VZCZCXRO8305
PP RUEHCI
DE RUEHKT #0201/01 0720210
ZNR UUUUU ZZH
P 130210Z MAR 09
FM AMEMBASSY KATHMANDU
TO RUEHC/SECSTATE WASHDC PRIORITY 9924
INFO RUEHAD/AMEMBASSY ABU DHABI 0185
RUEHLM/AMEMBASSY COLOMBO 7193
RUEHKA/AMEMBASSY DHAKA 2512
RUEHDO/AMEMBASSY DOHA 0240
RUEHIL/AMEMBASSY ISLAMABAD 5237
RUEHKL/AMEMBASSY KUALA LUMPUR 0695
RUEHLO/AMEMBASSY LONDON 6388
RUEHNE/AMEMBASSY NEW DELHI 2936
RUEHRH/AMEMBASSY RIYADH 0315
RUEHCI/AMCONSUL KOLKATA 4536
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHHJJPI/PACOM IDHS HONOLULU HI
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 KATHMANDU 000201 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ELAB ETRD PGOV NP
SUBJECT: NEPAL'S REMITTANCES GROW AMIDST DETERIORATING 
WORLD ECONOMY 
 
Summary 
------- 
 
¶1.  (SBU) Nepal's level of remittances grew 65.3 percent in 
the July 15-January 15 period, defying numerous local press 
reports that remittance growth would be severely affected by 
the deteriorating world economy.  Excluding India, record 
numbers of Nepalis continue to leave the country and seek 
employment primarily in Malaysia, Qatar, United Arab 
Emirates, and Saudi Arabia.  The Government of Nepal is 
offering a partial worker permit reimbursement scheme in case 
overseas Nepalis lose their jobs and are sent home and is 
placing employment creation as a priority in its fiscal year 
2010 budget process.  Declining economic conditions in 
Malaysia and Gulf countries will likely challenge Nepali 
employment prospects in mid-late 2009. 
 
Remittances Grow in 2009 
------------------------ 
 
¶2.  (U)  While local press reports a dismal outlook for 
Nepali overseas workers, remittances continue to flow back to 
Nepal at record levels.  Nepal Rastra Bank (NRB), Nepal's 
central bank, reported in early March that worker remittances 
to Nepal increased 65.3 percent in the first six months of 
Fiscal Year (FY)09 (July 15-January 15) compared to FY08.  In 
2008, remittances to Nepal totaled $2.2 billion and 15.5 
percent of GDP, according to the International Labour 
Organization (ILO).  The current depreciation of the Nepali 
Rupee (NR) against the dollar increases the value in Nepali 
terms of remittances from foreign workers in the Gulf.  The 
Qatari Riyal, United Arab Emirates (UAE) Dirham, and Saudi 
Riyal are all pegged to the dollar; remittances sent back to 
Nepal are worth increasingly more the more the rupee 
depreciates.  The Nepali Rupee continues to slide against the 
U.S. dollar due to the weakening Indian Rupee (the Nepali 
Rupee is pegged at NRs 1.6 to the Indian Rupee).  From 
mid-July through mid-January, the Nepali Rupee depreciated 
11.9 percent compared to a 3.1 percent appreciation during 
the same period a year earlier.  NRB set a record low 
exchange rate of NRs 82.8 to the dollar on March 4 (the July 
15 exchange rate was NRs 68.5 to the dollar). 
 
Nepalis Working Abroad:  The Numbers 
------------------------------------ 
 
¶3.  (U)  The Department of Foreign Employment on February 23 
contradicted projections of fewer Nepalis leaving for work 
when it reported an eight percent rise of laborers leaving 
Nepal from mid-January to mid-February compared to the 
previous month (18,715 against 17,300).  The Ministry for 
Labour and Transport Management reported that 239,637 Nepalis 
left for overseas work in FY08 (656 per day average from July 
16, 2007-July 15, 2008) compared to 199,191 in FY07 and 
136,131 in FY06.  Excluding India, 93 percent of Nepalis 
leaving for overseas work travel to Qatar, Malaysia, Saudi 
Arabia, and the United Arab Emirates (UAE), although the 
Government of Nepal has negotiated permission to send workers 
to 107 countries.  Malaysia hosts the largest number of 
Nepalis (approximately 400,000), but Qatar absorbed the most 
Nepalis in FY08 (85,441) due to a favorable labor agreement 
and construction boom.  More than 1.3 million people traveled 
abroad for jobs through registered manpower companies alone 
by mid-January 2009, according to the Minister for Labour and 
Transport Management Lekh Raj Bhatta.  In addition to 
documented workers leaving Nepal on work permits, an 
estimated two million Nepalis work in India at any given 
time; most are seasonal migrants who take advantage of the 
lack of border and employment restrictions to find extra work 
and reduce family income deficiencies. 
 
Government of Nepal Reactions and Actions 
----------------------------------------- 
 
¶4.  (U)  To alleviate the impact of potential overseas job 
cuts, the Government of Nepal announced in January that it 
 
KATHMANDU 00000201  002 OF 002 
 
 
will reimburse 40 percent of manpower fees (fees average 
between $1,000-$3,000 per worker) if workers return within 
six months and 25 percent of fees if workers return within a 
year and carry certification from the Nepal consular office 
or embassy abroad that the job loss was due to economic 
conditions.  However, the Foreign Employment Promotion Board 
claimed that the relief fund would run out of money if the 
number of workers returning to Nepal kept increasing.  NRs 
24.5 million (approximately $299,000 at the exchange rate of 
NRs 82 to the dollar) has been set aside for the relief fund 
in FY09, according to a January 29 Himalayan Times report. 
 
¶5.  (SBU)  In a preliminary FY10 budget discussion on March 
2, the Ministry of Finance announced it will address the 
potential impacts of the global economic crisis by requiring 
employment creation programs in every ministry. In the 
current policy arena, government officials have been 
providing press a variety of comments on how to prepare for 
potential negative economic impacts.  On February 11, 
Minister for Labour and Transport Management Lekh Raj Bhatta 
accused the Finance and Foreign Ministries of performing 
below expectations in regards to the potential crisis and 
singled out the Foreign Ministry in particular as not making 
diplomatic efforts to enlarge job opportunities overseas. 
Additionally, the local press reports that the government is 
in labor discussions with new employment destinations 
including Oman, Libya, Papua New Guinea, and Lebanon. 
 
Global Economic Crisis:  Predictions of Nepal's Remittances 
--------------------------------------------- -------------- 
 
¶6.  (U)  The World Bank predicted in its November 2008 
"Outlook for Remittance Flows:  2008-2010" that remittances 
from South Asians in the Gulf could decline by nine percent 
in dollar terms in 2009, compared to a 38 percent increase in 
the previous year.  World Bank Country Director Susan 
Goldmark has encouraged donors to begin to consider 
employment schemes anticipating a major return flow of 
migrant labor.  Oil-funded construction projects are being 
shelved in Bahrain, Kuwait, Qatar, Saudi Arabia, and the UAE, 
which employ roughly 11 million workers from Asia, according 
to a variety of international press reports.  According to 
the local Nepali press, remittance contractions of up to 40 
percent are pending, as well as fewer worker departures, and 
an influx of workers returning home after losing jobs abroad. 
 Additionally, Manolo Abella, ILO's Chief Technical Advisor 
on Labour Migration, issued a February report claiming worker 
safety issues could be exasperated during the global 
recessionary period.  Abella stated that due to the large 
investment required to secure an overseas work permit, many 
laid-off foreigners residing overseas may attempt to stay in 
the country to try and earn income to pay off their 
investment and thus become illegal and vulnerable to abuse. 
 
Comment 
------- 
 
¶7.  (U)  Local press in Nepal issue claims almost every day 
forecasting impending worker returns and domestic economic 
problems.  Remittance growth reported in January 2009 in 
Nepal and neighboring Bangladesh and Pakistan (with a 
majority of its workers in Gulf States) strongly suggest the 
"looming crisis" as repeatedly reported may not be as bad as 
assumed for South Asian economies.  Strong December/January 
remittance data and growing worker departures place Nepal in 
position to maintain remittance growth in the short term, but 
long-term growth (beyond FY09) amidst a faltering global 
economy will be dependent on the continued ability of Nepalis 
to secure and take up jobs overseas.  In the meantime, each 
month this developing country experiences remittance growth 
and more workers leave the country than come home is welcome 
news.  Remittances are driving consumer purchases and 
construction projects, usually securing credit from poorly 
regulated banks.  A major downturn could lead to bank 
failures. 
POWELL