Expatriates’
Economic Role
By Shahid Javed Burki
The story of the development
of the Pakistani expatriates community in various
parts of the world was the product of some remarkable
demographic shifts that occurred in the country
since it gained independence nearly six decades
ago.
Exactly how and why these shifts happened warrants
further study. This is for the simple reason that
the formation of the expatriates community and their
interaction with the home country are events of
enormous significance not just for the history of
the communities of Pakistanis living abroad but
also for the social, political and economic development
of Pakistan.
Like the Jews, the Chinese and some Indians, some
Pakistanis are also naturally diasporic people.
They are prepared to move long distances in order
to escape economic hardship or religious persecution
and also to look for new opportunities. Of these
early long-distance migrants it was only the Jews
who displayed a strong sense of separate identity
and nationhood.
These impulses were strong enough for them to create
a homeland for themselves against heavy odds. The
Indian and Chinese communities for a long time took
little interest in their respective countries of
origin.
The Chinese, living in various China towns in the
western world, were almost totally out of touch
with the homeland. This was also the case with the
Indian communities in the Caribbean and various
parts of Africa.
The Asian foreign communities were founded hundreds
of years ago. Their isolation from the homeland
may have been the result of poor communications
in those periods. The more recent migrants are different.
No matter where they come from they tend to remain
in close touch with the places and people they have
left behind. This is made possible by the low cost
of communication; it takes a few pennies to make
a telephone call to the homeland whereas a few decades
ago the cost was a multiple of the daily wage.
The same is true about the cost of travel. A return
air ticket from the United States to Pakistan costs
less than one-tenth of the annual minimum wage of
a gainfully employed person.
It is not surprising that, when the new migrants
have the financial wherewithal, they tend to look
at their homeland as a destination for their savings.
This is certainly what the large communities of
Pakistani expatriates are now beginning to do.
This would not be an unusual role for a diaspora;
this type of contribution has been made - and is
being made - by the communities that originated
in many countries. These include Israel, Ireland,
Poland, China, the Philippines, India and Mexico.
Pakistan has now joined this league of nations.
In fact the total amount of remittances flowing
into the developing world from the groups of immigrants
living and working in various parts of the developed
world is now more than $100 billion a year.
This is twice the amount of total foreign aid provided
by rich nations to poor countries and about a quarter
of the annual flow of foreign direct investment
into the developing world.
The fact that governments in the developing world
invest so much time and effort in maintaining good
relations with the providers of development assistance
but spend practically no time at all studying their
expatriates or working with them is a good indication
of the ignorance about the important role these
communities are playing - or could play - in the
development of their homelands.
The precise interest of the expatriate communities
in their homeland is the product of several factors.
These include the economic and social background
of the immigrants, the nature and scope of types
of ties the overseas communities maintain with the
country of their origin, the types of financial
instruments that are available to the remitters,
and the way the communities living and working abroad
view their home country’s economic prospects.
Given these factors no stream of remittance is the
same. A country hoping to economically benefit from
the wealth of its citizens living abroad would do
well to understand their economic interests.
In a previous article, I began to provide some insights
into one of these communities - the one in the United
States of America. Let me recapitulate some of the
guess-estimates I provided about the economic situation
of the Pakistani expatriates in North America before
moving forward with the story about their growing
influence in the home country.
I settled for a smaller estimate of half a million
for the total number of Pakistanis resident in North
America. This is a lower count than my earlier estimates,
taking into account some of the more recent work
done in this area. That notwithstanding, I still
believe that there are many more Pakistanis in North
America than suggested by some studies.
I suggested earlier that the aggregate annual income
of the North American expatriates is of the order
of $25 billion, their accumulated wealth is in the
neighborhood of $100 billion, and their combined
yearly savings is probably more than $6 billion.
With about 200,000 households making up the expatriate
community in several cities of the United States,
their average net wealth is about half a million
dollars per family. The income from this asset base
should be around $40,000 a year.
In other words, the Pakistanis resident in the United
States and Canada have enough accumulated wealth
to ensure a sizable yearly income in addition to
what they earn from their jobs and businesses.
How are they using their savings from both accumulated
wealth and current income? How much of these savings
are going to Pakistan and what is the likelihood
of their increase? Would the expatriates be prepared
to tap into their wealth to make investments in
Pakistan? Is there a role for the Pakistani government
in encouraging the expatriates’ savings to
flow to Pakistan? I will attempt answers to these
and other questions over the next week or two.
Financial flows from the Pakistani communities in
the United States could play a significant role
in the economic and social development of the home
country. This has already begun to happen given
the quantum jump in the level of remittances in
the last few years.
In 2003-2004, the total amount of remittances received
by Pakistan was more than four per cent of the country’s
gross domestic product, equal to about one-quarter
of the total amount of net investment.
This flow contributed more than one percentage point
to the increase in national income estimated at
6.4 per cent for the year. In other words, the Pakistani
expatriates are already contributing significantly
to their homeland’s economic development.
Neither the academic community nor government agencies
have taken much interest in understanding the economic
background and medium and long-term economic interests
of the Pakistanis residing in the United States.
It is my belief that this community is poised to
play a significant economic and social role in the
future of their homeland. Since the contribution
they could make will be more pronounced than that
of the two other Pakistani expatriate communities
- those in Britain and the Middle East - it is worth
the effort to develop a better understanding of
these communities.
What follows is an effort to dis-aggregate the large
community of Pakistanis in North America into its
various parts. This description is not based on
deep research but drawn from informed guess and
personal knowledge about the broad economic characteristics
of these diverse groups of people.
There is a rich mix of social and economic backgrounds
among the North American Pakistani expatriates.
The community in the Greater Washington area is
dominated by the professional classes, a significant
number of whom are employed in the public sector
including the federal government, the World Bank,
and the International Monetary Fund.
There are also people from this community - in particular
from the second or third generations - who have
found jobs in the numerous think-tanks that operate
in the area. A growing number of working class immigrants
from Pakistan are now resident in the northern part
of the state of Virginia, next door to Washington.
Further up the East Coast are the communities of
New Jersey and New York which have a larger proportion
of working classes than is the case with the other
expatriates.
As is common with other groups of immigrants, the
members of this group have congregated in the businesses
in which some of those that had come earlier scored
successes. Prominent in this group are taxi drivers,
owners of newspaper kiosks, owners and workers in
small retail businesses, and owners and waiters
in ethnic restaurants.
Moving further north are the communities in Chicago
and Detroit. Not unlike the Washington group, this
group also has a significant number of professionals
- physicians and surgeons, engineers, lawyers, economists
and accountants. Almost all of them work in private
businesses, either self-owned or as employees in
large firms. The Toronto Pakistani community in
Canada - the largest Pakistani expatriate community
in that country - is basically an extension of the
Chicago group.
The community in the San Francisco and Los Angeles
area is dominated by the people in the high-tech
industry. As a result of the IT and dot.com booms
of the ‘nineties some of these people have
experienced vertiginous upward economic mobility.
The size of accumulated wealth and annual incomes
of this community is considerably greater than the
average for the communities in other parts of the
continent.
Finally, the Pakistani community in the Houston-Dulles
area is dominated by the people who have set up
successful businesses; some of them in the oil sector
while some other have taken advantage of the economic
boom that has lasted for decades in the area.
Since this part of the United States has a very
strong presence of immigrants many of whom operate
their own businesses, the Pakistanis have found
an easier acceptance here as business owners and
operators.
These communities have different economic interests
in Pakistan. The working class communities on the
East Coast (Washington-Virginia and New Jersey-New
York) are not unlike the Pakistani workers in the
Middle East.
While they earn considerably more but save less
than the Pakistani workers in the Gulf states, they
do send money to their relatives and friends back
in the homeland. A steady flow of about $150 million
from the United States to Pakistan in the period
before 9/11 was made up of this type of remittance.
It is unlikely that the total amount of money originating
with this group would grow in any significant way
unless their number increases. The size of this
component of the expatriate community is unlikely
to increase given the constraints imposed on the
entry of people with low levels of skills into the
United States following 9/11. These constraints
are particularly severe for the Muslim world.
The more well-to-do members of the various communities
of Pakistanis identified above have come recently
into the picture as active remitters, attracted
by the booming real estate markets in various parts
of Pakistan. How they are responding to the opportunities
they see in the homeland will be the subject of
the article next week. (Courtesy Dawn)
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