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Dhaka, Monday, 2016-02-16

Why are expatriates lukewarm towards stocks, real
M. S. Siddiqui
According to a survey, a total 8.6 million Bangladeshi workers live abroad and over 70
per cent are in the member-states of the Gulf Cooperation Council (GCC). Remittances
sent by Bangladeshis working abroad stood at $15.31 billion in the FY 2015, a record in
the country's history, marking a 7.6 per cent growth over the previous fiscal year. A
lion's share of such earnings comes from the expatriates working in the Middle East,
Malaysia, Singapore, South Korea and some other countries. The Kingdom of Saudi
Arabia (KSA) topped the list of major sources of remittances with a total of $ 3.34 billion
sent in the FY 2015.
Unfortunately, the contribution to the country's remittance earnings by a few million
Bangladeshis who migrated to many developed countries including the US, the UK,
Canada, Europe, Australia, and New Zealand with their families, is very nominal. Since
they live there permanently, they do not need to remit any money to Bangladesh.
The impact of remittance is well-known to all. It reduces the extent of the country's
dependence on foreign aid. In terms of foreign currency inflow, the contributions by
official development assistance (ODA) and foreign direct investment (FDI) are negligible
compared to those of export earnings and remittance from the country's expatriate
workers. Moreover, about half of the total disbursement of the ODA goes back for
payment of interest and principal amount over the years. Readymade garment (RMG)
exports from Bangladesh remain dependent on import of raw materials. Naturally,
remittance is regarded as the most secure and stable source of foreign exchange for
Bangladesh (Unnayan Onneshan, 2012).
Currently, garment manufacturing is considered as the highest foreign currency-earning
sector of our country. But remittance contributes directly to Bangladesh' Gross National
Income while contributing indirectly to the real GDP growth of the country. Remittance
as an equivalent percentage of GDP and export earnings has increased over the years.
A research showed that increase in remittance by Tk 1.00 would result in the increase in
national income by Tk 3.33.

The survey also suggests that nearly 89 per cent of Bangladeshi migrant households are
able to afford more varied kinds of food and therefore enjoy more diversity in their diets
as a result of remittance income. According to the Bangladesh household remittance
survey 2009 (IOM, 2010), remittance led to improvements in the consumption of food
among a majority (61.7 per cent) of Bangladeshi households with at least one migrant
worker working abroad. The report also suggests that remittances have positive impact
on education; nearly nine in ten Bangladeshi migrant households (87.9 per cent)
acknowledged that remittances have enhanced educational opportunities.
The capacities of migrant households are also higher. Average yearly food expenditure
of a migrant household amounts to Tk 122,462, well above the Tk 95,288 spent in an
average household in Bangladesh. A migrant household yearly spends, on average, Tk
16,292 on health care, compared to Tk 10,793 in health spending by an average
household. Average yearly education expenditure is Tk 12,896 in a migrant household,
but is just Tk 9,204 in an average household. The real estate companies offer special
prices and the RAJUK gives special quota of lands for expatriates for purchase in foreign
The expenditures from remittance for durables and other items are 77.99 per cent for
agricultural land purchase and the case is more substantial at divisional levels; in some
of the divisions such as Barisal, Dhaka, Khulna, Rajshahi, and Rangpur, 80 per cent to
90 per cent are spent for purchasing lands. Among the divisions, the lowest amount
56.05 per cent is spent for land purchase in Chittagong, followed by Sylhet 62.70 per
cent; both the figures are considerably lower than those of other divisions. Between the
disaggregated share of land and other non-land spending in total remittances, about 17
per cent of the total remittance is used to purchase lands in the country. Economists
have been blaming the expenditures on acquisition of real estate for the land price hike
and loss of cultivable lands. They say that this is also the reason why the country is
losing at least one per cent of its cultivable lands each year. Unproductive utilisation of
remittance would contribute to further artificial price hike of property and increase the
number of idle population in rural areas.
According to the survey, expatriates also look for savings and investment after meeting
their expenditures. Around 66 per cent keep an amount in savings accounts--seven per
cent in DPS (Deposit Premium Scheme), five per cent in fixed deposit and six per cent in
bonds. Some 84 per cent of the savings is being put in banks while 16 per cent is kept in
insurance and other sectors, according to the survey. The savings rate is only 13.74 per
cent, which is extremely poor.
The government policy has been to direct remittances to capital market. It has floated
bonds for migrant workers with lucrative returns. The government has many initiatives
to attract investment from expatriates. It issues (a) Wage Earners' Development Bond,
(b) US Dollar Investment Bond, (c) US Dollar Premium Bond. The government has
allowed Non-Resident Foreign Currency Deposit (NFCD) and Non-Resident Investor's

Taka Account (NITA) accounts for easy investments in bonds and shares. The
government has given permission to three banks for non-resident Bangladeshis. The
capital market regulator has reserved quota of 10 per cent for non-resident
Bangladeshis in primary public shares and allowed the Investment Corporation of
Bangladesh (ICB) to open investment accounts for expatriate Bangladeshis. However,
the bonds failed to become popular among non-resident Bangladeshis. Interestingly, the
return on investment in different saving instruments in Bangladesh is very high but the
response from expatriates is very poor.
In FY 2012-13, the portfolio investment stood at US$ 95.53 million from US$ 506.31
million in FY 2011-12 with a negative rate of growth of 81 per cent. During July-January
of FY 2013-14, total portfolio investment stood at US$ 337 million which is 88.27 per
cent higher as compared to US$ 179 million with a rate of growth 90.43 per cent than
that of the same period of the previous fiscal year. Portfolio investment showed an
increasing trend due to various policy measures already taken by the government.
In a developed market economy, there is a relationship between the real estate market
and the stock market. The importance of this relation comes from the fact that these
two markets have great impact on investment in any country. Both the markets share
the largest chunk of the liquidity pool of funds available for investment in the economy
of any country. But in Bangladesh, these markets are not substitute for each other. Since
the expatriates have different necessities for use of their money, they are not very keen
to invest in real estate. They rather invest in agricultural lands and improvement of
households. They are not very aware of the nature of capital market.
The studies on these markets find that educated and relatively well-off expatriates, now
living in the US and Europe are not keen to invest in real estate and capital market.
Although, according to industry insiders, the remitters and their families buy around 35
per cent of our total flats, 40 per cent apartments are sold to businesspeople majority of
whom are exporters.
Financial institutions allow remittance recipients to access credit needed to finance
business projects, smooth consumption, and establish a financial and savings culture
more broadly. Remittance flows, however, do not solve the structural financial
constraints befalling many a developing country. Remittances provide a potential boon
for a country's financial development and a stream of earnings to be tapped for savings
and leveraging through formal credit and other products.
The major reason behind unsatisfactory bond sales or investment in real estate is a lack
of knowledge among overseas Bangladeshis about these bonds and other facilities
provided for non-resident Bangladeshis. Expatriates also don't have desired confidence
on realtors. This failure is attributed to lack of initiatives aimed at disseminating
information about such investment schemes and real estate services among expatriate
Bangladeshis. For promoting such products among non-resident Bangladeshis,
appropriate campaign mechanisms need to be designed. The expatriates may be

divided into two segments: less educated and living in the GCC countries and educated
living in Western countries. The marketing strategy should be different for the two
sections of expatriates.
The writer is a legal economist.