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The role of Expatriate Labour in the Economy

Opinion Editorial by Ibrahim Athif Shakoor, economic expert and co-founder of Maldives Economic Review, on the role of expatriate workers in the Maldivian economy.

19 October 2020, MVT 13:23
Expatriate workers during the construction of a bridge connecting phases 1 and 2 of Hulhumale'. FILE PHOTO: NISHAN ALI / MIHAARU
19 October 2020, MVT 13:23

The issue of expatriate labour, including undocumented workers, have been a topical and relevant issue for a decade and more now. This article is focused on the role that expatriates play in the economy, formally and otherwise.

The Numbers

On the 21st of July 2020, the Chief of Defence Forces reported to the Parliament that there were 179,964 registered and 66,000 non-registered labour in the country reaching a grand total of 245,964 expatriate labour in the country.

The Household Income and Expenditure Survey of 2019/20 issued by the National Statistics Bureau reported that the working age population (those 15 years and above) of the country at 317,482, of which the labuor force of the country is 181,144.

If we take the word of the Chief of the National Defence Force seriously, as we righty should, and work with a figure of 245,964 expatriate labour in the country, we arrive at the unhappy conclusion that the migrant labour force of 245,964 resident in the country is more than 134% of the local labour force of 181,144.

The role of Expatriate labour in the local economy

It is the contribution from the different sectors of the economy that add up to calculating the GDP of any economy. The shares and contributions of various industries are regularly published for all economies including ours.

Even as the total number of expatriates in the country are not fully known, arriving at the % of expatriate workers in separate industries require more imagination and indirect conjecture.

Table 1 - GDP share from National Accounts published by National Statistics Bureau. IMAGE/ATHIF SHAKOOR

While the figures in right-hand column of Table 1 are not enumerated data, we are assuredly working with conservative estimates, and they offer a stark picture of how dependent the Maldivian economy is on input from Expatriate labour.

Even though expatriates are officially not allowed to work on board fishing vessels, it is an open secret that they serve as fishing crew and are especially plentiful on the smaller vessels used for reef fishing. Expatriate labor process the fishery products in small and large factories and work in small size agricultural plots to grow the produce that offer us nutrition and sustenance. They power the construction industry and service the hotels, café’s and restaurants that feed the population, the staff as well as the high paying guests in the resorts. The transport vessels that ferry us are crewed by them and a variety of commerce are managed and operated by them. Apart from industries, our municipal services are rendered almost exclusively by expatriate workers. A considerable ratio of doctors, nurses and teachers too are expatriate, be it that they may not be included in the undocumented and labour category.

Not only is much of the energy required to run the machinery of the economy provided by expatriate labour, but much of our social life is facilitated and shaped by their contribution. Our homes are cleaned, meals cooked, and our waste disposed of by them and our elderly and the young too are looked after by them. It is the services rendered by them at our homes, that allow us to work, serve and become a productive member of economy.

How dependent the various sectors of the economy are on the input of expatriate labour and how as individuals and families, we are dependent for their input to manage our daily grind at homes and offices, have got to be fully appreciated and internalized before we speak of finding alternate solutions to the expatriate labour issue in the country.

The foreign currency drain

The Annual report of MMA for 2019 state that over a 90m US $ were remitted out by foreigners in 2016 but that only 75.1 US $ was remitted out of the country in 2019, 42% of which was remitted to Bangladesh. The report comments that this decline in official remittance numbers have been noticed since the introduction of the 3% expatriate remittance tax in 2016.

Because actual number of expatriates have actually increased since 2016 while official remittances have actually decreased, it is evident that remittances had been made using the more informal ‘hawalaa’ methods of transfer, by-passing the official banking and money transfer networks. If we, use an indirect method and assume, that each expatriate worker would have remitted a minimum of 100 US $ every month, then 245,964 expatriate labour would remit out a total 295m US $ in 2019. And 100 US $, would be a conservative estimate.

Earnings from domestic merchandise exports for the year 2019 was 158m US $. A 295m US $ outward remittance would mean that 186% of our export earnings would have been remitted out in 2019. To offer a different perspective, 295 m US $ converts officially to 4.541b Mrf. Which would mean that 156% of Business Profit Tax of 2019, 275% of Tourism Land Rent of 2019 and 34% of total Tax revenue of the country for 2019 would have been remitted out by foreigners in 2019.

A bank worker at BML counts USD 50 cash notes. Despite the introduction of Remittance Tax, Athif Shakoor states that the decrease in remittance revenue from 2016 to 2017 indicates that expatriates were by-passing the legal banking and money transfer networks. FILE PHOTO/MIHARRU

For a country, that is always, in desperate need for foreign currency such a drain, consistently and increasing each year, is a major economic consideration that needs to be factored in when reaching policy decisions regarding the impact of expatriate labour in the economy.

Transactions in the shade

As the amount of expatriate labour has climbed up to 77% of the total working age population (15 years and above) of the country, the country has also seen a hike on a veritable array of entrepreneurial activity being conducted by the expatriate labour.

They range from trading outlets to small carpentry units, automobile and air conditioning outlets, small tailor, and barber shops to the ever-increasing corner shops. Such businesses are registered in the name of absentee locals and do even pay GST and perhaps BPT too. They are in fact; entrepreneurial activity being undertaken by expatriates in the name of locals yet the profit is accrued to the entrepreneur and not to the registered local owner.

Additionally, there are similar trades rendered in nooks and corners with no official registration procedures and managed totally in the shade with no dues accruing to the state.

There are also services like kitchen repair, tiling, plumbing, wiring and other home and office repair works, rendered cheaper and with much more flexible hours than are available from locals. Flocks of them are always available for day-hire, a service used by businesses small and big, and also for selected repair and upgrade works at home.

All the above, are services rendered in the shade, much of them not officially registered or paying dues to the state and are therefore not officially acknowledged and therefore, very unlikely to be included in the Gross Domestic calculations.

Criminal activities in the dark

Criminal activities - who control them, who benefits from them, what happens to the revenue of such activities and what are the social consequence of such activities, these some of the most intriguing aspects of the study of any economy.

While most expatriates are law abiding hard working laborer’s who toil by day and often late in to the night, and live in desperate circumstances, away from family and loved ones to earn and to make their life better, we have also witnessed the active involvement of expatriates in criminal activities.

They include organized human trafficking using people from their own country for material benefit and registering front companies to undertake all manners of trade and commerce.

Ibrahim Athif Shakoor, former head of Financial intelligence unit (FIU) and an economic expert. He details the role of expatriates in the Maldivian economy, urging to understand the issues at hand in order to work towards an agreed national consensus on solving them. PHOTO: MIHAARU FILES

They also manage and control prostitution networks not only for their own kin folk but commercially available for all. They are the people who will respond immediately for foreign currency needs and offer the best customer care by visiting you at home and offer the best exchange rate. Most importantly these services are open 24/7 for business. There is also evident money laundering activity as workers remittances are now successfully evading the official banking and money transfer networks.

In addition to large-scale theft and burglary activities being traced to them they have been charged for having murdered their own countrymen. They have involved themselves in all manner of nefarious activities from drug trading, kidnapping and raping of under-age boys.

While it can be argued that the end user, like addicts who buys drugs, is driven by physiological need, the network of criminals who mastermind and benefit from these activities are attracted to it because of the high returns generated by such insidious activities.

Such activities undertaken in total darkness, generating liquid cash, often in foreign currency, often with pain and hurt to the party of the second part, is too, an important element to be understood, then accepted, if we are to make a realistic plan to deal with the issue of expatriate labour.

Conclusion

The above is not meant to be flattering to us as a country or to the expatriates who are here. Yet, however, unflattering the emerging picture might be, the picture needs to be seen in it’s true colors and the right hues.

Expatriate labour energizes our industrial and commercial activity and offer space for many locals to participate in the local economy because much of the home and family responsibilities are looked after them. They serve municipal functions but also undertake entrepreneurial activity much of which evade national account calculations. At the same time, they drain precious foreign currency out of the economy while organizing to undertake the nefarious and criminal activities, much of which happened in the shade and often in the dark.

Without understanding the role and nature of these activities in the Maldivian Economy, and indeed in our society, we as a nation will not be available to face up to the challenge, have a meaningful national dialogue and start working towards an agreed national consensus on solving the issues at hand.

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