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By Rupa Chandra
Professor, Indian Institute of Management, Bangalore
Introduction
The South Asian region is one of the most important exporters of services through the movement of natural persons (Mode 4 exports under GATS). However, the definition has now been broadened to include the environment in which trade transactions take place, the transparency and professionalism of customs and regulatory environments, as well as harmonisation of standards and conformity with international or regional regulations.
According to officially reported statistics, the outflow of migrant workers from India, Pakistan, Bangladesh and Sri Lanka was put at 355,000, 104,000, 268,000 and 158,000 respectively, in 1998. The World Trade Organisation (WTO), the United Nations Conference on Trade and Development (UNCTAD) and the Organisation for Economic Cooperation and Development (OECD) have restricted the scope of their definitions to the relatively free movement of goods, and, more specifically, to customs procedures and technical regulations that can impair or delay trade.
The significance of movement of natural persons for South Asia is also evident from the large volume of remittances received by countries in this region. According to the WTO, trade facilitation is defined as “the simplification and harmonisation of international trade procedures” with trade procedures being the “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade”.
Remittances amount to over US$ 2 billion in Bangladesh, representing some 4% of GDP and one-third of gross export earnings. Across all countries, remittances constituted between 2% and 8% of GDP. Documentation requirements
In terms of geographic orientation, there are three main groups of countries that are important as destination markets for South Asian service-providers: countries in the Gulf and Middle East, chiefly Saudi Arabia, Kuwait and the United Arab Emirates (UAE); the English-speaking industrialised countries, in particular the UK, US, Canada and Australia; and, increasingly, South East Asia, chiefly Singapore and Malaysia.
The skill and occupational breakdown varies according to the destination market.
Temporary labour flows to industrialised countries are mainly in higher-skilled and professional occupations such as medicine, information technology, engineering and teaching.
Temporary labour flows to the Middle East are dominated by the lower-skilled occupational categories, in particular construction work, transport operations and domestic services, although there is some movement of professionals too, especially doctors, nurses and accountants to the Middle East from South Asia.
Temporary migration to South East Asia is, again, a mix of skilled and lower-skilled occupations, including domestic services and plantation work as well as doctors and information technology personnel.
Non-immigrant labour flows to the Middle East and South East Asia are truly temporary and thus within Mode 4 of GATS (cross-border movement of labour) in the strict sense, while non-immigrant labour flows to industrialised countries are often subject to change of status to immigrant categories for permanent residence and citizenship in those countries, and thus only a part of these flows constitute Mode 4 exports of services.
Mode 4 exports from India
India has traditionally been a large source country for high- and low-skilled migration. There are an estimated 20 million-plus Indians living abroad who generate about US$ 160 billion in annual income, and account for US$ 400 billion worth of output (80% of the Indian economy).
The bulk of labour movement from India is to countries in the Middle East.
The Gulf countries accounted for over 90% of labour outflows from India throughout the 1980s and 1990s. Indian workers constitute the largest group of migrants in the Gulf. A report by Birks, Sinclair and Associates estimates that the migrant non-native population of the six Gulf countries was 7,075,851 in the 1990s, of whom over 20% were Indian.
According to another estimate, there were over 1.5 million Indian migrant workers in the Middle East in 1991, rising to 4 million in 1995 (D'Sami, ‘Migration in India', unpublished note, Chennai, 2001).
The Gulf region became an attractive destination for Indian migrant workers following the oil-driven boom in these countries in the 1970s and continuing through into the 1980s, with the demand for large numbers of unskilled workers for infrastructure projects and for menial work.
According to the Emigration Division of the Indian Ministry of Labour, during the 1991-97 period, Saudi Arabia accounted for about 50% or more of these workers, followed by the UAE with about 20%, and the others, including Oman, Kuwait and Bahrain accounting for the remainder.
In 1998, India issued about 100,000 visas for labour overseas, a majority of this being for Saudi Arabia, followed by the UAE.
The majority of Indian migrants in the Middle East are engaged in low- or semi-skilled occupations. About one in three Indian migrants to the Middle East is engaged in construction work.
According to International Labour Organisation (ILO) sources, there were an estimated 425,000 construction workers of Indian origin working in the Gulf in 1996. In addition, Indian workers in the Middle East are also engaged in other low- and semi-skilled occupations, as production workers, transport equipment operators, domestic help, nurse's aids, craftsmen and technicians, although there is also some movement of professionals, such as engineers and accountants.
It is estimated that in 2000, out of a stock of 285,000 Indian workers in Kuwait, around 100,000 were engaged as domestic help.
Most low-skilled Indian workers in the Middle East are employed under contractual arrangements.
India is also an important exporter of skilled manpower, mainly to developed countries. India's significance as a supplier of skilled and professional manpower is evident from host country immigration statistics on visas and work permits. Indian workers accounted for nearly 37% of Asian immigration to the US, and around 17% of all immigration to the US, under the professional, technical, executive and managerial categories during the 1994-96 period.
If one adds to these categories occupations such as sales and administrative support, which also require some level of skill and qualifications, then the share of Indian workers in Asian immigration and in world immigration to the US was 57% and nearly 25%, respectively.
Thus, India accounted for over half of qualified and professional immigrants to the US from all of Asia, and a quarter of all such immigrants from all over the world to the US.
In the case of Canada, India ranked second among the top ten source countries for foreign labour in Canada, with a share of 10% to 12% overall, as well as skilled inflows into Canada for the years 2000, 2001 and 2002, with a similar occupational profile.
There was a net inflow of 29,000 migrant workers of South Asian origin into the UK during the 1995-99 period, of which 19,000, or 69%, were in professional and managerial occupations.
Skilled migration from India has spanned a wide range of professions, including architecture, engineering, management, scientific and consulting services, computer services and accountancy, and auditing services.
It has, however, been significant in two or three occupations and sectors. Since the 1990s, the main source sector for skilled migration from India has been the IT sector. US immigration statistics from the 1990s indicate a disproportionately high share of Indian computer professionals in all H-1 visa admissions to the US.
Over 47,470 visas, or 73%, of all H-1B visas granted to Indians were in computer-related fields, and Indian professionals accounted for around 70% of all H-1B visas granted in the computer-related occupational category across countries, during the 2000-2002 period.
The significance of the IT sector in skilled Indian migration to the US reflects the surge in demand for IT workers in the US during the late 1990s, and subsequent increases in the H-1B quota from 65,000 to 115,000 in 1999 and further to 195,000 in 2000 under the American Competitiveness and Workforce Improvement Act.
Mode 4 exports from India in the IT sector are not only significant for the US in meeting skill shortages in this area, they are also extremely important for India's own IT industry. Over 40% of export earnings in India's IT industry are based on on-site delivery of custom application, software development, and maintenance services by Indian IT professionals to developed-country markets.
On-site professional services contributed US$ 3.6 billion worth of export revenues in 2001-01, out of total export revenues of US$ 7.7 billion that year. Industry sources in India estimate that out of a supply of 132,986 newly-entering IT professionals in 2001-02, about 64,350 left India to provide on-site services that year. Migration for on-site work accounted for 15% of the total stock of 428,636 IT professionals in 2001-02.
Evidence from other countries further confirms India's importance as a supplier of skilled manpower, with IT, engineering and healthcare constituting the main source areas for Mode 4 exports. Germany, Austria, Singapore and Japan have introduced special work permit and visa schemes in recent years to attract Indian IT professionals and meet shortages of such workers in their markets.
India has the largest stock of overseas doctors among all countries, and also exports nurses to several developed countries like the UK and Australia. There is movement of nurses and doctors under private arrangements with establishments in the Middle East and Gulf countries, under arrangements between institutions in India and in developed countries, and under special visa schemes such as the H-1A visa for registered nurses in the US.
In the past few years there has been a surge in demand for Indian nurses due to huge shortages in the US and UK. As a result, many nursing schools and big hospitals are training nurses for work overseas in American and British hospitals and placement agencies; even big hospitals are advertising for nurses. (Conservative estimates put the shortage of nurses in the US at 100,000. It is projected that by the year 2008, there will be a demand for 450,000 nurses, a large part of which can be met by India. See Economic Times , May 5 2004.)
A detailed account of the work permits issued in the UK by occupation shows that Indians received admission in the engineering, computer science, health, teaching, management and administration, business, and finance professions. Over 60% of the over 12,000 work permits granted to Indians were allocated to computer professionals, followed by 9% of all work permits being granted to healthcare professionals.
Mode 4 exports from Sri Lanka
It is estimated that there are 1.2 million Sri Lankan workers abroad. Around 70% of this stock of workers are estimated to be in the Middle East. Among these, over 60% are female migrants.
The Middle East is the most important destination market for Mode 4 exports by Sri Lanka. The Middle East accounts for more than 90% of all departures for foreign employment from Sri Lanka.
Within the Middle East, Saudi Arabia receives more than one-third of all migrants from Sri Lanka, followed by Kuwait and the UAE, with around 19% and 15% respectively, in 2001.
Saudi Arabia had a stock of 300,000 Sri Lankan workers in 2001, followed by Kuwait and the UAE, with 161,700 and 130,500 workers respectively.
This country-wise composition of labour flows from Sri Lanka also holds true in the case of female migrant workers. Saudi Arabia accounts for around 30% of total female worker outflows, followed by Kuwait and the UAE, with shares of 23% and 15%, respectively.
In addition to the Middle East, other destination markets include Singapore, Malaysia, Canada, the US, the UK and Australia. The number of overseas contract workers in Italy, Singapore, South Korea and Hong Kong was estimated at 60,000, 14,000, 4,000 and 2,500, respectively.
Data on remittances, which is a proxy for both temporary and permanent migration, confirms the importance of markets other than the Middle East for Sri Lankan labour. These include North America, the European Union (EU) (mainly the UK), South East and Far East Asia, and Australasia, which are all important sources for private remittance flows to Sri Lanka.
Other evidence from host countries also supports this fact. For instance, Sri Lanka was among the top ten source countries for foreign workers in Canada in the years 2000, 2001 and 2002, with a share of 2% to 2.5% (though the latter includes both temporary and permanent migrants).
Sri Lanka's labour exports consist of both skilled and unskilled categories of workers. Prior to the oil boom, the majority of migrating Sri Lankans were professionals and skilled workers who travelled mostly to developed countries for employment and to obtain permanent residency.
After the oil boom, the nature of migration from Sri Lanka changed and the Middle East became the primary destination for Sri Lankan workers. These include construction workers, drivers, mechanics and domestic help. Since the 1990s, professionals and low-skilled Sri Lankans have increasingly been going to South East Asia.
In 2001, there were close to 37,000 departures by skilled workers, ie, those in trade-based occupations like technicians, mechanics and nurses, for employment overseas.
The number of professional migrants is small.
Skilled workers constituted 20% of all migrant workers in 2001.
An important occupational group within skilled workers has been nursing, with a large number of Sri Lankan nurses going to the Middle East, the UK and also Canada.
The unskilled category, which essentially includes construction and production workers, is large, at over 33,000 in 2001, accounting for 18% of all unskilled migrant workers. If one combines the housemaid category with this (it also falls in the unskilled group), then the number adds up to over 130,000, or over 70% of all migrant workers.
The most striking feature of migration from Sri Lanka is the dominance of the housemaids category. This is the single largest occupational group abroad, constituting 56% of all departures in 2001, and is consistent with the high share of female migrants in Sri Lanka's labour outflows noted earlier.
Saudi Arabia, Kuwait and the UAE are the three most important markets for all kinds of workers, with Saudi Arabia accounting for around one-third of migrant workers in the skilled, unskilled and housemaids categories. More recently, Singapore, Malaysia and Brunei are also emerging as important markets for Sri Lankan maids.
There has not been much change in the basic skills and occupational mix of labour outflows from Sri Lanka over the past few years. The number of departures under the housemaids category has been between 80,000 and 100,000 per year, during the late 1990s; the number of unskilled migrants has been around 30,000 per year and the number of skilled migrants around 47,000 per year.
Mode 4 exports from Pakistan
Government estimates indicate that there were 3,180,973 Pakistanis abroad. More recently, the number of legal Pakistanis registered with the Overseas Pakistani Foundation has been put at 4 million.
Temporary migration from Pakistan has mainly been to the Middle East, for contract-based work. Since the 1970s, both skilled and unskilled Pakistanis, but predominantly unskilled workers, have been migrating to the Gulf region for work. By the mid-1980s, there were an estimated 2 million Pakistanis in the Persian Gulf states, making up the largest group of foreign workers and remitting more than US$ 3 billion every year to Pakistan, or nearly half of Pakistan's foreign exchange earnings.
Typically, these workers stay overseas for five to ten years, following which they return home. This movement has been regulated by Pakistan's Ministry of Labour under its Programme for Overseas Pakistanis.
The breakdown across countries is quite similar to that for Sri Lankan migrant workers discussed earlier. Saudi Arabia has been the main destination market, although its relative importance has declined since the mid-1990s. The UAE is the second most important destination market, followed by Kuwait.
The bulk of this movement to the Middle East is in the unskilled categories. Professional migrants constituted less than 10% of all migrants to the region, in the 1990-96 period, while migrants engaged in services and production, which basically cover menial occupations, contributed to 80% of all migrants to the region.
Pakistan also exports labour to other parts of the world, to North America, Europe (especially the UK), the Far East and Australia, and to parts of Africa. Pakistanis have been going to the US and the UK since the 1960s, though most of these outflows have been permanent in nature, unlike flows to the Middle East.
In 1998, there were an estimated 934,068 Pakistani nationals working in Europe, of which 720,000 were in the UK. There were 605,000 Pakistanis working in the US, close to 73,000 in South East Asia, Australia and the Far East, and around 18,000 in Africa. The bulk -- over 1.5 million -- were working in the Middle East.
Thus, although the Middle East dominates as the destination market, other countries, including industrialised countries in North America and Europe, are also important markets for Pakistani labour.
Evidence from host countries confirms the importance of Pakistani workers in total labour inflows. For example, Pakistan ranked as the third most important source country for overall foreign labour inflows as well as for skilled labour inflows into Canada, for the years 2000, 2001 and 2002, with a share of around 6% of all such inflows.
The data suggests that most Pakistani labour flows to developed countries have been in the skilled and professional categories.
Mode 4 exports from Bangladesh
The basic pattern of migration from Bangladesh is broadly similar to that for other South Asian countries, in terms of its primary orientation towards the Middle East and concentration of semi-skilled and unskilled categories in these flows.
Bangladeshi service-providers are mainly engaged as construction labour, domestic help, and nurses (in addition to working as fish- and vegetable-sellers and in garment production) in overseas markets. The most important market is Saudi Arabia.
Increasingly, Bangladeshi maids and nurses are also going to countries in South East Asia. There is an estimated stock of around 250,000 Bangladeshi workers in Malaysia, mostly engaged in low-skilled work. However, an increasing number are also being employed in skilled occupations such as engineering, health and nursing.
Labour flows to industrialised countries are mostly permanent in nature and are mostly concentrated in semi-skilled categories of work.
Conclusion
It is evident from the data on labour flows to developed and developing countries from South Asia that all South Asian countries have a strong interest in exporting labour-intensive services, at all levels of skills.
The main markets of interest are the Middle East, South East Asia and the industrialised countries, in particular the US, UK, Canada and Australia.
Sectors of interest include professional services such as information technology, finance and engineering, as well as semi-skilled and low-skilled services such as construction work, repair, nursing and domestic help.
All countries have also been focusing on the software industry as a thrust area, by facilitating domestic and foreign investment in this industry and by investing in training and skill-development to create the requisite manpower for this industry.
Hence, Mode 4 is a focus area for securing and enhancing market access in services exports for South Asia.
It is also worth noting that Mode 4-based exports are critical not only for the growth of certain industries such as IT, but also for generating resources for development in the source sectors and communities of these countries, and thus important not only from the strategic viewpoint of the GATS negotiations but also from a larger development perspective.
(This article is an edited excerpt of the author's paper ‘Trade in Services and South Asia: An Aggressive Agenda' in Centad's South Asian Yearbook of Trade and Development 2005. To download the full paper, with tables and references, in PDF format, click here. )
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