Dhaka, Bangladesh (BBN) – The use of a staggering 88 percent of remittances sent by Bangladeshis abroad on unproductive purposes like buying flats and land and other conspicuous consumption was prompting artificial price hike of property and consumer goods, said economists.
Recipients spent 72.05 percent of the annual inflow of remittances on building homes and 15.89 percent on buying flats, said the state-run Bangladesh Bureau of Statistics (BBS) in its first public survey on the issue.
The survey blamed lack policy for better utilization of the hard-earned foreign currencies for the staggering misuse.
Around eight million Bangladeshis working in mainly in Arab countries and Malaysia sent home $14.46 billion in 2012-13 almost double of $7.9 billion they had remitted in 2007-08.
The remittance, nearly half of the country’s annual export earning and one third of the export payments, heavily helps cushion the country’s balance of payments.
Economists have been blaming the expenditures on acquisition of real estate for the land price hike and loss of cultivable land.
They say that this was also the reason why the country was losing at least one per cent of its cultivable land each year.
Besides, an alarming increase in flight of capital and falling private investments also contributed to growing unemployment, say economists.
Unproductive utilization of hard earned remittance led to increased expenditures on import of consumer goods, household appliances, chemicals and gold, say economists.
The BBS said most of remittances sent by workers abroad was being spent for unproductive purposes like building homes and buying flats.
In the executive summery of the BBS survey said that the government should frame policies immediately for diverting the remittance for productive utlization.
Bangladesh Institute of Development Studies director general MK Mujery said the national economy would suffer in the long run if the current trend of remittance utilization was allowed to continue, according to the New Age, a local newspaper, report.
Unproductive utilization of remittance would contribute to further artificial price hike of property and increase the number of idle population in rural areas, he said.
Former BB governor Saleh Uddin Ahmed said it would be a big challenge to divert remittances for productive utilization.
Despite the odds, he said, the government ought to adopt proper action plans to encourage remittance senders to invest in productive sectors.
The BBS survey said recipients of remittance in Dhaka, Barisal, Khulna, Rajshahi and Rangpur divisions spent 80 to 90 percent of remittances on buying land.
Remittance recipients in Chittagong spent 56.05 per cent on buying land while those in Sylhet sent 62.70 per cent for the purpose, it showed.
Over the last one year, a substantial portion of remittance was used for the buying food and non-food items.
Chittagong division spent the highest 50.81 per cent on buying food items and Rajshahi the lowest 24.18 per cent.
Dhaka division topped in spending on non-food items like household appliances and Sylhet division the lowest.
Only 25 percent of the remittance-receiving households invest in productive sectors after paying for livelihood necessities, while others do not, according to the survey.
Remittance receivers spend 39 percent of funds on food and non-food items, it added.
The BBS surveyed 9,961 households between January 2013 and June 2014.
The main purpose of the survey is to identify the different uses of inward remittance, said Dilder Hossain, programme director of the survey, Use of Remittance 2013, according to the Daily Star, a local newspaper, report.
Almost 8.6 million Bangladeshis are currently working abroad.
Nearly two million additional young people join the labour force every year and the outflow of workers will continue in the future due to the country's lack of ability to create jobs at home, Hossain said.
People from Rangpur invest the highest—36.63 percent of remittance, while those of Sylhet invest only 16.33 percent. In the last year, homebuilding takes the largest share of remittance—72.05 percent, followed by flat purchase standing at 15.89 percent, Hossain added.
Barisal as a division spends 81.84 percent of remittance on home construction, followed by Khulna at 80.47 percent, Rangpur at 79.96 percent and Rajshahi at 78.92 percent.
Dhaka spends the lowest in home construction, while topping the list of flat buyers with 68.30 percent.
Nationally, 56.96 percent of households receiving remittance save from the income. Banks are the biggest custodians of savings from remittance income, Hossain said.
About 84.01 percent of total savers kept their savings in banks in different forms: savings accounts, savings bonds and timed deposits.
Banks are the main saving destinations in all divisions, he added.
Among the major expenditures from remittance: 77.99 percent is spent on land purchase, especially on the divisional level.
Remittance receiving households of Barisal, Dhaka, Khulna, Rajshahi and Rangpur spend the majority of their income to purchase land.
Remittance receivers in Chittagong scored lowest with 56.06 percent of funds spent on land purchases, followed by 62.70 percent in Sylhet, the survey showed. Most migrant workers lack higher education, with very few professionals, like doctors and engineers, in the mix, Hossain said.
The majority, 62 percent, are below secondary school certificate level, while only 2.41 percent have professional education, the survey revealed.
Two-thirds of remitters use proper banking channels to send money home, and 6.87 percent use Western Union. 'Hundi', an illegal system of sending money, is used by 10.04 percent of remitters, data showed. Around 96 percent of remittance is transferred as cash.
The BBS survey aimed to estimate the share of investment, savings, and consumption as part of total inward remittances and to identify the socio-economic conditions of the remittance receiving households and to provide supplementary information for national income accounting.
BBN/SSR/AD-27June14-10:35 am (BST)
