Ministry of Commerce And Supplies - Enhanced Integrated ...

N T I S2010Salaries and Transaction Costs: Nepalese migrant workers in the Middle East typically earn around US$200a month, plus possibly overtime payments and typically food and accommodation is provided as well.However, the worker often has to bear additional costs for flights, visa, medical certificates and a fee toforeign employment companies (FECs). These costs typically add up to around US$1,200, which is 25 percent of the total salary over a two-year contract. In some cases, the employer would bear a large part of thecosts. The GoN has regulated the maximum fees that FECs are allowed to charge for workers going to thosecountries with which labour agreements exist (US$850-1,100, depending on the destination, and includingcosts for flight and visa). The overall transaction costs are relatively high in the case of Nepal compared toother countries in the region (Khatri, 2009). The involvement of middlemen can incur extra costs to workers.In addition to the problems faced in Nepal, workers face problems in the destination countries, again due tothe use of middlemen by employers who might capture part of the rent arising from work permits.Workers’ savings are estimated at around US$150 per month, including overtime work. Remittances are sentthrough banks, money transfer companies, and informal banking channels (hawala/hundi). A portion of theremittances is used to pay back the loans borrowed earlier to go abroad, with the remainder being used tomeet household expenses. Remittances are also found to be typically used to buy land and housing. Somepeople argue that only a small proportion of migrants use the remittance directly for productive investmentlike agriculture, manufacturing and trade (Shrestha, 2008).Migration to India is usually informal, with much lower salaries and relatively small amounts sent back toNepal.Nepal’s World Market Share: Nepal’s share in world remittances inflows is 0.6 per cent.Dynamism of Exports: There has been a significant increase both in the number of people working abroadand in remittances. Figure 2.5 shows monthly remittances inflows for Nepal. There has been a strong upwardtrend in recent years, but growth has slowed since the second half of 2008, most certainly due to the globaleconomic crisis.Figure 2.5 Monthly Remittances for NepalSource: World Bank.96NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT