Government of Nepal allowed private recruitment agencies to recruit workers to a selected set of countries, mostly in the Persian Gulf and a few others like Malaysia, Japan and South Korea, upon obtaining clearance from the Ministry of Labor (Seddon, Adhikari, and Gurung, 2002). This has led way to the surge in migrant outflow from Nepal in the 2000s (see Table 1). This outflow has been dominated by the migration of low-skilled, mostly male, workers to Malaysia, and the Persian Gulf countries, especially, Qatar, Saudi Arabia, and the United Arab Emirates. By 2011, 15 percent of the households had a current migrant in these destination countries.

Most of the current migration to non-India destinations, especially to the Persian Gulf countries and Malaysia, happens through recruitment agents (The World Bank, 2011). Typically, potential migrants contact, or are contacted by, independent local agents that are connected to recruitment firms in Kathmandu. These recruitment firms receive demands for low-skilled workers from firms or agencies abroad and are fully responsible to fill the demands and arrange all necessary paperwork<sup>9</sup> . Migrants to these destinations pay the intermediaries more than Rs.100,000 (US$ 1333) for job-search, intermediation and other related costs (Table 2). This amounts to three years of per-capita consumption in Nepal.

Despite the higher costs, workers earn significantly more in Malaysia and the Persian Gulf countries once they are abroad. Most of these workers (65 percent) work in the booming construction and manufacturing industries. A typical worker in these destinations earns more than Rs.14,000 (US$ 187) in a month. They tend to save almost three-quarters of this income (Table 2)<sup>10</sup> . The median migrant to the Gulf countries and Malaysia spends 2.3 years abroad per migration episode. More than 85 percent of them finance migration by borrowing, mostly from local loan merchants and from friends and relatives<sup>11</sup> . Borrowing from formal financial institutions is, however, quite infrequent with less than 5 percent of the migrants borrowing from banks. Of the remaining 15 percent too, most finance the migration through grants and help from family and friends.

A few key points of international migration from Nepal are worth highlighting, which ties the theoretical framework in the context. The cost of migrating to India and finding a job is much lower than the costs of migrating elsewhere. Interestingly, these costs do not seem to vary by location of origin community or by the education level of the migrants<sup>12</sup> . The returns to migration also seem to follow the same pattern so that migration is quite profitable on average, given the typical duration of migration and the amount of savings while abroad. Jobs, particularly to non-India destinations, are prearranged so that there is no risk of not finding work conditional on migration. The vast majority of the migrants finance their migration by borrowing, but borrowing from formal financial institutions is quite low. Most migrants borrow from local moneylenders against a collateral.

# **Data on migration rates**

The data on migration for this paper comes from three different surveys conducted by the Central Bureau of Statistics (CBS) of Nepal over 2001-2010 period. All three surveys have information on absentee members of the household and because of their unique and circumstantial survey design, forms a panel of nationally representative villages observed thrice during the decade.

> 9For more details, see Shrestha (2017b,a).

> 10Though the earnings in Malaysia seem to be lower than the earnings in the Gulf countries, it is believed that the wages are actually higher in Malaysia. Workers in the Gulf countries tend to work more hours.

> 11Author’s calculations from Nepal Migration Survey 2009 and The World Bank (2011).

> 12Author’s calculations from Nepal Migration Survey 2009 and The World Bank (2011).

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