects.

"Now is not the time to leave Nepal. Now is the time to give assistance, but give it as directly as possible," Pande said.