[Throwback] South Asian Migration and COVID-19, Picking Up the Pieces

This article is taken from the Special Section of NEFport 48, published in March 2022 and is part of our throwback series.

On March 11, 2000, the World Health Organization declared the 2019 coronavirus disease (COVID-19) outbreak a pandemic. The virus took the world by surprise, and countries were under-prepared to deal with a crisis of this scale. In the absence of immediate treatment, as a first response, governments imposed restrictions on local mobility (lockdowns and curfews) along with the closure of their borders to contain the spread of the virus, crippling global and regional mobility. Since the outbreak, it became apparent that poor and vulnerable countries would be hit the hardest.

Because of the COVID-19 pandemic, South Asian countries were confronted with a potential disruption of the domestic health system and economy and the potential loss of billions of dollars in remittances due to the expected drop for foreign labor demand in destination countries.

Since the majority of labor migrants from the South Asian region migrate to the Gulf Cooperation Council (GCC) countries (Table 1), the looming unforeseen economic downturn in the Gulf was expected to have a disastrous impact on the migrants’ income and consequently on the number of remittances sent to their countries of origin. In the case of Nepal, remittances accounted for 23.51% of the GDP in 2020 (Table 2) and were a substantial contribution to the local economy and socio-economic development. This is also true for other South Asian countries.

The Worst-Case Scenario Was Averted

The COVID-19 driven economic downturn did materialize but was, apparently, relatively short. Though global economic growth fell sharply during the second quarter of 2020, it recovered and became positive since the third quarter of the same year. Similarly, the GCC economies after a contraction of 4.9% in 2020, grew by 2.3% in 2021 and are expected to grow by 5.1% in 2022.

According to the IMF, in 2020, the pandemic reduced the global economic growth by an annual rate of -3.2%, which was partially compensated by an economic growth of 5.5% in 2021. This rate was stronger than expected for South Asia with a growth of 6.8%. Moreover, the international migrant stock in 2020 reached 280,598,105, an increase of 13.16% since 2015, and of 3.3% since 2019 (271,642,105 ). While, the number of migrants from South Asia increased by 11% to 42,068,932  from 37,897,481  in 2015.

Table 1: Migrants Choosing to Migrate to the GCC

Table 2: Remittances Expressed as a Percentage of the Gross National Product (GDP)

Remittance’s Resiliency

In 2020, inward flow of remittances increased significantly despite the COVID-19 outbreak. The World Bank had projected that in 2020 the flow of remittances sent to Low and Middle Income Countries (LMICs) would decline by 20% as a consequence of the COVID-19 pandemic. However, defying predictions, remittances to LMICs declined by a mere 1.6% in 2020. While for the same year, remittances to South Asia increased by 5.2% and are projected to have increased by 7.3% in 2021. The increase in remittances to South Asia was driven by Bangladesh and Pakistan. Both countries showed strong gains in remittances inflow in 2020 with an increase of 18.4% and 17.4%, respectively. Meanwhile, India and Nepal reported only minor decreases.

The Global Knowledge Partnership on Migration and Development (KNOMAD) suggested that this unexpected resilience was partially attributable to a shift from informal to formal remittance channels. The greater use of digital money transfer mechanisms and governments’ remittance supportive policies has made recording inflows of remittance easier. According to the Global System for Mobile Communications (GSMA), in 2020 more than USD 1 billion in international remittances were sent and received per month and processed via mobile money, equivalent to a year-on-year increase of 65%. In addition, other mitigating factors such as the rapid global economy (partial) recovery, and fiscal and monetary policies implemented in the major destination countries also plaid a major role.

Post-COVID-19 and South Asian Migration’s Challenges

The pandemic highlighted, yet again, the risks that South Asian labor migration incurs because of its high geographic concentration in the Gulf region. Moreover, the increase in remittances during the pandemic established that migrants keep substantial savings abroad that are mobilized in times of crisis, and which are not accounted for by the existing measurement methods.

Eventually, the world will recover from the pandemic, but South Asia will still have to address other systemic factors that shape its migration policies. Demand and supply of skilled and unskilled foreign workers from the region will be influenced by nationalization policies of the workforce in the GCC in general (KSA Nitaqat). Migrant sending countries will have to address the existing mismatch between skill demand and supply since many migrants from South Asia are still unskilled or semi-skilled and don’t speak English. Another influencing element is the growing competition from African workers migrating to the Gulf who are well-educated, speak English and accept comparatively lower wages. A closer look at the inflow of remittances during the pandemic seem to show that the market for unskilled workers will be dominated by Pakistan and Bangladesh, while semi-skilled and skilled migrants from India, Sri-Lanka and Nepal will be exposed to fierce competition from other migrant sending countries outside South Asia.