Collapsing remittances will compound Asia’s energy shock

Like many young Nepalis, Pushpa Kumar Chaudhary thought the path to prosperity ran through the Gulf. Three months ago, the 27-year-old was hired as a restaurant chef in the United Arab Emirates. That made him one of nearly 1.7m Nepalis working in the region. Then the American and Israeli war with Iran began. More than half of the two dozen or so people known to have been killed by counter-strikes that Iran has launched on Gulf countries have been migrants, including Indians, Nepalis and Pakistanis. Mr Chaudhary avoided injury, but his restaurant has shut. Like tens of thousands of other migrants, he has since had to leave.

In 2024 more than 20m people from South and South-East Asia (see chart 1) were employed across the six countries that form the Gulf Co-operation Council (GCC). That was 65% more than in 2010. This labour force includes computer programmers and businesspeople. But the overwhelming majority are cooks, construction workers, nannies or perform other blue-collar work. The fact that many have headed home because of the conflict risks being a problem for the Asian countries that send them.

Unlike wealthy expatriates who make a choice to leave, migrant workers are mostly being compelled to go. Many firms in the Gulf have stopped hiring: the number of Bangladeshis granted emigration clearance to Gulf countries collapsed to 31,279 in March, from 92,460 in the same month last year. The flow from Nepal has also slowed after its government stopped issuing new labour permits because of concerns about workers’ safety.

Having fewer people abroad will bring hardship at home. In 2025 Bangladesh received $32bn in remittances, a sum roughly equivalent to 6.5% of GDP. That far exceeded the value of other inflows, such as aid and FDI. Remittances to Nepal account for a quarter of that country’s GDP. Even in giant India, money sent back by migrants contributes 3.5% of GDP (see chart 2). According to Capital Economics, a consultancy, a 1-2% drop in GDP in Gulf countries is typically associated with a 5% decrease in money remitted by migrant workers in the region. Earlier this month the World Bank warned that countries in the GCC are at risk of experiencing just such a contraction this year.

This will heap more pain on countries, such as Bangladesh and the Philippines, that are among the worst affected by a war-induced energy shock. “I just got married and six people at home depend on my earnings, which have now ended,” says Saimum Islam, a Bangladeshi who has left Saudi Arabia after losing a job with a fishing firm. A period of lower remittances could have consequences that last long after the crisis in the Middle East has abated. Remittances are often used to finance schooling, which in turn draws workers from low-productivity farm labour and into higher-paying jobs, according to a study of Filipino migrants by Gaurav Khanna of the University of California, San Diego, and colleagues.

The best hope for the likes of Mr Islam and Mr Chaudhary is that things go back to normal quickly, letting them get back to their jobs abroad. Optimists speculate that the need to rebuild war-damaged infrastructure could perhaps end up increasing the flow of migrant workers into the region—and potentially even to Iran. But if the war continues, Bangladesh and other countries are going to need to “open new doors” for their workers, says Ali Haider Chowdhury, the head of a Bangladeshi recruiting agency.

One set of opportunities lies to the east. Even before the war in Iran, Japan and South Korea had become intriguing destinations for wannabe migrants. Working conditions in Gulf countries are often dire, and basic human rights are routinely ignored, says Mahesh Kumar Basnet, the boss of a recruiting agency in Nepal. Scores of Nepalis are now learning Japanese and Korean. They are lured by the prospect of better pay and more tolerable conditions. Countries in South-East Asia are also possible destinations, especially Malaysia and Thailand.

But building new migration routes is not easy. A South Asian’s path to the Gulf is well established; agents, recruiters and local networks already exist to help. Moreover, Japan and South Korea remain reluctant to admit lots of foreigners, despite ageing populations and worsening labour shortages. Migrants make up only around 3% of Japan’s population and 5% of South Korea’s, well below the OECD average of 15% and nowhere near the roughly 50% seen in the GCC.

Sending countries could do more. “Bangladesh needs to pursue labour diplomacy,” says Mr Chowdhury, the recruiter. Something of that nature appeared to pay off on April 9th, when Malaysia said it would reopen its labour market to Bangladeshi workers two years after closing it. A bilateral agreement promises not just to increase the number of jobs available to Bangladeshis, but also to cut the risk that they will be exploited by unscrupulous employers and agents. The war in Iran has narrowed one well-trodden path for Asian migrants. Might it force countries to forge new ones? ■