IMPACT OF OUT AND RETURN MIGRATION ON DOMESTIC EMPLOYMENT AND LABOUR MARKETS TO THE MIDDLE-EAST IN PAKISTAN

A Report for the Pakistan Planning Commission 1987

[Summary of the pioneering study conducted over 1985-86 on overseas migration to the Middle-East by ILO/ARTEP which included a field survey of return migrants and airport survey of migrants returning temporarily or permanently from abroad]

            At a meeting organized by the Pakistan Planning Commission on 26 February 1987 Dr. Rashid Amjad ILO/ARTEP, under whose overall supervision the study was conducted, presented the main finding of the report on ‘Impact of Out and Return Migration on Domestic Employment and Labour Markets in Pakistan’ which had been recently submitted to the Government of Pakistan. The meeting was presided over by Dr. M. Baqai, Secretary, Planning Division and attended by Mr. Zahur Azhar, Member, Planning Commission, Prof. S.N.H. Naqvi, Director, Pakistan Institute of Development Economics, Director, Pakistan Manpower Institute and senior officials of the Planning Commission, Ministry of Finance, Ministry of Labour, Manpower and Overseas Pakistanis, Overseas Pakistanis Foundation, Overseas Employment Corporation, Pakistan Institute of Development Economics and representatives of the World Bank Resident Mission in Pakistan and the USAID. The Director and the Deputy Director of the ILO Office in Islamabad also attended the meeting.

            The submission of the report marked the completion of the ARTEP studies undertaken in response to the request by the Government of Pakistan, made in 1983, to analyse in detail the economic impact of the migration to the Middle East which has had a far reaching impact on the entire socio-economic structure of the country. In view of the urgency of the problem and in order to arrive at some preliminary conclusions at an early stage of the study, it was divided into two phases. The report of the first phase, which was completed and presented to the Government of Pakistan in April, 1984, contained a preliminary analysis on the basis of existing data. It came up with broad policy recommendations for the Government and identified the main issues in need of further in-depth analysis. The second phase of the study was launched in early 1985 and was funded under the Technical Assistance. Credit Agreement between the World Bank and the Pakistan Government.

The Background

            Over the last decade the phenomenon of overseas migration from Pakistan to the countries of the Middle East has had a far reaching impact on the domestic economy. Indeed no factor has more dramatically affected the domestic employment situation and the balance of payments position as the outflow of contract workers and inflow of workers’ remittances from these countries. According to the Sixth Five Year Plan (1983-88) as much as one-third of the increase in the labour force during the years 1978-83 i.e. the Fifth Five Year Plan period was absorbed by migration to the Middle East. At its peak in 1982/83, official in flows of remittances from the Middle East were equivalent to 70 percent of the country’s total exports of goods and services.

            While there is considerable uncertainty as to what the future trends may be, there is broad consensus that the peak of the Middle-East ‘boom’ is over and that the ‘decade of migration’ which started in 1976 will never reach the same intensity as it did during these years especially between 1976/77 and 1982/83. Given the fact that this migration had such a far reaching effect on the entire socio-economic structure of the country, its slowing down too is bound to have important repercussions.

            It was precisely to assess the impact of overseas migration on the domestic economy and to reduce to the extent possible the uncertainty as regards present levels of return migration and future demand prospects for Pakistani labour that the present study was undertaken.

            The study addressed itself to four main issues:-

     (i)    Forecasts of overseas labour demand in selected Middle-East countries and estimates of home remittances by Pakistanis in this period.

    (ii)    Estimation of the extent of return migration so as to be able to gauge, given official estimates of out migration, net migration which is currently taking place to the Middle East.

   (iii)    Formulation of policies for re-absorption of return migrants on the basis of field surveys, establishing important characteristics of return migrants.

   (iv)    To establish whether the industrial sector is still facing problems of skill scarcities as in the earlier phase of overseas migration and adequacy of existing skill training programmes in the  country.

Main Findings

Estimated Demand for Pakistani Labour and the likely level of Workers’ Remittances from Selected Middle East Countries (Saudi Arabia, U.A.E., Kuwait, Oman and Qatar).

            Workers’ remittances from Saudi Arabia, UAE, Kuwait, Oman and Qatar comprise 85 percent of total workers’ remittances to Pakistan from the Middle East and Pakistani workers in these countries are roughly in proportion to the levels of remittances received. The study had aimed at estimating the demand for Pakistani labour and the likely levels of workers’ remittances from these countries for the 1986-90 period under three oil price scenarios: (a) ‘high’ oil prices, (b) ‘low’ oil prices and (c) ‘intermediate’ oil prices.

            The main findings of the study were:-

     (i)    In the most likely ‘low oil prices’ case, that is, if current oil prices of $ 15 per barrel (constant 1986 prices) persist in the 1986-90 period non-oil GDP growth rates are likely to decline to between 2.5–3 percent,  the number of Pakistani workers in these countries together is likely to decline by 31 percent over the 1986-90 period. The Pakistani labour force is estimated to go down from 952,000 in 1985 to 661,000 in 1990 or by 291,000 workers. Net return migration will therefore on average be 4850 workers a month or 58,200 workers a year.

    (ii)    In the ‘intermediate oil price’ case, e.g. under ‘managed’ oil market conditions (with oil prices of $ 15-30 per barrel, constant 1986 prices) at which atleast the Middle-East OPRC countries maximise their revenues and non-oil GDP growth of 8–12 percent growth rate the number of Pakistanis in these countries is unlikely to increase substantially. The projections estimate this increase at only 6 percent (to 1.006 million workers) between 1985 and 1990. The third alternative examined (the ‘high oil price’ case with oil prices at $ 31 per barrel, constant 1986 prices) and non-oil GDP growth rates of 6 to 10 percent per annum, shows Pakistani workers declining by 4 percent (to 916,000 workers) by 1990.

   (iii)    Total workers’ remittances through the banking system (if it is maintained at current levels estimated at 57 percent of total remittances) is likely to decrease in current prices by 32 percent during 1985-90 (from $ 1975 million in 1985 to $ 1334 million in 1990) in the $ 15 oil case, increase slightly to $ 2022 million in the $ 20-30 oil scenario and decline somewhat (to $ 1855 million) in the $ 31 oil scenario.

   (iv)    The skill composition of international labour demand changes over the 1985 to 1990 period to reflect the decline in construction activity in all these economies (although this is in large part made up by the continued increased need for this type of labour in the service sectors). The demand for professional workers increases marginally while there is a more significant decline for unskilled workers.

            The result of the above projection exercises, which must be cautiously interpreted as providing broad orders of magnitude rather than precise estimates, were supplemented with visits to the major labour receiving countries by government officials and the ILO/ARTEP to study first hand the changing demand situation and reports of these visits missions were made available to the Government during the project. In fact a major objective of the project was to continuously provide information on the changing situation so that the government could initiate policy measures even during the implementation of project activities.

Estimates of Flows of Return Migrants: Results of Airport Surveys

            An important objective of the study was to help establish the extent of return migration as no data are currently available to these flows. In order to estimate these, two rounds of surveys covering all international airports were conducted for a duration of one month each jointly by the Manpower Division, Ministry of Labour, Manpower and Overseas Pakistanis and ILO/ARTEP. These surveys were conducted from 25 April to 24 May, 1985 and during the month of October, 1985.

The main results of these surveys were:-

     (i)    The total number of monthly return migrants coming back into the country on expiry of contract of their work abroad (based on an average of the two one month surveys) were 11,608. Of these 11,284 were from the countries of Middle East. The numbers returning from Saudi Arabia, UAE, Kuwait, Oman and Qatar were 9504.

    (ii)    Two important conclusions emerged on the basis of the airport surveys. The first that net flows i.e. return as compared to out migration are now negative and though difficult to generalize on just two airport surveys would suggest tobe in the range of 45,000 to 50,000 per year. This means that the domestic employment situation would come under correspondingly greater pressure. The second that these results are broadly consistent with the results of the projections for demand for Pakistani labour in the Middle East reported earlier.

Re-absorption of Return Migrants in the Domestic Economy

            In order to devise policies which can facilitate the process of re-absorption of return migrants in the domestic economy it was important to identify their main characteristics including factors which influence their choice of employment/occupation, determine obstacles in the way of setting up their own businesses and most important of all investigate the extent of unemployment amongst them. For this purpose a field survey of return migrants was conducted in areas of high concentrations of overseas migration to the Middle-East covering 1327 return migrants of which 62 percent were in rural and 38 percent in urban areas.

The important findings of the field survey were:-

     (i)    The vast majority of return migrants (over 60 percent) are under 35 years of age, with limited family responsibility (33 percent are unmarried), have some formal education (65 percent) including 25 percent having passed Matric or having higher education. More than 50 percent are skilled and 40 percent unskilled workers. Only 3.4 percent belong to technical/professional categories.

    (ii)    Of their total monthly take-home income while abroad 52.8 percent were sent back as remittances and 24.2 percent were retained as savings abroad. The propensity to save out of total income was as high as 70 percent. On the average, remittances were over 3 times the household income of the family left behind i.e. household income as a percentage of remittances was only 29 percent.

   (iii)    The existing level of unemployment amongst return migrants is as high as 21.6 percent. However, 4.2 percent of the return migrants were not currently looking for work in the country, and therefore, unemployed and looking for work were 17.4 percent. Studying the adjustment process in more detail shows that two-thirds of return migrants in urban areas and three-fourths in rural areas find employment in the first year. The adjustment process continues during the second and third year in urban areas at the end of which 14 percent are still unemployed. In rural areas, 13 percent are unemployed, at the end of the second year.

Impact of Migration on Industrial Labour Markets and Adequacy of Existing Technical and Vocational Training Institutions in meeting Skill Requirements

            In order to assess whether out migration was still causing skill shortages in the industrial sector a field survey was conducted (by the Federal Bureau of Statistics) covering 240 firms in the manufacturing sector and 40 projects in the construction sector located throughout the country.

The main findings of the survey were:-

     (i)    At present industrial labour markets (both manufacturing and construction) are not seriously affected by out migration. As compared to the late 1970s when firms faced skill shortages, especially the construction sector, at present there are no longer any severe shortages of skilled or unskilled workers. Return migration too is not having much of an impact. Part of the reason could be that it is too early at this stage to predict what the influences may be since most of the industrial sector has not yet encountered the pressures of return migration.

            In order to evaluate the capacity and performance of existing public and private sector training institutes surveys were conducted in Punjab and Sind (though the Manpower Directorates, Department of Labour). The total numbers of institutions covered were 30 in each of the two provinces equally divided between the public and private sector.

The major findings of the survey were:-

     (i)    The existing training capacity, both in the public and private sectors, in Sind and Punjab remains underutilized, leading to increased cost per trainee and a waste of resources.

    (ii)    The cost of training in public sector institutions is several times higher than the cost in private sector institutions. A major portion of this cost in the public sector is on account of salaries and allowances, indicating very high administrative costs. This may suggest inefficient use of resources in the case of public sector institutions and inadequate provision of resources in the private sector institutions.

   (iii)    The following difficulties were identified both by the institutions and the trainees as the most pressing: (a) lack of physical facilities; (b) inadequate equipment; (c) inadequate and underqualified teaching staff; (d) lack of teaching materials; and (e) lack of adequate funds. In both Sind and Punjab the major difficulty reported by the institutions was lack of adequate funds. It was further observed that financial constraints and difficulties were much more pronounced in the private than in the public sector institutions. On the other hand, only 17 percent of the private institutions in Punjab perceived lack of adequate/suitable teaching staff as a difficulty, as against 77 percent of the public sector institutions.

Policy Recommendations

            Suggested policy measures concentrated on four major issues. The first, to ensure that Pakistan’s share in Middle East labour demand does not decline as it has done in recent years. Second, policies that ensure a smooth re-absorption of return migrants. Third, improvements especially as regards quality of skilled manpower produced in technical and vocational training institutions. Finally the major elements of a development strategy for the Seventh Five Year Plan (1988-93) which ensures adequate provisions for employment generation in the domestic economy given the high rate of growth of the labour force (over 3 percent) and most likely net (return) migration of between 40-60,000 per annum.