UAE emerges as top remittance source for Bangladesh

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Bangladesh, United Arab Emirates, UAE

Bangladesh received the highest remittance from the United Arab Emirates (UAE) in the first ten months of the outgoing fiscal year, surpassing traditional leaders such as Saudi Arabia and the United States. Central bank figures revealed that this surge provided much-needed relief to Bangladesh’s economy, which has been struggling with a foreign currency reserves crisis for the past two years.

During the period from July to April of the 2023-24 fiscal year, remittances from UAE-based expatriates totaled $3.65 billion. This marked a significant 52 percent increase from the $2.41 billion received in the same period the previous fiscal year, propelling the UAE to the top position, up from third place in the prior year. The UAE’s contribution constituted 19 percent of the total $19.11 billion remitted by Bangladeshi migrant workers during this period, according to data from Bangladesh Bank.

The UK emerged as the second-highest source of remittances, with Bangladeshi expatriates there sending $2.35 billion. The US followed with $2.28 billion, while Saudi Arabia, historically the top remittance sender, was relegated to fourth place with $2.16 billion. This represents a substantial decline from the $3.04 billion remitted from Saudi Arabia in the same period the previous year.

The dramatic increase in remittances from the UAE has been a positive development for Bangladesh, aiding in stabilizing the country’s foreign exchange reserves and improving its balance of payments. However, experts have raised concerns about the possibility that some of this money could be previously smuggled funds returning to Bangladesh to take advantage of government incentives and to legalize it.

Prof. Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, emphasized the need for a thorough investigation. “There are no significant differences between the skill levels and salaries of workers in the UAE and those in Saudi Arabia. So, it is necessary to see who is sending the money from the UAE and why this sudden spike?” Mr. Rahman queried. He suggested that the phenomenon might be a “round trip” of money, where funds previously smuggled out of the country are being remitted back to Bangladesh to secure the government’s 2.5 percent remittance incentive and gain legal status.

The suspicions are further fueled by the fact that the UAE is not the largest destination for Bangladeshi expatriates. According to the Bureau of Manpower, Employment and Training (BMET), 2.158 million Bangladeshis have gone to the UAE for work since 2004, which is significantly lower than the 3.885 million who went to Saudi Arabia. Despite this, remittances from the UAE were 40.8 percent higher than those from Saudi Arabia in the first ten months of FY24.

Mohammed Nurul Amin, a former managing director of Meghna Bank and NCC Bank, pointed out another possible reason for the increased remittance flow. He noted that many wealthy Bangladeshis have settled in Dubai, attracted by its lucrative investment environment. These expatriates are incentivized to send money back home through formal channels to benefit from government incentives, contributing to the spike in remittances from the UAE.

The UAE’s significant role in remittances comes amid deepening bilateral relations between the two countries. UAE Ambassador Abdulla Ali Abdulla Khaseif Alhmoudi assured Bangladesh’s Prime Minister Sheikh Hasina that the UAE would continue to take manpower from Bangladesh, but only after confirming job placements. This measure is intended to prevent illegal migration and ensure that the workers have secured employment before their departure.

Furthermore, the UAE and Bangladesh are exploring new avenues to strengthen their relationship. The UAE ambassador indicated that several UAE ministers would soon visit Dhaka to discuss potential investments, including in Bangladesh’s special economic zones and infrastructure projects like container terminals. Prime Minister Hasina welcomed these initiatives and assured the envoy of expedited processes to facilitate UAE investments.

In addition, the UAE has proposed to provide an Advance Passenger Information System (APIS) to Bangladesh’s civil aviation sector. This system is currently in the final stages of price negotiation, indicating progress in technological and logistical cooperation between the two nations.

While the increase in remittances from the UAE is a welcome boost for Bangladesh’s economy, it also calls for careful scrutiny to ensure the integrity of these financial flows. The government’s remittance incentives are designed to encourage legal and formal channels for money transfers, but it is crucial to investigate and prevent potential misuse of these incentives by those seeking to legalize illicit funds.

In summary, the UAE’s emergence as the top remittance source for Bangladesh highlights both opportunities and challenges. The increased financial inflow is beneficial for the economy, yet it also underscores the need for vigilance and transparency to maintain the integrity of the remittance system and ensure that it serves the intended purpose of supporting migrant workers and their families.

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