Wednesday, 11 November 2009

MIGRANTS’ REMITTANCES FARE BETTER THAN EXPECTED IN CENTRAL ASIA

Published in Analytical Articles

By Erica Marat (11/11/2009 issue of the CACI Analyst)

In the fourth quarter of 2008, Tajikistan reported a sharp decline in remittances sent by labor migrants living in Russia and Kazakhstan. Many experts rushed to predict a massive return of migrants to Tajikistan, Kyrgyzstan and Uzbekistan – all three being major migrant sending countries. But as recently released World Bank data show, while there was indeed a decline in remittances among Tajik migrants, the level of remittances increased in Kyrgyzstan.

In the fourth quarter of 2008, Tajikistan reported a sharp decline in remittances sent by labor migrants living in Russia and Kazakhstan. Many experts rushed to predict a massive return of migrants to Tajikistan, Kyrgyzstan and Uzbekistan – all three being major migrant sending countries. But as recently released World Bank data show, while there was indeed a decline in remittances among Tajik migrants, the level of remittances increased in Kyrgyzstan. Overall, remittances fell only 6.1 percent world-wide as opposed to the earlier expected 7.3 percent. This trend demonstrates that labor migration has proved to be a stabilizing economic force in some regions, including Central Asia.

BACKGROUND: Experts estimate there are between 600,000 to over one million Tajik migrants, 500,000 to over one million Kyrgyz migrants, and over 2 million Uzbek migrants residing in Russia and Kazakhstan. According to the World Bank, in 2008 migrants’ remittances made up to 50 percent of the GDP of Tajikistan and 28 percent in Kyrgyzstan. Early this year, regional experts unanimously believed that returning migrants would shake the very economic foundation of Tajikistan, Kyrgyzstan and Uzbekistan. Some even worried that migrants would overburden local infrastructure, join radical religious groups and cause national destabilization. Finally, a number of Central Asian experts predicted at least a 15-20 percent drop in the number of labor migrants who travel to Russia and Kazakhstan in spring 2009 and braced for the corresponding drop in capital.  

However, the World Bank’s November 2009 data on migration and remittances showed that compared to other capital flows, labor migration trends remained fairly unaffected during the economic crisis. Although remittances did shrink in 2009, it did so at a different speed throughout the world. In South Asia, for example, the economic crisis only slowed down the overall increase in remittances, but did not cause a decline. The World Bank economists expect the remittances to return to their 2008 level already by 2010.

The bank’s data also indicated that the decreased volume of remittances did not affect the number of migrants seeking jobs abroad, while the number of migrants living abroad during the crisis remained stable. Unlike earlier predictions, most migrants were unwilling to travel to their country of origin – mainly due to fears of not being able to return back due to tighter immigration regulations. Indeed, remittances decreased due to the loss of jobs and employers’ delays with payments to guest workers. But the sharp drop in remittances to Tajikistan in late 2008 could also reflect the general trend of remittance flows. Summer months usually constitute the peak of productivity for labor migrants and most of them remit money home before the school year begins.  Finally, a large number of returning migrants attracted the attention of regional experts despite the known tendency of the majority of migrants to travel home during the coldest months. Remittances to Tajikistan continued to decline by roughly 30 percent in the first half of 2009, but remittances to Kyrgyzstan increased by 2 percent in the first half of 2009. Partly, this is explained by the growing number of Kyrgyz labor migrants in the past few years compared to Tajik migrants who left Tajikistan en masse already in the 1990s.

The Russian government’s efforts to stop the devaluation of ruble affected the volume of remittances as well. As of the fall of 2008, migrants could transfer money only in rubles, but Uzbek banks do not accept deposits in rubles. As a result, the remittances’ real value has dropped as the ruble’s value suffered a 25-30 percent decline between fall 2008 and winter 2009. The exchange rate inevitably affected the real volume of remittances sent from Russia. Therefore, Tajikistan’s 30 percent loss in U.S. dollar equals a 10 percent decrease in rubles. A similar comparison between the U.S. dollar and the ruble shows a 17 percent increase of remittances in Kyrgyzstan. Importantly, the overall volume of remittances in 2009 in Tajikistan was still higher than in 2007. In Kyrgyzstan the volume of remittances in 2009 rose by almost 50 percent compared to 2007.

IMPLICATIONS: The global economic crisis has shown that labor migrants represent a powerful stabilizing force for the Central Asian states. Because the Central Asian governments are not able to create jobs at home, the number of migrants seeking jobs abroad continues to grow. While a lack of jobs in winter months could have forced more migrants to return home in late 2008, it was hardly a reason for worry. When jobs are scarce at home and future possibilities for return to Russia or Kazakhstan become uncertain because of tougher immigration regulations, migrants prefer to work abroad at lower paying jobs instead of traveling home.

2009 was certainly more difficult for Central Asian migrants in their search for earnings abroad. According to the World Bank, migrants today are facing increased risks. Their ability to work and send remittances largely depend on the availability of jobs, strict immigration controls, and unpredictable exchange rates. The lives of labor migrants have become more difficult due to these risks. Migrants increasingly compete among themselves for jobs rather than competing with locals.

Especially during the 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. To amplify the positive effect of labor migration, the governments of Kyrgyzstan and Tajikistan must actively encourage the investment of remittances, foster interstate collaboration on labor migration, train public servants dealing with migration issues, invest into vocational education, and fight corruption in law-enforcement structures.

Predicting remittance patterns through 2010 is complicated, as the economic downturn affected both migrant-sending and migrant-receiving countries. Fluctuating oil prices and exchange rates complicate forecasting as well. In the Central Asian context Russia’s sharp cut in the guest worker quota is the most damaging factor regarding the outlook for 2009-10. Central Asian migrants prefer to remain in Russia to fill menial jobs outside the construction sector, which has been hardest hit by the Russian government’s slashed quotas in major cities.  But to date Central Asian governments continue to take migrant remittances for granted without seeking to maximize social and economic returns.

CONCLUSIONS: Unless domestic economies in poor countries like Kyrgyzstan, Tajikistan and Uzbekistan create enough incentive for the labor force, current levels of out-migration will continue to increase. Contrary to regional experts’ prediction, returning labor migrants are unlikely to become a cause of political changes simply because they are unlikely to return to their homelands unless they see appealing opportunities. Millions of Central Asian migrants residing in Russia have already built extensive connections there, and these contacts help more people emigrate. Active Central Asian diasporas across Russian cities, the possibility to travel by air and ground, and general knowledge among the region’s population of ways of travel and living in Russia make labor migration a process difficult to overturn by mere decisions of governments.

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