First and foremost, some bare facts.
- As I pen this piece on May 19, 2016, crude oil Brent trades at $47.86 per barrel. Certainly an improvement over $28 to which it had plummeted after the price fall commenced in 2014! But indeed a far cry from the $125 zone in which it used to hover steadily till 2014. One also remembers a barrel costing $150 not so long ago. But all that seems like a dream now. The forecast is grim. A crude oil Brent barrel will not fetch more than $54 at least till 2017-end and that too once in a blue moon.
- Saudi Arabia‘s economy is in a bad shape. Its oil minister of two-decade vintage has been replaced by a new one. The latest budget has horrified citizens. Taxes, so far unheard of in the world‘s largest oil exporting country, have been levied. Subsidies have been curtailed. Wages of the largely migrant work force are getting slashed. Saudis have been given more than a hint that they will now need to work, that is, soil their hands. A traumatic prospect indeed for a generation used to wallowing in luxury! The Kingdom, whose 73% of total revenue comes from the oil industry, lost 23% of its oil income last year. The country announced a budget deficit nearing $100 billion. According to the International Monetary Fund, Saudi Arabia could go bankrupt in five years if things continue the way they are.
- Qatar‘s Al Jazeera media network has suddenly reduced its global headcount and has pulled the plug on its America channel, launched in 2013 only, because of drastically declining oil revenues. According to the Middle East Institute, the Emir Sheikh Tamim bin Hamad Al Thani warned Qataris in November 2015 that due to tumbling oil prices, the government could no longer “provide for everything.â€ This is in spite of the fact that Qatar‘s economy is the most diversified amongst the Gulf Cooperation Council countries and is not unduly dependent on oil; it relies more on natural gas reserves and engagement in other economic activities like finance, both conventional and Islamic, construction, sports, tourism, etc. Yet austerity measures like cuts in electricity subsidies and rise in domestic petroleum prices for the first time in eight years were vociferously resented by the Qataris. The country has applied brakes on its prestigious $6.4-billion al-Karaana petrochemical project. Jobs are being slashed. Expatriates will be bearing the brunt of the downturn. In fact, the rising cost of living is driving away highly skilled foreign professionals. The impact is being felt by even low and semi-skilled labour migrants now.
- Being an exporter of crude oil, Malaysia too is feeling the pinch of its price fall. The Ringgit has depreciated by 30 percent in a year. Only 30,414 Nepalis left for Malaysia between August 2015 and January 2016 whereas more than 152,453 left during the same period the previous year, figures from the Department of Foreign Employment reveal.
- By now it should be obvious that the challenge rocking the Organisation of the Petroleum Exporting Countries (OPEC) is a clear and present danger for the migrant labour which keeps these economies ticking. Upheavals in these countries can spell doom for a country like Nepal which derived 29.2% of its gross domestic product in 2014 from remittances. The amount stood close to $7 billion.
Though Nepal received remittances from around 35 countries in 2015, the highest inflows were from Qatar ($ 2.02 billion), Saudi Arabia ($ 1.8 billion), India ($ 1 billion), United Arab Emirates ($ 803 million) and the United States ($ 332 million). While Qatar and Saudi Arabia provided employment to 124,368 and 98,246 Nepali migrants respectively in 2015, Malaysia attracted the largest number of Nepali workers â€“ 202,828 to be precise. But the total remittance was much lower at $185 million.
In fact, remittances (money) sent by Nepali migrant workers to their families form the mainstay of our economy. The period following the April 2015 earthquake had seen a significant surge in money inflow. This went a long way in helping the quake victims when the government failed to rise to the occasion. Remittances had played a similar role during the decade-long civil war in the country.
We can, therefore, well imagine the pivotal role of the money remitted to the country by Nepali workforce from abroad. Since these billions arrive directly to households they have had a salutary effect on our socio-economic system. According to World Bank estimates, extreme poverty has witnessed a decline from 70% to 25% during the last 15 years. The level of remittances has been growing steadily since the late 1990s when they constituted just 10% of the country‘s GDP.
But the drastic fall in crude oil prices has suddenly put a question mark over this steady inflow of funds. Nepal‘s economy is under threat. The unprecedented fall in crude oil price is a story in itself. The reasons behind the precipitous slump are beyond our control. Moreover, West Asia or what is also known as the Middle East is already a conflict-ridden region. Most of the OPEC countries there are in one way or the other related to the unending strife. Any escalation in the current turmoil can sound the death knell for Nepal‘s petro-propelled revenue remittance stream.
It has often been felt and also articulated by experts that Nepal has lagged behind abysmally in creating employment opportunities within. We have instead focused on exporting manpower. Worse, that manpower is not as skilled and as professionally equipped as are migrants from other countries. Therefore, remittance per Nepali migrant is hardly encouraging. It is simply sustaining a subsistence economy. We need to improve the quality of our manpower through technical and vocational training to ensure higher remittances.
Many economists and planners are of the view that the absence of able-bodied men from our agricultural sector is costing Nepal dearly. Left to be tended by single women, old men and children, our farm sector is not being utilised optimally. Rather it is largely neglected. Farm productivity is way below that of comparable countries. The loss thus caused is much bigger than the benefits from remittances. The large-scale migration of men is adversely impacting the country‘s social fabric as well.
The oil crisis is a timely reminder to the powers that be to devise sustainable and people-friendly ways of economic growth.
Basant Chaudhary is a Poet, Writer, The Chairman of BLC and Basant Chaudsshary Foundation. (email@example.com)