SHRINKING REMITTANCES INCREASE LABOR MIGRATION FROM CENTRAL ASIA

As the global economic downturn became inevitable in mid 2008, most experts argued that a shrinking volume of remittances from labor migrants would be one major implication of the crisis in Central Asia. Yet, while it is true that remittances have dropped significantly in the fourth quarter of 2008, it does not necessarily imply that the decline will continue throughout 2009-2010 – the expected duration of the crisis. The situation on the ground suggests that after the initial drop of remittances, more Kyrgyz, Tajik and Uzbek citizens are seeking jobs abroad. This year, remittances per migrant are likely to decline as jobs will be scarcer, but the overall volume of remittances will remain roughly the same with more migrants working abroad.    
BACKGROUND: By 2008, around 200 million people, or 3 percent, of the total world population lived outside their homelands. Although Central Asia represents only a fraction of the world’s migrant population, the impact of migration on national economies is among the greatest. Tajikistan is the world’s leading country in the proportion of remittances to its GDP. Experts estimate that between 600,000 to over one million Tajik migrants work in Russia. In 2007 they sent home over US$1.8 billion through banks, or up to 30 percent of the national GDP. Other sources state that remittances comprise up to 46 percent of Tajikistan’s GDP. Kyrgyzstan ranks fourth in the list, with 27 percent of its GDP, or US$322 million, sent in 2007. Uzbekistan’s immigrant population is the largest in Central Asia in absolute numbers. Over 2 million migrants are reported to reside in Russia, Kazakhstan, Kyrgyzstan, South Korea, the United States, and Europe. Uzbek migrants send roughly US$1.3 billion in remittances annually, constituting over 8 percent of the GDP. Of all Central Asian countries, Turkmenistan has the lowest number of immigrants working abroad. Of a total population of five million, 250,000 are reported to be working in Russia, Kazakhstan, and other countries.

Russia, Ukraine and Kazakhstan are the largest migrant recipients in Eurasia. During 2000-2007, Russia hosted on average 12 million migrants, making up 8-9 percent of its total population. Since the mid-2000s, Kazakhstan has emerged as a new popular destination for Central Asian migrants. Over 200,000 Kyrgyz, 50,000 Tajiks, and 250,000 Uzbeks worked in Kazakhstan in 2007. The vast majority of these migrants are forced to work illegally. Russian employers annually obtain over 300,000 work permits for foreigners, while even official records of migrants register from three to five million guest workers coming to the country. Migrant remittances surged dramatically between 2004-2007, when the construction sector boomed in both Russia and Kazakhstan. But recent downward trends indicate a rapidly changing picture.

IMPLICATIONS: In the fourth quarter of 2008, Tajik and Kyrgyz banks reported remittances dropping almost by half. This trend alarmed most international experts, who rushed to declare the catastrophic effect on Central Asian economies caused by returning migrants. According to World Bank data, however, remittances are quite stable capital flows over time, compared to other types of financial flows during economic crises. Previous economic downturns have shown that remittance levels tend to remain the same or even increase. Although the current economic crisis is global, remittances are still expected to help alleviate economic shocks in both migrant sending and receiving countries. Alas, job opportunities will be scarce, work conditions and salaries will decrease, but migrants will seek to maximize their earnings and allocate larger sums for remittances. The pressure to earn money will be stronger on the poorest strata.

In fact, the number of migrants from Kyrgyzstan, Tajikistan and Uzbekistan leaving for Russia has increased since the economic downturn in late fall of 2008. A higher number of young men bought one-way tickets to Russian cities in November 2008 through January 2009, mostly to Nizhny Novgorod, Yuzhny Sakhalin, and Yekaterinburg. The initial shock of a sharp decline in remittances in late 2008 thus propelled more migrants to travel abroad.

Furthermore, returning and new migrants tend to disagree with the claims that Russian authorities force them out of the country. Some even mention that their Russian employers requested them to remain on construction sites despite lower salaries until the economy rebounds. This is explained by the fact that Central Asian labor migrants working in Russia occupy their own niche in the job market, which is often not attractive to Russian citizens. Common jobs include public transport drivers, construction workers, retailers, and street sweepers. These dynamics in the Russian job market are unlikely to change during the economic crisis. Migrants, thus, compete mostly among themselves rather than with Russian citizens. This competition Is likely to intensify further.

In December 2008, Russian Prime Minister Vladimir Putin argued that the migrant quota should be cut by up to 50 percent of the total 3.9 million legally registered guest workers. The Prime Minister argued that this is a natural reaction to the economic downturn in the country. His order, although depicted as one of the measures to ease Russian citizens’ burden during the economic crisis, does not immediately lead to a significant cut of immigrants’ numbers for two reasons. First, Putin referred to the official number of immigrants, which is significantly lower than unofficial data. And, second, the number of immigrants can be cut anywhere between zero and 50 percent. Thus, in the worst-case scenario, up to 1,9 million of the total unofficial 12 million migrants will be sent back. Indeed, Putin can change the regulations depending on circumstances.

Putin, furthermore, entrusted the Ministry of Health to define how the quota should be reduced across the country’s cities and regions. Putin thus delegated the final judgment of how many migrants are allowed to stay in the country to the ministerial level. The Prime Minister’s overall reaction to the immigration issue amid the crisis suggests that the leadership recognizes the importance of the foreign workforce in Russia, while realizing the local population’s frustration with the economic slowdown and the need to take action. In the meantime, while Moscow announced a decrease in the quota for guest workers in 2009, other Russian regions requested an increase of the migrant quota for 2009. It is important to note that despite the slowdown of the construction sector in Russia, prices for real estate and land resources remained fairly stable during late 2008 and early 2009.

Central Asian governments, in turn, make little effort to create jobs at home to avert at least a fraction of the labor emigration. On the contrary, the Uzbek and Tajik governments continue to impose strict controls over the cotton sector, which benefits a small number of government officials but worsens conditions for regular workers. In late 2008, Kyrgyz President Kurmanbek Bakiyev multiplied taxes for small and medium businesses sharply. The new regulations stifle businesses and fuels unemployment, forcing people to look for jobs abroad. Hundreds of small businesses mostly in Bishkek were been shut down in January.

CONCLUSIONS: The high numbers of returning migrants this winter to a large extent reflect the annual tendency of the vast majority of migrants to travel back home during winter. This was not necessarily indicative of the economic crisis influencing the migrants’ earnings. Mostly due to the Central Asian governments’ poor ability to create jobs at home, the number of migrants seeking jobs abroad continues to grow. Especially during the economic crisis, Central Asian countries and Russia must seek to come up with bilateral and multilateral agreements to ease the migrants’ amplified burden. But receiving countries prefer to take unilateral decisions disregarding the implications for sending countries. Likewise, migrant sending countries are mostly concerned with the political implications of potentially large flows of returning migrants, trying to further centralize their power. This year will likely be the most difficult for Central Asian migrants in their search for earnings abroad. But although remittances per migrant will continue to decline, the overall volume of remittances is likely to remain roughly the same as more migrants seek work abroad.

AUTHOR’S BIO: Erica Marat is a Nonresident Research Fellow with the Central Asia-Caucasus Institute & Silk Road Studies Program Joint Center.