Impact of Workers' Remittances from the Middle East on Pakistan's Economy: Some Selected Issues (Phenomenon OF MIGRATION: INTERNAL AND External) (Report‪)‬

Over the last decade, the phenomenon of overseas migration from Pakistan to the countries of the Middle East and North Africa (1) has had a far reaching impact on the domestic economy. Indeed, no factor has more dramatically affected the domestic employment situation and the balance-of-payments position as the outflow of contract workers and inflow of workers' remittances from those countries. According to the Sixth Plan, as much as one-third of the increase in the labour force during the years 1978-83, i.e. the Fifth Plan period, was absorbed by migration to the Middle East [14, p. 499]. At its peak in 1982-83, official flow of remittances from the Middle-East was equivalent to 70 percent of the country's total exports of goods and non-factor services (Table 1). More recently, the slowing down in economic activity in the major labour-receiving countries together with increased competition from other labour-exporting countries has led to a decline in the outflow of migrant workers, and, with the quickening pace of return migration, there is a decline in the stock of Pakistani workers in these countries. (2) This has put considerable pressure on the domestic employment situation. While remittances from the Middle East countries have also declined after reaching a peak in 1982-83, the absolute decline has not been substantial, although there is still considerable apprehension about the volume of the remittances in future years. While there is considerable uncertainty as to what the future trends may be, there is a broad consensus that the peak of the Middle East 'boom' is over and that the migration which started in 1976 will never reach the same intensity as it did during the 'decade of migration', especially between 1976-77 and 1982-83. Given the fact that this migration had such a far-reaching effect on the entire socio-economic structure of the country, its slowing down, too, is bound to have important repercussions. The impact of this slowing down on the domestic employment situation and on the functioning of the domestic labour market has been the subject of a number of recent studies, and a broad consensus, at least as regards the latter, seems to be now emerging. During the initial spurt in migration, the concentration of demand for particular skills, especially in the construction sector, led to severe shortages in the domestic economy, and real wages of workers in construction and specific skills in manufacturing increased substantially. However, over the last few years, as a result of both the increase in domestic supply (including public-sector investment in skill-development programmes) and the slowing down of overseas demand, these shortages have been satisfactorily met, and the results of two recent surveys clearly show that firms in manufacturing and construction do not find capacity utilization constrained as a result of skill shortages caused by migration to the Middle East. (3)