E.g., 12/14/2017
E.g., 12/14/2017

Labor Migration from Myanmar: Remittances, Reforms, and Challenges

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Labor Migration from Myanmar: Remittances, Reforms, and Challenges

Burmese migrants peel shrimp in a processing plant in Thailand. (Photo: Thierry Falise/ILO)

As Myanmar emerges from decades of military rule, international labor migration is increasingly viewed, by migrants and policymakers alike, as a means of economic development at both the household and national level. Buoyed by thawing international relations and increasing regional integration within the Southeast Asian economic bloc, particularly since the ascension of Aung San Suu Kyi and the National League for Democracy (NLD) to power in March 2016, Myanmar has experienced a rise in labor migration.

Policymakers in particular are eager to understand how to harness migrant remittances as a means of securing livelihoods for the rural poor in Myanmar. With 26 percent of Myanmar’s 53 million people under the poverty line, and incidences of poverty twice as high in rural areas, the need to understand the role of migration and remittances in facilitating economic development is particularly important.

This article identifies the key flows and drivers of international labor migration from Myanmar, and examines some of the reforms that Myanmar has instituted that may impact migration and remittances. The article presents Singapore as a case study to highlight the diversification of labor migration destinations as well as key challenges that may inhibit the realization of Myanmar’s migration-development nexus.

Burmese Labor Migration: Flows and Drivers

Rural poverty, unemployment, lack of economic opportunity, and fragile livelihoods comprise the key drivers of both domestic and international migration from Myanmar, according to research from the Livelihoods and Food Security Trust Fund (LIFT), a nongovernmental organization (NGO) based in Yangon. In household surveys conducted in 2015 across 54 villages in six regions in Myanmar, LIFT found that most migration takes place internally toward urban centers such as Yangon and Mandalay in response to income loss (such as after Cyclone Nargis in 2008), seasonal irregularity in agricultural incomes, or to diversify incomes away from farm-based activities. In the Ayeyarwady region, for example, LIFT found that 42 percent of households experiencing food insecurity had a household member migrate in response. However, only 9 percent of all migrants in the region migrate internationally. While some workers migrate for “nonessential” reasons, such as social mobility or entry into prestigious professions, this accounts for a small minority of migrants, primarily from households with disposable incomes and asset bases.

Beyond internal migration, overseas labor migration has also increased. Historically, Thailand has been the largest recipient of Burmese labor, enabled by a porous 1,300-mile shared border. An estimated 1.9 million to 3 million Burmese live and work in Thailand, a large proportion of whom are unregistered. Initial outflows from Myanmar began in the mid- to late 1980s in response to economic and political unrest as well as efforts by the Thai government to import foreign labor to fuel economic growth in the service sectors, predominantly located in Bangkok, as well as to key manufacturing hubs such as Mae Sot near the Myanmar-Thailand border. Together, this mix of economic and conflict-driven migration accounts for much of the Burmese population in Thailand.

Malaysia is home to the second-largest overseas Burmese population, hosting more than 250,000 Burmese workers as of 2015, according to UN Department of Economic and Social Affairs figures. As in Thailand, workers here are typically concentrated in unskilled sectors such as agriculture, fishing, manufacturing, and domestic work. Additionally, significant populations of Burmese live in Bangladesh and Saudi Arabia (both countries host around 200,000 Burmese), although these stocks are comprised more of conflict-driven refugees, such as members of the Muslim Rohingya minority group, rather than labor migrants in the strictest sense.

Diversification of Destinations

In recent years, workers have gained access to new labor markets, especially within the Association of Southeast Asian Nations (ASEAN) bloc. Owing to the bureaucracy of international migration regimes, these labor flows are more formalized than the Myanmar-Thailand flows. Singapore, in particular, has emerged as a popular destination. More than 200,000 Burmese live in Singapore, according to an estimate cited by Myanmar’s ambassador to the city-state. This population, although not entirely comprised of labor migrants, has increased dramatically in the last ten years. Domestic workers account for more than one-third of all Burmese workers in Singapore, according to employment agency industry representatives, and others are concentrated in the construction and marine (shipping, shipyard, and maintenance) industries.

Three factors likely contribute to the diversification of destinations of Burmese workers beyond Thailand. First, the prior government of Myanmar —Thein Sein’s Union Solidarity and Development Party (USDP)—instituted a raft of reforms conducive to international labor mobility (explored in greater detail below). Second, Myanmar is increasingly politically cooperative with major labor-importing countries, prompted not only by the size of its overseas population, but also by principles of the ASEAN Economic Community (AEC), which Myanmar is set to formally join in 2018. For example, in December 2016, Myanmar and Singapore instituted 30-day visa-free tourism between the two countries. Third, the burgeoning infrastructure of migration market intermediaries has led to growing outflows of labor overseas to increasingly diverse labor markets. Where the NLD administration lacks an explicit and coordinated migration policy, the private sector commands significant leverage over the recruitment and placement of workers overseas, enabled by sprawling networks of village-level recruiters, migrant-processing and training facilities in urban centers, and corporate partnerships between worker-exporting agencies and worker-importing agencies at destination.

Financial Reforms and Migration Implications  

It is too early to say how the NLD will manage labor migration. In official addresses, the NLD leadership has made clear that three key migrant groups require urgent management: the significant population of internally displaced persons (IDPs) stemming from longstanding ethnic conflicts and military prosecution, the vast numbers of workers in Thailand, and the growing population of Burmese workers in other overseas destinations. Although the former two groups seem to take precedence in policy discourse, reforms have also been instituted in recognition of the growing number of workers found overseas and their role as economic actors. It is the reforms implemented by the preceding government—the USDP—that established the precursors to an increasingly liberal and internationalized Burmese labor market. Three policies, in particular, have important implications for Myanmar’s overseas workers.

Foreign Exchange Liberalization

In April 2012, the Myanmar government liberalized the Myanmar Kyat (MMK) from a pegged exchange rate to a managed float. Previously, the MMK had been pegged at 1 MMK to US $8.5 without adjustment since 1977. Foreign currency exchanges took place within an enormous black market marked by instability and opacity. Between 2007 and 2012, for example, the U.S. dollar fluctuated between 850 and 1,400 MMK in informal exchange rates. Moreover, international remittances were dominated by the informal sector, predominantly through hundi agents—a mode of informal remittance exchange largely based on social ties and cliental trust. With proponents advocating remittance formalization as economic policy, Myanmar’s steps to liberalize its monetary policy are an important step toward achieving that objective.

Banking and Remittance Reform

Beginning in October 2011, the USDP overhauled the banking sector, with potential impacts for remittances. First, unprecedented permission was granted for four major commercial banks in Myanmar to establish offices overseas. Malaysia, Indonesia, Thailand, and Singapore were prioritized, signaling increasing corporate and political recognition of overseas Burmese workers and the need to provide them with accessible financial services. The prioritization of ASEAN markets further signals regional economic integration; besides the U.S. dollar and the euro, the Singapore dollar is now also accepted for deposits in Myanmar banks.

Second, Western Union and MoneyGram, among the world’s largest money-transfer services, introduced Myanmar-bound remittance services to commercial customers. Though domestic access is dogged by a lack of physical financial outlets, there is a rapid proliferation of bank branches and ATMs as well as mobile payment technologies. Internationally, however, access to banking services remains constrained by the irregular status of migrants, documentation requirements, and unfamiliarity with services.

Though causality is difficult to establish, Myanmar experienced an exponential increase in recorded inbound remittances during this period of reform: It received US $3.1 billion in remittances in 2014, compared to $127.1 million in 2011, according to World Bank data (see Figure 1). In any case, a dearth of Myanmar remittances research and the infancy of reforms render short- to medium-term impacts unclear.

Figure 1. Annual Remittance Flows to Myanmar (US $), 1970-2014

Source: Migration Policy Institute (MPI) tabulations of data from the World Bank Prospects Group, “Annual Remittances Data—April 2016 update,” available online.

Microfinance

In November 2011, the Myanmar government passed the Microfinance Law. Where previous microfinance institutions (MFIs), especially those run by NGOs, operated quasi-legally outside the regulatory framework, the law provides for the formal registration of MFIs, intended to expand the reach and range of financial services. Between 2012 and 2015, for example, the share of households that were able to access loans from the Myanmar Agriculture and Development Bank (MADB), Myanmar’s largest microfinance provider, increased from 13 percent to more than 70 percent, according to a LIFT household survey.

Aside from offering the poorest households accessible credit to complement agricultural livelihoods and smooth consumption during periods of income shock, the law may also inadvertently facilitate mobility. Both internal and international labor migration from Myanmar are highly correlated with household wealth and the availability of credit, according to a LIFT study. Where credit becomes more accessible, therefore, one might anticipate increases in microfinanced migration. In Cambodia, for example, marginalized households that hold a formal loan are twice as likely to have at least one labor migrant than those without, according to a 2015 study by Maryann Bylander.  

Challenges to Implementation, as Seen in the Singapore-Myanmar Corridor

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Singapore is an increasingly popular and important destination for workers from Myanmar. Growing migratory flows are partly driven by demand for cheap domestic labor as migrants from traditional source countries, such as Indonesia and the Philippines, command increasingly higher wages. Compared to the average monthly salary of the Burmese domestic worker (US $330), Indonesians and Filipinos typically earn US $385 and US $460, respectively. Still, Singapore likely represents one of the largest origin-destination salary differentials for Burmese labor migrants in the region. Legal Burmese migrants in Thailand can expect to earn around US $225 per month while illegal migrants around US $85-140, according to a 2012 survey conducted by Supang Chantavanich and Premjai Vungsiriphisal. In comparison, using a small-sample survey, the author finds that Burmese domestic workers in Singapore earn an average monthly salary of US $352.50 whereas other unskilled workers in the construction or shipping industries earn an average monthly salary of US $720. For both worker groups, this represents an average 3.6-fold increase in incomes pre- and post-migration.

Nonetheless, there are several key challenges to be addressed if migration and remittances are to be effectively harnessed for development. First, banking reforms have had muted effects on the Singapore-Myanmar remittance corridor. For instance, the author found that nearly 90 percent of respondents to a small-sample survey used hundi agents as their primary means of remitting. This holds true across demographic groups such as sex, age, and occupation; though semiskilled and skilled workers are more likely than unskilled workers to use formal means such as bank transfers, hundi agents retain a monopoly of Myanmar-bound transactions overall.

Several reasons explain the continuing preference for informal transfer services. In addition to familiarity with existing services, migrants usually associate hundi agents with cheaper transaction fees, more favorable exchange rates, and greater convenience for recipients outside urban areas (and thus with poorer access to financial services). Hundi operators typically command greater service coverage in Myanmar in terms of remittance delivery, with some even offering door-to-door cash courier services. Formal services cannot yet compete with the scale of hundi operations and client attitudes are unlikely to shift in the short term. Though the World Bank recently approved US $100 million to expand financial services to families and small- to medium-sized businesses in Myanmar, fewer than 30 percent of adults have access to financial services. It can thus be said that poor uptake of formal remittance services by migrant workers can be attributed to both lackluster demand by remitters as well as a structural shortfall of financial services within Myanmar.

Second, despite policy ambitions to formalize and reduce the cost of remittance channels, the government has made few efforts to reduce or regulate the costs of migration. Migration pathways into Singapore for unskilled Burmese are discordant and often exploitative. For instance, these pathways are highly gendered; migration is generally more financially accessible for women than men, according to a 2016 study of domestic and construction worker migration to Singapore by Maria Platt and her coauthors. Male migrant workers typically secure employment via kinship or social referral networks, fronting the costs of migration (visa processing, airfare, placement fees). Funds are usually borrowed from family or local moneylenders, or obtained through the sale of household assets.

In contrast, domestic workers (primarily female) usually migrate with minimal upfront cost. Instead, the costs of migration and placement are repaid through salary deductions to the employment agency for six to eight months after securing a job. During this period, incomes are reduced to an allowance of tens of dollars per month. Debt not only enables migration, but also exploitative profiteering and labor control, especially when workers are most financially vulnerable during debt repayment. For male and female unskilled workers, this may manifest in an unwillingness to report or resist abuse at the risk of being fired or deported, reduced mobility and social isolation as workers are compelled to stay within their dormitories or employers’ homes, or degradation in mental and physical health.

These issues outlined above are not unique to the Myanmar-Singapore migration corridor, and policy innovations implemented elsewhere may also offer some opportunities for policymakers in Myanmar to consider.

Microfinance and Migration

Microfinance is one strategy that has been proposed to help migrants bypass the employment agency-financed or informal debt-financed migration route, which has monopolized unskilled migration to Singapore. Here, Indonesia provides a useful case study. In June 2016, the Indonesian government launched the Household Service Workers Industry Scheme (HIS), a new migration financing initiative aimed at reducing the cost of migration for Indonesian domestic workers in Singapore. Under HIS, the worker borrows around SGD $1,700 (approximately US $1,200) from scheme partner Maybank Indonesia to cover the costs of migration such as training, visa processing, medical exams, and placement costs. This loan is repaid by the worker directly; her salary and repayments will be deposited and withdrawn from the same account linked between Singapore and Indonesia.

HIS spawns three crucial innovations. First, rather than being indebted to an employment agency, the worker is the borrower and is responsible for, her own loan. This loan is consolidated into a single, transparent financial product rather than fragmented into multiple component expenditures. This reduces exploitative profiteering from intermediaries, as costs are clearly itemized. It also reduces the final cost of migration by nearly half (current total placement debts can reach SGD $3,600, or US $2,530). Second, the worker has a traceable record of her income where previously workers were often paid in cash. In addition, per HIS terms, the worker is required to contribute a portion of her income to a savings plan, ensuring accessible funds when she returns to Indonesia. Finally, by giving migrants access to a bank account and a proven record of earnings, HIS contributes to policy ambitions of migration and remittance formalization through expansion of access to credit and other financial services. Though microfinance and banking reforms in Myanmar are still in their infancy, the HIS scheme may present an important case study to inform future migration- and remittance-led development strategy.  

Finally, there is a lack of explicit migration policy outlined to date by Myanmar’s NLD administration. In this vacuum, serious worker abuses and violations have occurred. The Humanitarian Organization for Migrant Economics (HOME), for example, revealed that unscrupulous agents in Yangon and Singapore have knowingly recruited underage Burmese domestic workers, using forged travel documents. More generally, Myanmar-Singapore relations have also been strained by incidences of worker abuse, culminating in Myanmar imposing a five-month ban on migration of domestic workers to Singapore in September 2014, and another in June 2015. Workers were quick to circumvent official processes by entering Singapore on tourist visas, rendering them even more at risk of exploitation. The migration ban had minimal effect: between 2013-15, the population of Burmese domestic workers grew by 50 percent to around 30,000, HOME estimated.

This explosion in demand for Burmese labor has not been matched with adequate governance or regulation. Elsewhere, established labor exporters such as the Philippines and Indonesia have evolved sophisticated regulatory bodies to protect the welfare of their overseas workers and lobby for adequate rights protection at destination, via the Philippine Overseas Employment Administration (POEA) and the National Authority for the Placement and Protection of Indonesian Overseas Workers (BNP2KTI), respectively. Myanmar, in comparison, has yet to develop similar instruments. At present, policy is only incidental to migration and authorities otherwise act reflexively to issues as they arise, rather than proactively regulating the burgeoning market for overseas labor migration.

Moving Forward: Challenges Ahead

The pace of labor migration from Myanmar is likely to continue expanding under NLD leadership. Buoyed by stronger diplomatic ties, economic and political reforms, and a growing migration industry, Burmese workers increasingly seek out overseas employment opportunities in diverse locations. The drivers of this labor migration, including poverty, fragile livelihoods, and persistent income shocks, are structural and persistent in nature. Nonetheless, migration and remittances could also play a key role in Myanmar’s future development.

Importantly, the drive for formality has thus far produced mixed results. For Myanmar, banking reforms aimed at expanding the accessibility of migrant financial services have yielded limited results thus far, at least in Singapore, though examples from elsewhere—such as Indonesia’s HIS—provide useful lessons. Moreover, migration pathways require greater regulatory oversight if migration is to take place equitably, with regards to accessibility and cost. Finally, the absence of effective migration governance in Myanmar carries costs for the migrants themselves; in the case of Singapore, greater dialogue and coordination between governments could address issues of migrant exploitation.

Though still in its infancy, Burmese labor migration shows significant potential as a driver for domestic economic development.

Sources

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