Decaying Arabian economy puts pressure on South Asia’s rising tiger

The economy of Bangladesh – considered the rising tiger of South Asia – is under imminent threat because of the novel coronavirus pandemic.

Remittances sent by immigrant workers are one of the major driving forces of the Bangladeshi economy – which was more than $18 billion in 2019. This number is nearly five percent of the country's nominal GDP. There are more than 10 million Bangladeshi people living abroad and most of them are workers.

According to 2018 data, 2.2 million Bangladeshi immigrants live in the Kingdom of Saudi Arabia (KSA) – which is the largest number of people in the case of the Bangladeshi diaspora. Most of them work there as labourers. For the last couple of years, Saudi Arabia has secured the position of becoming Bangladesh's top remittance source. However, experts are afraid of losing this lucrative remittance source. Let's see why.

Saudi Arabia, the only member of the G20 from the Arab world, is going through economic chaos. This largest economy of the Middle East will borrow $58 billion in 2020 from different international sources, Mohammad Al-Jadaan, the finance minister of KSA, recently stated. This pandemic has caused Saudi's economy, based on crude oil exports, to come to a standstill as well as the whole world. Now, because of the worldwide lockdown, the oil price is at its lowest ever rate in history. However they cannot stop extracting oil as there is a huge possibility they will lose billions of dollars. This is hitting Saudi's economy harder than before.

Before this pandemic, the Saudi Arabian economy was burdened with debt. Saudi's external debt was $151 billion and $181 billion in 2018 and 2019, respectively, which shows a rapidly rising rate. Surely this rate will increase in the coming years. According to the Middle East Eye, Saudi's total debt has jumped by more than 1,500 percent since 2015. 

Again, their cash reserves are decreasing at an alarming rate. Where the reserve was $732 billion in 2014, it decreased to $499 billion in 2019 according to the Saudi Arabian Monetary Authority. There are few economies in the world that have seen this kind of decrease in the rate of reserves – in the 21st century. Now this pandemic is going to pour water on a drowned mouse. 

Many reasons can be pinpointed for this economic phenomenon in the KSA. First of all, Saudi Arabia is the world's top arms buyer according to the Stockholm International Peace Research Institute. In 2017, Crown Prince Salman Bin Abdulaziz signed a $100 billion immediate defence equipment import contract with US President Donald Trump. In total, $350 billion was to be spent on supplying arms over 10 years. Saudi Arabia has spent a lot on the ongoing Yemen and Libya wars. 

Many Bangladeshi workers are coming back home from Saudi Arabia during the pandemic. Most of them are women who experienced various miserable conditions in their workplace. Before the pandemic, many Bangladeshi store owners were anxious about taxes as the Kingdom continuously increases its tax rate on foreign citizens on Saudi Arabian soil. 

Crown Prince Salman Bin Abdulaziz has introduced Economic Goal 2030 – a plan to diversify KSA's economy, attract citizens to higher education and make them more active. This goal includes many mega projects. Now, because of these mega projects, Saudi Arabia will seek foreign workers shortly, but it will decrease the overall number of foreign workers in the country. 

Now experts think that nearly one million Bangladeshi immigrants will have to return home, directly or indirectly, because of the novel coronavirus crisis. This will really be devastating for Bangladesh's remittance flows, as well as the whole economy, because if Saudi's economy loses its stability – which is in process already – other middle eastern economies will also be affected.

After coming home, what will our remittance-providers do if they don't want to go back or don't have the chance? Most of them will try to start small businesses such as stores and wholesale operations. However, it will be crucial for them because after the pandemic, purchasing power will be decreased.

So, our government should search for new remittance markets and make more agreements with foreign governments if they really want to continue the healthy remittance flow as well as the GDP growth rate. Of course, they should also stop immigration brokers and agencies in Bangladesh because they are the only reason some Bangladeshi immigrants migrate illegally.

The author is a student of Department Of Criminology, University of Dhaka.